For manufacturing companies, supply chain management is a top priority. In the absence of an efficient supply chain management system, enterprises will inevitably face a variety of problems. For example, an unstable supply of raw materials can affect production schedules; Poor production management will lead to increased costs; Inventory imbalance will cause capital tie-up or stock-out risk; Untimely delivery can lead to customer dissatisfaction; and poor information flow can lead to poor decision-making, and so on.
If you want to avoid the above problems, you need to do a good job in refined supply chain management and control all processes of enterprise production.
Here is a "Supply Chain Control Tower Analysis Solution", which can help manufacturing enterprises achieve real-time, end-to-end visibility of the supply chain through integrated business planning, which is very constructive for the transformation and upgrading of the supply chain of enterprises: "link"
1. What is supply chain management?
1. The connotation of supply chain management
What is supply chain management? Supply chain management covers the whole process from raw material procurement to final product delivery, including supply management, production management, inventory management, distribution management and information management.
Supply chain management is a management concept, which regards the supply chain as a single entity, emphasizes cross-enterprise management coordination, and integrates all resources in a systematic way; Supply chain management can be a series of activities that implement management concepts, including integrated behavior, information sharing, risk and benefit sharing, cooperation, etc.; Supply chain management is also a series of management processes, which require enterprises in the supply chain to overcome their respective functional obstacles and adopt a process-based approach; Supply chain management is an operational management technique that enables the scope of business activities to extend from optimal logistics activities to all business functions.
2. The relationship between supply chain management and inventory management
Many people confuse inventory management with supply chain management, thinking that supply chain management is actually about managing inventory goods. In fact, inventory management is an important part of supply chain management, and it is a key part of it.
Inventory management can help companies execute activities strategically and connect with the rest of supply chain management. Supply management ensures a stable supply of raw materials and provides a basis for inventory management; Production management: Reasonable arrangement of production activities, affecting the inflow and outflow of inventory; Distribution management adjusts the distribution strategy based on the inventory situation to ensure that products are delivered to customers in a timely manner. Information management runs through the entire supply chain, provides accurate data support for inventory management, and realizes information sharing and collaboration in all links.
2. Challenges of inventory management under supply chain management
1. Insufficient informatization
The flow of information is crucial in supply chain inventory management, but to be honest, there are imperfections in the current messaging systems of many enterprises. According to relevant data, about 60% of enterprises face the problem of untimely information transmission in supply chain management. For example, due to the lag of the information transmission system, the supplier learned the customer demand information one week later than the actual demand, which led to the inability to adjust the production plan in time, and eventually caused a backlog of products and a significant increase in inventory costs.
2. Uncertainty in the external environment
Inventory management is subject to a variety of external uncertainties, including lead times, transportation conditions, raw material quality, and more. Many companies lack research on the sources and extent of uncertainty impacts, resulting in overstocked or insufficient inventories. For example, clothing companies may have overstocked inventory due to failure to consider demand fluctuations, and food companies may lack suppliers due to changes. Therefore, it is crucial for companies to understand the source and impact of uncertainty so that they can adjust their inventory control strategies.
3. Lack of performance appraisal mechanism
The performance evaluation index of supply chain inventory management is not perfect, and some enterprises only use a single index such as inventory turnover rate or order satisfaction rate, and the performance evaluation scale of each member enterprise is different. Specifically, two supply chains, which also have a 90% fulfillment rate, are very different in how quickly they can replenish the remaining 10% of orders. This shows that the existing performance evaluation indicators cannot fully reflect the actual situation of supply chain inventory management.
3. Inventory control strategy under the supply chain
1. Supplier-owned inventory (VOI)
VOI means that the supplier's things are placed in the enterprise to be used, and after the enterprise uses it, the supplier will be billed. From a supply chain perspective, VOI has clear advantages. For downstream enterprises, it can improve the timely delivery rate of suppliers, which can basically reach 100%. Taking an auto parts company as an example, after adopting the VOI model, the on-time delivery rate increased from 80% to nearly 100%, which greatly ensured the continuity of production. At the same time, it also improves the inventory turnover rate and reduces the occupation of inventory funds.
However, VOI also has a number of limitations.
