Welcome to GLS Consulting’s very first blog entry.
Why is it so hard to match supply with demand? For supply chain and process veterans, the key word is VARIABILITY. Variability in demand, process variability and supply uncertainty all play into the equation.
If we know the exact demand (and some organizations do!), it is much easier to plan and execute supply chain processes to match the supply. However, this is rarely the case. Therefore, good supply chain professionals turn to various techniques to reduce the variability in demand such as: improved forecasting, creating flexible supply, and even profit maximization techniques (oversupply vs. undersupply). In most situations, the ideal is to minimize the variation of supply to estimated demand.
Process variability is a throughput killer. Process throughput losses decrease yield and create back orders. Further, process setups interrupt the flow of many processes. Waiting time increases – both within the process and for external customers. Reduction of process variability is present in many business improvement approaches such as Six-Sigma, Bottleneck analysis, JIT and Lean.
Supply uncertainty has to do with the firm supply network and service providers (such as customs brokers and transportation providers). Any single failure in the supply network and service providers can create havoc in downstream supply chain operations. For example, the lack of a single critical part can delay new product launches. Border delays and vehicle breakdowns increase the supply uncertainty. The reduction of such uncertainty is apparent in the creation of reactive capacity, local supply and the use of vendor improvement initiatives.
In many organizations, supply chain professionals want to reduce the variability in order to better match supply to estimated demand. Reduction of variability can result in better supply chain performance to support sales and marketing efforts.
Do not hesitate to contact GLS Consulting if you would like more information or even to provide a comment. Feedback is most welcome.