As discussed in parts one and two of this series, perfect order fulfillment for the food and beverage manufacturer in a customer-driven marketplace requires excellence in both planning and execution. This includes being responsive to customers, while forecasting and managing continuous and unexpected change in both actual demand and supply processing, through all levels of the food and beverage supply chain.
Explore this issueAugust/September 2006
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In addition, the final critical element in attaining perfect order fulfillment as a food and beverage manufacturer in a demand-driven world, is establishing real time performance management, along with historical analytics, to provide short, medium and long term visibility of business relationships and processes. By defining target level measurements of expected performance with demand and supply trading partners, as well as internally across the organization, a company can compare these perfect order metrics against the timely, ongoing feedback of actual performance results. Collecting actual results is often achieved using automated methods, for real time activity and performance feedback. This information can then be compared against agreed upon target performance metrics, to provide both manufacturers and trading partners a new level of visibility and granularity about the effectiveness of the entire supply chain to provide each customer with the right product, at the right price, at the right time, and for the right cost.
Retailer Demand-Driven Performance Metrics
An example of this collaborative exchange of business metrics can be seen by today’s large retailers, who actively collaborate with suppliers around performance metrics, with the goal of improving perfect order performance for customers. While business applications like Wal-Mart’s Retail Link focus largely on providing inventory visibility at stores and local distribution centers, such applications allow retailers to share plans and forecasts with suppliers and manufacturers. These applications also provide a broad range of reports and key performance measures (i.e. zero sales products, products out of stock at the store or point of use, in-stock measurements, projections of inventory run-out, etc.), to help suppliers identify and respond to demand and fulfillment opportunities and issues.
As companies like Wal-Mart continue to change their own inventory carrying policies, retailers are now targeting minimum inventory levels from suppliers to local distribution centers, with new focus on immediately cross-docking incoming products from supplier’s trucks, to retailer’s store delivery trucks. The goal, of course, is to reduce the absolute value of inventory retailer’s own, while also driving down warehouse holding and logistics movement costs.
A further goal is to move to scan-based trading, where supplier payment is triggered at the point of store check out. While this certainly incents suppliers to lower inventory buffers, it also ensures retailers’ store shelves are always stocked at appropriate levels for consumers – the ultimate execution of the customer driven perfect order. Collaborative tools and business processes like these are being used today by Wal-Mart’s leading suppliers, and over time will become more prevalent throughout demand-driven supply chains.
How Well Do You Know Your Demand-Driven Supply Chain?
For the food and beverage manufacturer, it’s an opportunity to ask yourself how often you evaluate competing supply strategies and services such as collaborative forecasting, supplier outsourcing, contract manufacturing, quality testing, or packing, distribution and transportation execution? Do you know the related costs and the service impact when choosing between each of these alternate strategies? Are you able to negotiate desired levels of services with customers and suppliers, and even within your own manufacturing plants and departments, and then apply the terms and conditions of the agreement, based on the immediate feedback of measurable results during actual supply execution?