Foreword
Supply chain management plays an important role in enterprise operations, which has a significant impact on enterprise cost control, efficiency improvement and market responsiveness. In the actual production and operation process, enterprises often face challenges such as uncertain demand forecasts, rising supply chain costs, unstable material supply, and delayed product delivery, which pose potential risks to the sound operation of enterprises. In order to cope with these challenges, enterprises need to carefully formulate and optimize supply chain management strategies according to their own actual conditions to better manage risks and ensure smooth operations, so as to improve their core competitiveness.
Based on rich practical experience and cutting-edge theoretical research, CUHK Consulting has launched a series of articles on supply chain strategy, aiming to provide enterprises with a comprehensive supply chain management framework and practical improvement strategies: the first article proposes the path for enterprises to strengthen the top-level design of supply chain in view of the practical problems of supply chain management often faced by enterprises (click to read: "Supply Chain Strategy: Three Steps of Enterprise Overall Planning and Supply Chain Management"); The second part, starting from the supply chain strategy model, discusses the focus of management strategies under different models (click to read: "Supply Chain Strategy | Prescribe the right medicine, enterprises choose the appropriate supply chain strategy model). This article will further elaborate on the key points of supply chain management, and provide directions for enterprises to optimize and improve supply chain management by focusing on specific dimensions such as demand planning management, procurement management, supplier management, and inventory management.
1. Demand planning management
Demand planning management specifically includes two aspects: demand forecasting and planning. Demand forecasting is the estimation and judgment of future commodity demand and changing trends, and the forecast results are an important basis for enterprise management to formulate and adjust decisions including procurement, supplier selection, production load planning, process selection, inventory, equipment layout, etc. Therefore, improving the accuracy of demand forecasting is a key problem for enterprises to deal with. In order to improve the accuracy of demand forecasting, enterprises need to do a good job of benchmark forecasting, and ensure that the forecasting work is carried out scientifically and reasonably by establishing a standardized forecasting process, so as to minimize the forecast deviation. The general steps of demand forecasting include clarifying the demand forecasting objectives, collecting reference information data for forecasting, identifying the main factors affecting forecasting, selecting appropriate forecasting methods, and establishing forecasting performance and error measurement standards. On the other hand, it is necessary to do a good job of judgment adjustment, that is, to dynamically adjust the benchmark forecast, and adjust the benchmark forecast by judging the impact of random factors on demand, so as to reduce the difference between the forecast and the actual market demand.
▲Figure 1 Schematic diagram of the demand forecasting process
The formulation of the plan is based on the forecast results, combined with the current inventory level, production capacity and other basis of the enterprise to formulate a reasonable procurement, production, inventory and other plans, to promote the enterprise to rationally allocate resources under the premise of the lowest cost, and reduce the pressure on the supply chain of the enterprise. Planning is the specific implementation and implementation, enterprises can build their own supply chain planning system on the premise and basis of demand forecasting, and do a good job in advance planning of procurement, production, inventory, logistics, delivery and other activities. In the process of formulating plans, enterprises need to focus on the coordination of various plans between different departments and fully consider the opinions of different departments. In addition, according to the dynamic adjustment of demand forecasts, the rolling plan is implemented to promote the flexible adjustment and revision of the plan according to the actual situation changes, and improve the accuracy and operability of the plan.
▲Figure 2 Supply chain planning system framework
2. Inventory management
One of the main purposes of demand forecasting is to optimize inventory management. In enterprises, inventory is equivalent to a "reservoir", regulating the imbalance between production and demand, ensuring that the supply chain of enterprises has a certain degree of flexibility, but at the same time, inventory will occupy funds and generate additional management costs. Therefore, strengthening inventory management is another problem that enterprises need to focus on. The core of inventory management is to manage inventory levels, and ultimately achieve the purpose of effectively balancing service levels and inventory levels, specifically, a reasonable inventory quantity can not only ensure the normal operation of production, but also ensure the timely delivery of orders, while avoiding inventory backlog and reducing the occupation of cash resources.
