Advantages of Segmenting your Supply Chain

Executives and supply chain leaders face many challenges today in every aspect of their operations and enterprise integration. The following in my opinion are the top ten challenges:
• The need to be more customer oriented while managing the supply chain cost (bottom-line) more efficiently. Companies have long known the importance of designing offerings to serve the needs of different markets and consumers, but accomplishing this can be difficult given how quickly customers’ behaviors and expectations change. Also, more business to business (B2B) customers are expecting a business to consumer (B2C) experience when interacting with other businesses.
• Information delay or latency, which creates the need for companies to design business processes that realize the information flow between business partners.
• Globalization which intensifies the competition and makes the competitive advantage crucial.
• The increased complexity of supply chains including the need for tighter control, the growing complexity of managing information flows, SKU proliferation, channel complexity, and the increasing trends of 3rd party logistics.
• Long and unpredictable product life cycles. Rapid product innovation forces the product introduction cycle to be faster to react to the market needs and gain competitive advantage.
• The shift from vertical integration to horizontal supply chains which calls for more efficient and effective collaboration with suppliers and customers. The new trend is for companies to buy out competitors in the same business or merge with them instead of buying their suppliers (i.e. to expand vertically instead of horizontally).
• Expensive operating cost structures, especially when companies are facing intensified competition. Related to that is the increase in transportation cost due to outsourcing
• The disruption to the supply chain from demand and supply mainly caused by supply chain uncertainty and variability.
• Supporting the redesigned processes with leading edge technology that is easy to integrate, cheap to maintain, and fast to achieve results.
• Outsourcing and having suppliers across the world. Companies continue to outsource assembly work, information systems management, call centers, and product engineering to contractors. The challenge is to decide what to outsource, and how to make sure that customer satisfaction, delivery service, and quality are not compromised.
• The need to explore insourcing for certain clusters to improve responsiveness rate. More than a decade ago, many companies started moving their production operations to lower-cost countries.

The industry is again on the brink of a major global shift. Various of the offshore cost advantages that once existed are beginning to erode. Wage inflation, tariff taxes, rising oil prices — even natural disasters — are among the factors affecting outsourcing supply chain profitability, agility, and risk.

Several companies underestimated the offshore impacts of long lead times and high inventory carrying costs. They are discovering that maintaining service levels, in addition to the inventory and logistics buffering costs necessary to support the long-distance supply chain, far outweigh any labor cost advantages. In addition, outsourcing production introduces a latency lag in bringing new products to market and responding to market trends (Johnston, 2012).


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