Industry Market Trends

Ask the Right Questions to Improve Supply Chain Planning

May 17, 2012

Rising pressures make holistic supply chain network planning more critical than ever. A new paper provides key questions that can help improve network planning.

While reducing operating costs and inventory, improving on-time delivery, availability and cycle times are all top business objectives in supply chain initiatives, supply chain planning is not simply about supply, operations or manufacturing. Rather, it requires a holistic view of demand, product and supply processes aimed at maximizing opportunity and mitigating risk.

Earlier this year, a World Economic Forum study called for new models to address supply chain risks. The report, produced in collaboration with Accenture, highlights the need to review risk management practices to keep pace with rapidly changing contingencies facing the supply chain.

Indeed, escalating global risks and local pressures make supply chain network planning more critical than ever.

"According to Deloitte LLP, there are more than 200 current and emergent risks that may have an impact [on] supply chains," Supply Chain Management Review reports. "Furthermore, industry data shows that 85 percent of global supply chains experienced at least one disruption in the last 12 months."

Meanwhile, with direct-to-customer and e-fulfillment representing 10 percent of all sales volume and forecast to double in the next few years, it would behoove logistics leaders to tap into the expertise all across their companies, not simply supply chain knowledge.

A new paper from Tompkins International makes clear that world-class transformational supply chain network planning is "based upon a full understanding of an organization's business objectives - not one or two pieces of the entire supply chain," and it leverages expertise across multiple disciplines to address the full range of business requirements.

"The most successful networks consider the entire global supply chain," according to CEO Jim Tompkins. "By going beyond an analysis of the typical costs - transportation, distribution, inventory - and including taxes, customs tariffs and duties, and security compliance, your company moves to the highest phase of network planning."

Whereas most network studies are conducted by the supply chain group, which typically has little to do with setting business, marketing or sales strategy, according to Tompkins, including these teams in the network planning group along with supply chain can shift the focus from cutting costs and delivering products to growing the business profitably. This optimized approach further enables businesses to accommodate new patterns of customer ordering, fulfillment and service through multiple channels of e-commerce.

Tompkins believes that answering the following questions can help improve network planning:

  • What are the correct costs of operations given the right application of technology?
  • What are the real costs of transportation given the correct transportation solutions?
  • What are the right levels of inventory and locations of inventory given the correct inventory strategies?
  • What are the real costs of the required real estate in any given location, and not just the costs of "average" space?
  • What are the incentives available by locating in certain areas?
  • What are the correct energy costs for the various locations being considered?
  • What are the tax implications of being located at the various places being considered?
  • What are the cost impacts (fuel charges, etc.) or volume fluctuations (M&A or growth) on the plan for the network?

"If your prime motivation is to use your network to drive business, then you may get very different answers than if your main objective is to 'optimize' the network," Tompkins says. "If you are introducing a new product, then determining the network structure is not the desired outcome - because that is strategic.

"Leveraging expertise across the company - not just supply chain - leads to solutions that promote robust growth potential and address all business strategy requirements," Tompkins continues. "And since the supply chain is viewed as a tool for maximizing profitability and return on capital, network planning is never a one-time project; it is an ongoing process that evolves as a company evolves."