To manage inventory levels, enterprises should dig out the root causes of problems, formulate relevant policies according to their own conditions, establish effective management models, and explore advanced management methods. For example, in view of the lack of information sharing, inventory management is facing the problem of large demand fluctuations, enterprises can be solved by strengthening cooperation with enterprises on the chain, the current common supply chain inventory management modes include supplier managed inventory (VMI), joint inventory management (JMI), just-in-time production (JIT), etc., various inventory management models have their specific application scenarios and advantages and disadvantages, enterprises can consider business scale, business strategy, supply chain structure, customer demand fluctuations and other factors. Adopt a suitable inventory management model. In view of the large variety of inventory products and the "one-size-fits-all" control strategy, enterprises can use the ABC classification method to classify inventory and further propose differentiated management measures for different types of inventory.
▲Figure 3 Supply chain planning system framework
3. Procurement management
Procurement management aims to procure materials, services and equipment from the right suppliers at the right time, at the right price, in the right quantity and with good quality through integrated management methods. Procurement cost and quality are the focus of enterprises in the procurement process, and obtaining high-quality supply products with less capital expenditure is the main goal pursued by enterprises. Therefore, in the face of the practical problem of diversified procurement material demand and limited funds, it is necessary for enterprises to do a good job in the classification management of procurement materials from the source, formulate appropriate procurement strategies according to the characteristics of different procurement categories, and strive to achieve the purpose of reducing costs under the premise of ensuring quality.
Enterprises can evaluate and classify purchased materials as a whole according to the two dimensions of "supply market complexity" and "impact on business", and clarify the positioning of all purchased materials. Among them, the "supply market complexity" dimension specifically includes five subdivision criteria, such as entry threshold, supply market competition, pressure from substitutes, buyer's bargaining power, and seller's bargaining power, and the "impact on business" dimension includes expenditure impact (the proportion of procurement costs in the total expenditure of the enterprise), customer value impact (value provided to customers), product differentiation impact (can cause product differentiation), leading technology impact (let customers experience the leading technology of products), Procurement unsuccessful impact (procurement failure will affect customer satisfaction) and other five sub-criteria.
▲Figure 4 Schematic diagram of procurement category positioning
On the basis of classification, enterprises can further adopt different management strategies according to the characteristics and attributes of different categories. For the utilization-oriented procurement categories with the characteristics of high business income and low supply risk, the procurement management strategy should be based on the basic principle of selecting suppliers with good quality on the basis of cost reduction, and the specific strategy combination methods such as procurement volume concentration, optimal price evaluation, and global procurement can be adopted. For secondary procurement categories with the characteristics of low business income and low supply risk, the procurement management strategy should be based on the basic principle of reducing manpower, time and other related inputs, and the method of centralized procurement volume and the most effective price evaluation strategy can be adopted. For strategic procurement categories with high business income and high supply risk, the procurement strategy is based on the basic principle of establishing close strategic partnerships with suppliers and realizing vertical integration of resources, and can adopt a strategic combination method of product specification improvement, joint process improvement, and relationship reconstruction. For bottleneck-type procurement categories with low business income and high supply risk, the procurement management strategy is based on the basic principle of ensuring the continuity and safety of supply, and the strategy combination method of product specification improvement, joint procedure improvement, and relationship reconstruction can be adopted.
