Mark Fasold, Strategic Advisor to Falls River Group (FRG), IMAP USA, shares with Creating Value the guiding principles companies should follow to optimize their supply chains including the vital dos and don’ts. Using omni-channel retail as an example, he explains why a company’s approach and decisions regarding its supplychain will ultimately affect every aspect of its financial position. For company owners looking to sell, this is key in terms of working towards achieving a higher valuation.
The world has experienced supply chain disruptions in many markets largely as a result of the COVID pandemic. The root cause of these disruptions is primarily the dramatic changes in both consumer and business demand and behavior for products and raw materials. Companies that had strong supply chain processes were able to react faster and with less disruption fulfilling customer demand. Supply chain processes have many discreet elements, options, and choices, however, no two are the same. While there are no prescribed formulas, there are dos and don’ts that are important regardless of the model.
Guiding Principles for All Supply Chains
The following principles apply to virtually all supply chains. Often business professionals mistakenly think of the elements as overly analytical and precise, often saying “buy more”, which sounds easy, but nothing could be further from the truth. These principles should guide all supply chain decisions.
a. Manage the “whole” first, then the components. It’s crucial to understand the end-to-end view. It’s like a chain; break a link and the chain fails.
b. Optimizing each supply chain component will suboptimize the whole. The inter-dependency of its functions and processes is significant.
c. Learn to live with uncertainty and variability. Dealing with issues from front to back is just par for the course.
d. Staff the supply chain with people that can see its entirety and intuitively balance risk. People that want things clean cut, uncomplicated, and overly precise won’t do well.
e. Setting up systems of punishment for your vendors will backfire. The manufacturer needs to have a seat at the table and be part of the broader team.
Implications of Omni-Channel Retailing
Omni-channel buying by consumers is the melding of how people shop and place orders. i.e., online, phone, retail stores, by text, and direct to business. The COVID pandemic placed the consumer front and center and wanting to shop where and when they desired, changing the buying process at a pace none of us could imagine.
Each shopping method presents challenges to the supply chain, e.g., one unit is picked and shipped for an on-line sale, yet a store needs to present depth of assortment by SKU. Packaging and tagging for the item differ depending on the purchase channel. Furthermore, the receiving, storage, and pick and pack in warehouses vary depending on where the product is going.
Warehousing to fulfill multiple channels requires significant engineering and process control. Each transaction type needs to be mapped out from beginning (when the product is commercialized and is in the production phase) to when it is presented to the customer for sale. Legacy companies - retail store based or direct to consumer - need to re-imagine how the supply chain is configured to serve customers in this exploding omni-channel world.
Read the full article in IMAP's Creating Value magazine here.