Beyond the horizon - managing a global supply chain

In spite of the past few years of economic uncertainty, the International Monetary Fund predicts that there will be a 3.7 percent increase in the global economic output this year. Businesses in Singapore are in an excellent position to reap the rewards of a global supply chain but only if they adopt a strategy of forward planning.

Singapore recently received a Logistics Performance Index score of 4.13 out of 5 from the World Bank, marking it as a global leader; this score is only set to rise over the next few years, so it is an exciting time for supply chains based in the Asia Pacific region.

However, to ensure continued success, companies must keep abreast of technological advances and economic events whilst juggling an increasingly demanding customer base.

This is, of course, easier said than done, especially when maintaining the health of a global supply chain, with many different links to uphold.

Companies that adjust their supply chain models to anticipate long-term trends and goals are better placed to weather the trials that befall a logistically complicated global supply chain; this also enables them to make the most of any opportunities for business growth.

Visibility over demand and supply chain planning are essential for a healthy domestic supply chain. But the ability to plan for the distant future is particularly pertinent for the survival of the typically longer global supply chain.

From dealing with multiple supply chain partners, to the fluctuating foreign exchange rates, there are many variants affecting a global supply chain that are, unfortunately, above and beyond our control.

Overlooking these details can be hugely detrimental to the bottom line, resulting in a loss of millions. The key to diminishing the impact of these factors on the supply chain lies in strategic long-term planning and visibility.

It’s surprising, then, that many organisations still forecast only as far as the next three to four months, or to the end of the financial year. This can result in hasty decisions, and too often, it is the level of performance required by customers that suffers.

Another common mistake is to over-stock the inventory in an attempt to cater for any eventuality, without actually planning ahead. This is neither cost-effective, nor efficient.

Increasingly, organisations are using an integrated management process such as Integrated Business Planning (IBP) to aid in strategic planning and supply chain alignment. Successfully implemented IBP puts the horizon at the forefront of business planning, allowing companies to look out over a minimum rolling 24 months, continually updating the forward view.

It also allows for comprehensive scenario planning that covers many different potential problems; for example, if a sharp rise in the future cost of shipping, coupled with an expected increase in demand is anticipated over the next 24 months, the effects of this can be predicted and the business can move accordingly ahead of time, without having to make snap decisions that could result in over-stocking or compromising customer service.

Market analysis - which becomes multifaceted and ever more difficult to monitor once numerous geographic locations are involved - has to be treated not as a one-off event but a continuous process of monitoring and evaluation.

The important thing is to create a ‘futuristic’ model that initiates a true cost comparison by capturing all the parameters. There is complexity in understanding the true cost of ownership because of the multiple inputs of the cost base, e.g. cost of shipping; labour; inventory in the supply chain; customer location; the required service response; and so on.

Organisations need to establish the level of performance - current and future - for each and every one, decide around which area to optimise the supply chain, and take account of their own position in the supply chain.

Recognising too the relative size and influence of different entities within the supply chain is important, especially if you are a small firm.

Having established where you stand in the supply chain, it is essential to co-operate closely with partners to help ensure a more accurate view of demand, as well as allowing optimum performance. Where planning in isolation can be debilitating, collaborating with others in the planning process can be transformational.

The key is to establish and prove the relationship with multiple touch points throughout the partner organisations (not just between sales and purchasing), making it resilient to any future changes in personnel.

The closer an organisation works to the demand signal and the more accurately 
it is communicated, the less amplification there is further back in the supply chain. The process then becomes more efficient, producing less waste and generating more profit.

In fact, supply chain collaboration reduces operating costs by up to 50% at the same time as improving customer service levels.

Integrating the product portfolio with the demand management process and overall business plan can have a dramatic impact on the health of a global supply chain.

For example, an international beverage company yielded huge results in product design department, at the expense of transportation. As a result, products were often damaged during shipping, resulting in significant losses.

When this became apparent, the supply, finance and product department were integrated so that transport became a vital area of product development. The result? Huge savings to the organisation’s bottom line. Integrated Business Planning allows for every aspect of the business to be aligned, creating a holistic plan.

IBP can deliver dramatically improved future visibility and predictability, which in turn allows organisations real control over demand, so nasty surprises can be planned for and avoided.

And with full product portfolio integration, demand planning becomes a collaborative exercise, ensuring a healthy global supply chain that is fully equipped to seize the opportunities presented by a growing global economy.