Supply chain execution (SCE) systems have evolved from variable home-developed mainframe systems through to sophisticated GUI packages running in web browsers. In general, the aims of these systems were similar – to quickly move product through the supply chain at low cost; to ensure a high level of service for the retail stores; and to do so with the minimum amount of investment in stock except where investment purchase opportunities exist. The systems have evolved to make this possible but operate, of course, in an imperfect world.
So what are the key obstacles that stand in the way of a more efficient supply chain operation, and what solutions exist to overcome these problems?
Unfortunately, customers have a habit of buying more or less than was thought as they react to price changes, advertising, in-store promotions, weather changes and many other variables that can cause short-term variability in consumer demand, and this, in turn, is reflected in the orders placed on the distribution centres.
The next problem is the suppliers’ insistence on requiring minimum loads, creating a saw-tooth effect on inventory rather than a smooth continuous flow. In addition, delivery from suppliers is not always reliable, often due to factors beyond their control, meaning that additional safety stock must be held in order to ensure that service level targets are met.
Misplaced, damaged or stolen stock also confuses the supply chain systems, resulting in pick instructions being generated by a system trying to send virtual inventory which is available only within the memory of the computer system.
The cost of getting it wrong
Retailers have responded by gradually increasing their efficiencies throughout the supply chain. But without the correct metrics to hand, these efforts are sometimes misplaced – i.e. getting better at doing the wrong things. An example would be getting faster and better at put-away and let-down operations in the DC, when a stockless distribution method would be more appropriate.
There have been many recent examples of businesses, for example top supermarket chains, which have slid down the rankings on the basis of less than optimum supply chain performance.
Being unable to identify clearly where the
