Tips to Better Manage Your Product Supply Chain

Manage the Complexity
Once you have a grasp on these overarching complexities, how do you manage them? One of the key pieces of the puzzle is a better handle on demand planning. The more accurately you can forecast future demand, the more you can align your supply chain to minimize the effect of shortage (lost sales) or excess inventory (which forces discounting of merchandise).

Demand planning tools have been available for some time; however, more organizations are starting to realize that "guessing" the future based on hopes (buyers wanting to meet their performance targets) or some historical backward look (financial people looking at past performance as predictors of the future) isn't cutting it. Successful adoption of demand planning requires a combination of the right technology, the right knowledge and the discipline to use the information through a collaborative process (such as an S&OP process).

This multipronged strategy makes the difference between a leading organization that will maximize its growth and profitability and a laggard that will continue to feel the effects of squeezed margins and shrinking market share. Leaders will show lower inventory levels, fewer lost sales (increasing revenue), reduced markdowns and lower product costs, with all of this adding up to 5 percent of net margins to their bottom line.

Yves Belanger is a director in West Monroe Partners’ Operations Excellence practice. He can be reached at ybelanger@westmonroepartners.com.