Year 2007 - Critical Success Factors

companies are exploiting outside expertise in order to provide the best-available skills and resources needed to compete in today’s complex and global marketplace. This outsourcing strategy has caused a ramp-up in contract manufacturing, outsourced warehousing, distribution, transportation and other logistics services, and has also resulted in a heavier reliance on vendor-managed inventory. Develop a close, risk- and profit-sharing relationship with business partners When companies are involved in outsourcing, they need to allocate their resources to manage the processes and relationship with their business partners. Companies must build a collaborative environment that is flexible and adaptable to the changing customer needs. Companies must break down the traditional boundaries established to protect the company and form partnerships with critical entities along the supply chain. They must also learn to work as a team to eliminate non value-added processes, and leverage the capabilities of each team member to maximize value. The establishment of long- term partnership would also avoid the time wasted in matching the right partners, improve product quality, and reduce production lead-time and costs. Adopt information technology to optimize the operation of the supply chain Information technology (IT) takes on an important role to facilitate information sharing, reduce lead times and increase accuracy in planning.The accelerated infusion of technology enables business partners to engage in instantaneous worldwide communication, analysis of complex decision rules, and real-time visibility in most business processes. What many companies neglect is the concept “business drives IT”. It is important for the IT department to have a good understanding of how the company’s business strategy is planned, implemented and analyzed. Just because an IT initiative is possible to provide all of the bells and whistles, this does not mean that it is what the business wants or needs, especially if it will take longer to get the product to market. Too often IT focuses on delivering one product or service whilst the business or consumer is asking for another. Design, implement, evaluate and adjust the work flow, physical flow, information flow and cash flow in the supply chain Aside from managing information flow, a supply chain manager must also integrate and streamline the work flow, physical good flow, and cash flow process. Companies should oversee and constantly optimize the entire supply chain from sourcing, production, transportation, warehousing and sales, in order to achieve: Shorten product lead time and delivery cycles With consumer tastes changing rapidly and markets increasingly segmented into smaller niches, a broader spectrum of products is becoming more and more time-sensitive. Product obsolescence leading to inventory markdown at the end of the season would cause an enormous expense to both manufacturers and retailers. As a result, production and delivery cycles must be shortened in order to meet the ever-changing consumer demand. Here, supply chain management and synchronization play a critical role. Companies should bear in mind that the grouping and order of the manufacturing steps along the supply chain could result in great differences in production efficiency and effectiveness. Lower costs in sourcing, warehousing and transportation In order to optimize the supply chain and drive down costs in each segment along the supply chain, it is imperative for companies to work together to dissect the supply chain and find out the best way to lower inventory and transportation time, increase usability of warehouse and lower management fees. The concept of Just-In-Time (JIT), small batch shipping, vendor managed inventory and replenishment forecasting techniques are a few ways to achieve cost reduction along the supply chain. 12 Feature