AMN Perspectives by Thomas Group: Experience at Work

Posted: July 27, 2004, 9 a.m., EST

IRVING, TX — How do you develop an integrated operating system that can simultaneously improve working capital, enhance revenue and margin, and improve order-to-delivery speed and predictability? One innovative approach is to select and configure a unique blend of capabilities and strategies, or “supply chain DNA,” across the dimensions of process, information, cash and organization. Over the coming weeks we’ll present a multi-part roadmap to executing that approach-and in the process, achieving all three benefits at once.

Can there be any more profound challenges than those confronting today’s supply chains? Perhaps these challenges are here to stay, and are more than just the manifestations of a tough economic cycle. Some leaders are acting on this assumption and are thoughtfully considering the implications of the forces creating these challenges. The implications of five key forces, in particular, demand close attention from both senior executives and supply chain professionals.

The Trend Toward Outsourcing

The loss of jobs to overseas competitors continues unabated in manufacturing, technology and service sectors. The dynamics, cultural differences and geographic distances associated with outsourcing add increasing complexity to global supply chains.

Wall Street Driven Cash Engineering

Once the financial markets saw the power of the Dell model and negative cash-to-cash cycle time, the course was set. Wall Street’s expectation of increasing working-capital velocity through supply chain models is spreading across other industries, and the era of cash engineering in the supply chain is here to stay.

Competitive Forces Changing the Playing Field

Companies like Dell, Wal-Mart and Zara have been able to reduce supply chain costs and working capital requirements while achieving faster response time than the competition. By applying the economic and operational strength of their models, they create a strategic advantage that is continuously leveraged to expand market share.

Unplanned Economic, Social and Political Events

Forecasting, inventory planning and resource deployment are becoming ever more difficult in today’s dynamic global marketplace. In this environment, fulfillment strategies that respond more nimbly to the daily changes in supply and demand can be the difference between life and death in the market.

Shorter, Less Predictable Product Lifecycles

In a tough selling climate, the seamless transition between new and end-of-life products becomes critical. With ever shortening product life cycles, the pressure on supply chain execution only intensifies. In this environment, failure to effectively coordinate complex, cross-functional processes can result in warehouses full of older inventory losing value by the day.

Companies will have a difficult time overcoming these challenges through traditional supply chain strategies. Traditional approaches generally have focused more on moving the product and cash, and less on the information systems and organization-which are at the heart of many of the challenges. And while traditional models have been successful at optimizing individual functional areas, they have lacked the ability to optimize the entire supply chain.

What’s needed is a dramatic new approach that directly responds to the challenges and, at the same time, opens the door to new growth and profit opportunities. In future installments of this column, we’ll describe a model that does exactly that.

This article was authored by Thomas Group Consultant John Steidl and David Demers, president of Avicon. Avicon is a consulting company that works in tandem with Thomas Group on Supply Chain Transformation.

For additional information, visit www.thomasgroup.com or call Mike Manor at 972-401-4444.

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“AMN Perspectives by Thomas Group: Experience at Work” is written and sponsored by Thomas Group. The opinions expressed in “AMN Perspectives by Thomas Group: Experience at Work” articles appearing on aftermarketNews.com do not necessarily reflect the opinions of AMN or Babcox Publications.