▲Figure 5 Schematic diagram of procurement category-procurement strategy combination
Fourth, supplier management
One of the activities closely related to procurement management is supplier management. As an important supply chain resource of enterprises, strengthening supplier management is an indispensable functional activity to promote the efficient operation of enterprises. Supplier management aims to establish good cooperative relations with suppliers through supplier screening, classification and classification, assessment, incentives and other means, so as to ensure that enterprises obtain high-quality products or services from suppliers, reduce procurement expenditures and reduce supply risks. Supply quality, cost, safety and punctuality are the core purposes of supplier management. In order to achieve these core goals, enterprises need to focus on the "management" of suppliers from the perspective of long-term sustainability, focus on supplier evaluation and screening, supplier performance appraisal, hierarchical and classified management, etc., and form an effective supplier management strategy that is consistent with the actual situation of the enterprise through innovative management plans, optimization of index systems, and improvement of relevant systems.
Supplier evaluation screening. The purpose of the evaluation selection is to maximize the selection of suppliers that meet the needs from the decision-making stage, so as to avoid frequent elimination. At the operational level, enterprises can establish a comprehensive supplier selection and evaluation system, select appropriate evaluation criteria for different procurement categories, and then clarify the weight and scoring rules of each evaluation standard, and finally build a supplier evaluation framework model for the evaluation and screening of candidate suppliers.
▲Figure 6 Schematic diagram of the supplier evaluation framework model
Supplier performance appraisal. The purpose of performance appraisal is to supervise the supplier's quality, punctuality and stable supply behavior, so as to avoid the impact of untimely supply, supply interruption and unstable quality on production and operation. At the operational level, enterprises should build a supplier performance appraisal index system based on the characteristics of suppliers, which is used to dynamically and timely evaluate suppliers and evaluate whether they achieve the expected performance.
▲Figure 7 Schematic diagram of supplier performance appraisal index system
Supplier hierarchical and classified management. The purpose of classification and grading is to find out the current situation and provide a basis for the allocation of management resources. At the operational level, on the one hand, enterprises can divide suppliers into four levels: A, B, C, and D based on the results of supplier performance evaluation, and on the other hand, they can divide suppliers into four categories: strategic suppliers, bottleneck suppliers, leveraged suppliers, and general suppliers according to the dimensions of material type, procurement amount, and risk size, and put forward differentiated management measures in a targeted manner to promote the efficient management of suppliers.
▲Figure 8 Schematic diagram of supplier hierarchical management
epilogue
In today's rapidly changing market environment, the core components of an enterprise's supply chain system – demand planning management, inventory management, procurement management and supplier management – play a decisive role in the efficiency and responsiveness of the company's overall operations. Therefore, enterprises must have precise control over every aspect of supply chain management.
Among them, demand planning management is the starting point of the whole process of supply chain management, and enterprises need to make it clear that the forecast cannot be 100% accurate when formulating the demand plan management strategy, and only through the establishment of a standardized forecasting process, the use of effective forecasting methods, the establishment of a rolling forecasting mechanism and other measures to reduce the forecast deviation as much as possible, improve the quality of forecasting, and further prepare plans on the basis of forecasting, so as to guide production practice. Inventory management is an important means for enterprises to respond quickly to the market, and enterprises need to focus on inventory level management when formulating inventory management strategies, focusing on achieving a balance between meeting market demand and maintaining low costs.
Procurement management activities are trivial, complicated, and at the same time in an important position, enterprises need to focus on the classification of procurement materials when formulating procurement management strategies, and then put forward different procurement strategies according to the characteristics of different procurement categories. Supplier management and procurement business synergy, affecting the daily production and operation of enterprises, in the formulation of supplier management strategy, enterprises need to clarify the basic concept of "focus on selection, focus on management", by strengthening supplier evaluation and screening, performance appraisal, classification and classification management and other long-term good cooperative relations with suppliers, in order to support the stable operation of enterprises to build a reliable, excellent quality, strong innovation ability of the supplier partner team.
By continuously optimizing the above-mentioned supply chain management strategies, enterprises can build a flexible and efficient supply chain system and strengthen synergies with all parties in the supply chain, so as to enhance their ability to adapt to market changes, maintain a leading position in the fierce market competition, and achieve sustainable development.
Author: CUHK Consulting Research Institute
Source: CUHK Consulting
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