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Building a Proactive Supply Chain


François Gagnon

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Supply Chain industry has evolved in the last few decades with the aid of several technological enhancements and innovative strategies. Traditional flow of goods is now accompanied more and more by flow of data and information. There is however a greater need for supply chain management systems to become more proactive by better utilizing available data and information. Proactive planning will be the key in current economic scenario where timeliness and cost effectiveness will be crucial in maintaining the competitive edge.

Supply Chain Management Systems have been traditionally designed with greater emphasis on data gathering and reporting abilities with limited focus on logic for proactive planning.  Supply chains can be transitioned into a more proactive role when current management systems are enhanced with decision support capabilities helping the users make proactive decisions. 

Warehousing and Distribution Networks

Warehousing and Distribution (W&D) networks experience a great deal of uncertainty with fluctuating supply and demand cycles. Day to day planning requires a more tactical approach where seasonal stochastic models prove to be inadequate. This is even more pressing challenge in the Third Party Logistics (3PL) W&D environment where multiple clients add to the complexity in planning.

Technologies like ASN/EDI in W&D environment offer tremendous opportunity by providing key shipment related data in advance. Enhancements within W&D systems can be explored where ASN data can be combined with internal labor and material handling standards. This can help W&D managers/supervisors proactively plan labor and material handling requirements before the actual arrival of shipments in the warehouse. W&D operations can better deal with variations in receiving activity if information available in advance can be used for proactive planning.

Outbound shipping process in W&D also offers several opportunities for proactive planning. Pick tickets generated in the warehouse can be based not only on the single objective of optimizing picking time but also on optimizing truck/container loading process and obtaining better cube utilization.  This proactive approach can save time usually spent on cube utilization planning after the picking process.

Retail Networks

Retail Networks deal with replenishment of store inventory amid a constantly fluctuating demand. Different forecasting models are separately used on a periodic basis by each operational group within the retail network. Stores, regional warehouses and central distribution centers plan for anticipated demand individually at specified time intervals.

The collective objective is generally to retain certain amount of safety stock at regional warehousing locations and central distribution centers to meet the anticipated demand while taking into account supplier’s delivery lead time, ordering lead time, transportation time between warehouses and stores, etc.

Proactive systems in retail environment can improve upon this scenario by integrating different functional groups and updating forecasting information based on emerging trends at stores.  This information can also be shared with the vendors/suppliers on frequent intervals. This will eventually help vendors/suppliers proactively plan internal inventory requirements based on needs of retail customers. Safety stock at each node in the retail network therefore can be better managed and eventually reduced.

Express Courier Networks

Time sensitive courier networks require a lot of coordination and planning from the origin to destination. Just in Time (JIT) requirement in express courier network offers a very small planning window for any last minute changes or exceptions from forecast.

Route planning for delivery process is generally based on historical information, time standards and seasonal demand trends. This planning exercise is carried out on a periodic basis and any exceptions to the plan are managed in a reactive mode.

Opportunities for a more proactive approach can be explored by further investigating the overall process. Delivery related information is generally scanned into the system at the time of pickup. This information resides in package handling systems and is used only for sortation related purposes at hubs and regional service centers. Usage of this information can be further extended to planning of delivery routes based on actual number of packages and actual delivery addresses. This can eliminate current uncertainty in planning.

In the proposed scenario, systems can start accumulating delivery related information until all pickups are completed.  Planning logic within the system can then group the deliveries optimally by delivery area and eventually by routes minimizing number of routes and delivery time while maximizing number of deliveries. This can help drivers with daily route planning workload and minimize time spent by managers/supervisors on balancing routes on a daily basis.

Several opportunities therefore exist and solutions are feasible. A fresh approach towards the role of supply chain management systems is needed. The phrase “Information is power” does speak volumes about the role information can play in defining the shape of future supply chain networks.

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