Supply chain management is a cross-functional approach to coordinating the entry of raw materials into an organization, managing the internal processing of materials into finished products, and then moving these finished products to the end consumer.
In B2B environments, the demand signal is lagging due to three reasons. The first is latency because the time has changed when the demand signal is processed. The second is amplification: changes in demand become exaggerated as each trading partner removes hedges or adds hedges to the forecast. The third phenomenon is interference where market events add to uncertainty. The best option and the only option for us is to be very flexible and collaborative. That’s where focused supply chain management comes in. The primary role of demand planning in a build-to-order or setup-to-order environment is to allocate capacity and materials to anticipated demand rather than having the final items in stock. The key requirement is to forecast at multiple levels (final products or components), as well as to be able to bring in orders to consume the forecasts. Once the forecasts have been created, an important aspect is to track how they are executed and how well they performed. Therefore, visibility and performance tracking are critical.
Furthermore, collaboration becomes an important topic because it is necessary to involve channel partners within the forecasting process. Lastly, minimizing the supply chain cycle time from order processing to manufacturing and assembly is one of the most crucial aspects.
As organizations strive to focus on core competencies and become more flexible, they have reduced their ownership of raw material sources and distribution channels. These functions are increasingly outsourced to other entities that can perform the activities better or more profitably. The effect is to increase the number of organizations involved in meeting customer demand, while reducing the management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts that aim to improve trust and collaboration among supply chain partners, thereby improving inventory visibility and speed. .