Automated evolution

From the February 2022 print edition

In the high technology manufacturing sector, where much of my experience lies, manufacturing is either done in-house or through contract manufacturers that act as an extension of the organization.

Sometimes, it’s a combination of both. In this sector and others, over the past couple of years the effects of the COVID-19 pandemic have caused, and continue to cause, a global crisis. This crisis has clearly stressed supply chains. During that time, supply chain professionals have been pulled in multiple directions and face several simultaneous challenges.

For example, manufacturers require parts to ensure their production line continues to function. Sales departments must deal with customers who still want their products shipped on time – even products they may have ordered over a year ago. Procurement must deal with suppliers whose lead times are increasing at least every quarter. These suppliers may de-commit on original schedule dates, while customer service centres request badly needed parts for the dealer.

And of course, coupled with the above issues are the constant price increases supply chain professionals must contain and mitigate.

Accurate data reporting lies at the heart of supply chain. As well, the tools that supply chain professionals require are effective systems and technologies. These include ERP platforms such as a robust demand management system. Such systems can include ATP (available to promise); vendor web portals; purchase to pay processes; visibility into the contract manufacturer’s compliant MRP system to identify issues; electronic data interchange (EDI); barcoding; and warehouse management systems (WMS) including cycle count programs and data analytic mining to encourage cost reductions. This last point is especially useful in the current market, in which inflation is a factor.

Other useful tools include establishing strategic safety stock levels and identifying items on the critical supply path, as well as Internet of Things (IoT) components like advance shipping notices (ASN).
The pandemic means that supply chain data that organizations rely on has been dynamic over the past few years. Original delivery dates are no longer valid since suppliers can encounter delivery issues. These issues are due to several factors, including staffing levels associated with the impact of the pandemic. As well, both the supplier and a buyer organization could be in a mandatory short-term lockdown. Certain raw materials are on allocated or restricted supply. At the same time, increased transit cycle times due to port congestion and trucking and container availability play a role. Avoid suppliers that employ contractual penalties or backslash by playing the force majeure card due to the pandemic.

Keep data current
It is important that data attributes are updated and reflect the current environment. If this doesn’t happen, or systems and technologies are not properly integrated, aligned and streamlined, there is no credibility in the supply chain process. The organization will be flying by the seat of its pants. That reliability is lost, and customers will re-source their products elsewhere.

There are major consequences that come with a lack of data integrity. There is also risk associated with no or fragmented processes designed to streamline that data with other systems and technologies. Sometimes, the demand management function is simply broken. This can happen when planning has been working with inaccurate data. Such a situation jeopardizes the entire planning cycle. This can lead to outdated supplier lead times or in-transit inventories not properly accounted for. Inventories on hand may go unrecorded due to a backlog in receiving. This can stem from manually recording transactions rather than those recorded through barcoding, inventory inaccuracies or inventory allocation issues.

It is important that customer service staff provide realistic status updates to customers, which in turn have commitments that they must fulfill.

All the above have a cascade effect on supply chains. For example, vendor portals allow suppliers to input the latest lead times and delivery dates. Production planners use these portals to calculate when final product is available, when production-line shortages occur and any other supply chain impacts. This formulates demand management requirements. Sales can then provide a realistic delivery date for a new customer order, knowing the ATP (available to promise) is credible.

Data integrity and integration through streamlining allows an organization to be proactive, rather than in a constantly reactive, firefighting mode.

Back to basics
It’s important to remember the fundamentals necessary to ensure systems are properly aligned, running smoothly and producing efficiencies. Supply agreements or master supply agreements (MSAs) in place with suppliers can help to ensure they are updating lead times as they increase or decrease. MSAs can also help track other attributes like lot sizes, minimum order quantities, price breaks, HS codes, country of origin and so on.

Strictly adhering to your company’s supply chain key performance indicators (KPIs) can also help to ensure the systems run smoothly. Doing so ensures that in-transit inventory is accurately stated. It can also help guarantee that supplier delivery dates are realistic, and that the receiving department can conduct a receipt within one day. It helps to solidify inventory accuracy, for example that the right goods –
in the right quantities – are shipped on the right day, and within one business day. Further, it can prevent shipments to customers that are on credit hold. All this arms customer service with the proper information.
Still, supply chains suffer when hardware like printers and barcode scanners don’t work properly. To manage this, ensure that backup equipment is available. Software should be validated to the most recently released version. That software should be available both in the cloud and through user licences.

Using technologies and systems is paramount in navigating fragile supply chains. We have seen this over the past few years with the COVID-19 pandemic. Yet we now have an effective toolbox to deal with supply chain challenges. These include the ERP platform, a well-controlled demand management process and warehouse management systems.

Other tools on the list are systems like the vendor portal, tracking systems provided by 3PLs, barcoding, data mining and data integrity compliance. Further, management should review KPI report cards with a focus on continuous improvements.

In supply chain, accurate and real-time information is the foundation for making quick decisions. We can do this through utilizing our effective toolkit of systems and automation – all coupled with streamlined efficiencies.

As systems and technologies continue to evolve, the next phase in the process will be investigating both artificial intelligence (AI) and blockchain. Going forward, this evolution will no doubt continue to be as interesting and innovative as what we’ve seen so far.

Michael Shelton is an executive supply chain consultant.