Included in our Ferrari Consulting and Research Group Research Advisory, 2021 Predictions for Industry and Global Chains, 2021 Prediction Six states: The Fostering of Connected Manufacturing and Supply Chain Operational Synchronization Among Product Demand and Supply Networks Remains an Important Priority.

Today’s highly complex, and now extended supply networks are a product of increasing individual customer requirements, an overall global sourcing strategy that heavily weighted lowest cost producer, and a lack of realization that overall synchronization of manufacturing and supply chain operational processes requires new thinking. Prior to the 2020 COVID-19 disruption, many businesses were under pressure to significantly increase efficiencies, reduce overall costs, but at the same time be able to support the dramatic shifting of markets and just-in-time focused customer fulfillment needs. Indeed, the pandemic laid bare the cracks and fissures of manufacturing and supply customer fulfillment processes.

2021 Predictions

 

Manufacturers and businesses face a reality of extended product demand and supply networks that require more agility and overall synchronization of activities. Owned factories and customer fulfillment centers generally remain as black boxes that have isolated islands of information or multiple systems of transactional record. Often, the only way to bring disparate data and information together is the default use of spreadsheets. The guidance is often the maxim that “automating a broken process only causes the process to fail faster.”

Rather than solving such challenges by adding more safety stock or re-organizing the supply base, there is a need for New Thinking, New Definitions and ultimately New Directions.

New Thinking is about adopting an outside-in perspective where end customer needs drive manufacturing, direct materials procurement and end-to-end inventory management and replenishment requirements. Rather than fighting multiple localized fires each day or optimizing one supply or logistics network fulfillment mode at the expense of inefficiency or added bottlenecks in another, new thinking is an overarching customer demand pull process perspective.

It requires the capture and data convergence of siloed information occurring among existing software and operational application systems in the context of outside-in demand pull data convergence. For manufacturers, connecting existing “islands of information” begins in individual factories.

The new normal in manufacturing is incorporating lean principles such as Kanban for products with level demand but also planning processes to accommodate less predictable demand that is driven by mass customization of specific products. Supplementing material and inventory planning requirements by establishing a Plan for Every Part (PFEP) methodology achieves a more holistic view of inventory optimization.

New thinking includes the notions that smarter, more responsive and flexible factories are indeed the building blocks for smarter, more responsive supply networks.

New Definitions involve a context for driving needs for added efficiencies beyond a single production facility, to include multiple production and supplier facilities. It is a goal of linking interconnected manufacturing and supply chain material and information flows under common decision-making context of quality, cost and delivery (QCD) factors.

New definitions rest with an understanding that Lean principles remain relevant but must now further consider the notions of material requirements, inventory and customer order flows across an extended supply and customer fulfillment network. It could include supply chain mass customization or product postponement strategies initiated at different nodes of the network. The digital transformation of Lean also means a new definition for just-in-time inventory–success of a customer centric supply chain depends on the ability to scale inventory based on present situations.

In the “new normal” of Lean, information will be constantly changing and subject to continuous adjustments. The rethinking of just-In-time is one of just enough inventory to meet existing customer orders, but at the same time, to a more weighted context to now important risk factors, including required customer service levels, existing supplier or transportation lead times, supplier performance and known risks of potential disruption. The quest for a zero inventory model is behind us.

Connecting multiple factories therefore requires a more complete understanding of inventory planning and requirements within and among connected factories or customer fulfillment centers.

New Directions are in building the foundation for more predictive (likelihood of what is to occur) and prescriptive (actions that need to take place to ensure needed outcomes) decision-making capabilities related to manufacturing, customer fulfillment and extended supply network material and inventory replenishment flows. It is a focus on enhanced control, prioritization and joint collaboration to optimize inventory and customer order flows.

New directions are in establishing the business process and technology enablement of connected manufacturing and supply network control towers that better synchronize overall material flows, optimize inventories and needed actions. It is a goal of freeing-up people from constant firefighting and allowing them to assist appropriate teams to initiate exception-based control, prioritization, and collaboration on the most optimal or highest priority inventory flows when disruptions do occur, which they will.

 

Supply Chain Matters will be featuring additional thought leadership perspectives on this important capability related to connected manufacturing and supply network synchronization. This will include a guest posting from one of noted thought leaders in Lean Manufacturing practices, Richard Lebovitz.

Stay tuned.

 

Bob Ferrari

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