How to Complete Goals in Supply Chain Management – sales | operation | logistics
How to Complete Goals in Supply Chain Management
Supply chain managers have to make a lot of tough choices between competing goals. Let’s look at two conflicts that occur in almost every supply chain and I’ll explain the techniques we can use to resolve them.
The first conflict is between sales and operations. Sales people tend to be optimistic about how much customers will buy and they know it’s harder to make a sale when you don’t have product available. So the sales department will lobby to make sure there’s plenty of inventory.
Operations and logistics managers want to maximize capacity utilization while avoiding waste, shut downs, and overtime. So production plans are constrained by time and capacity limitations and the operations department is often lobbying to shrink inventories in order to save money.
In many companies, that means that the sales department and the operations department are actually working towards different business targets and most of the time, they don’t even realize it. The result is either overproduction, which creates unnecessary inventory, or underproduction which leads to lost sales. We can resolve this conflict by using a process called sales and operations planning or S&OP. With S&OP, the leaders from the sales department and the operations department come to the table with their goals and constraints and then they agree on a plan.
That shared plan helps to align all of the efforts and expectations for the entire company. The second supply chain conflict is between a customer, like a retail store, and their suppliers. The customer wants to make sure that they can always get the products they need when and where they need them, but suppliers don’t wanna have more inventory than what their customer will actually buy. The more information suppliers have about their customer’s sales trends, inventory levels, and upcoming promotions, the easier it is to meet their needs.
Collaborative planning, forecasting, and replenishment, or CPFR is a process where the customer and suppliers share information and this helps to prevent stockouts in the supply chain while also reducing inventories. Supply chain management is really about finding balance. Those are just two examples, but there are lots of other conflicts that occur in a supply chain. Resolving conflicts can be hard work, but the key is to understand all of your goals and then communicate and collaborate across business functions and across companies. To find solutions that provide the best result for your entire supply chain.
After viewing this video , you should be able to understand about the physical inventory and the service inventory