First of all, the VOI method does not constrain downstream enterprises to share planning information with suppliers, resulting in limited sharing of sales and production planning information between the two parties. This may only realize the transfer of inventory costs from one company to another, and the supplier may eventually make the downstream company pay the bill in the form of increasing the unit price.
Secondly, it is difficult to implement the management responsibilities of VOI materials, and the risk of material loss is high, which increases the difficulty of inventory management for suppliers. For example, after a manufacturing company adopted the VOI model, due to unclear management responsibilities, materials were lost, which brought large losses to suppliers.
Thirdly, this kind of inventory control based on the asymmetry of status and contract will generally lengthen the accounts receivable cycle of suppliers.
2. Vendor Managed Inventory (VMI)
VMI focuses on changing the replenishment model, generally in the form of a contract that stipulates information sharing and planning collaboration between enterprises. Different from VOI, VMI has a richer form, not only the downstream enterprises of the supply chain can be the core enterprises, but also the upstream enterprises of the supply chain can also be the core enterprises, and third-party logistics can also be introduced.
In practice, there are many integrations between VOI and VMI. Because the advantages of the two can be combined, the transfer of property rights after use can be used while planning and synergy. For example, an automobile manufacturing company has adopted VMI's information sharing and planning collaboration model in its cooperation with suppliers, and combined with VOI's post-use settlement method to reduce inventory costs and improve supply chain efficiency.
There are generally three forms of implementation of VMI with manufacturing companies at the core.
(1) "Supplier-manufacturer" model. The manufacturer selects some core suppliers, provides them with warehouses, or the suppliers rent warehouses, and then the suppliers decide whether to send warehouse management personnel according to the degree of cooperation and agreement between the two parties. The manufacturer regularly provides the information such as sales forecast, sales plan, and production scheduling plan to the supplier on a rolling basis, and the supplier automatically replenishes the warehouse according to the manufacturer's production arrangement, and even sends it directly to the manufacturer's workshop station.
(2) "Supplier - third-party logistics - manufacturer" model, the introduction of third-party logistics companies for warehouse management. Third-party logistics companies can provide services to multiple suppliers and multiple manufacturers to give full play to the advantages of scale and service. In this model, the 3PL is like a hub in the network, so it is also called the VMI-HUB model.
(3) The core enterprise (generally the manufacturer) - the distributor (or retailer) model, through the cooperation with the distributor or retailer, to achieve effective inventory management.
As an advanced inventory management model, VMI breaks the traditional silo inventory management model, which can reduce the inventory management cost of both parties to the transaction, increase the profitability of the enterprise, and better adapt to the rapidly changing market conditions. For the entire supply chain, the main advantages of the VMI model are: to achieve information sharing and improve the accuracy of inventory management decision data; Reduce supply chain tiers and speed up the processing of inventory management data; Strengthen the strategic cooperative relationship between upstream and downstream enterprises in the supply chain; Reduce overall logistics, communication and other transaction costs.
Fourth, the future development trend of supply chain management
1. Digital transformation
With the rapid development of information technology, the digital transformation of the supply chain has become an inevitable trend. The application of IoT technology in the supply chain is becoming more and more extensive, and real-time monitoring and route optimization of vehicles can be realized by installing sensors on logistics and transportation vehicles.
2. Sustainable development
In the context of increasing global awareness of environmental protection, the sustainable development of the supply chain has attracted much attention. Enterprises are paying more and more attention to the use of environmentally friendly materials to reduce environmental pollution. Take electronics companies as an example, electronics companies can use recyclable materials to make product packaging to reduce the impact of packaging waste on the environment.
3. Intelligence and automation
The development of intelligent and automated technologies has brought new opportunities for supply chain management. Robots are becoming more and more widely used in the supply chain, which can efficiently complete repetitive tasks and reduce labor costs. The automated warehousing system can realize the automatic classification, storage and retrieval of goods, which greatly improves the efficiency and accuracy of warehousing.
4. Networking and collaboration
At present, the trend of network and collaboration in the supply chain is becoming more and more obvious. Information sharing and collaboration between businesses, between businesses and suppliers, and between businesses and customers has become more important. By establishing a supply chain network platform to achieve information interconnection, all parties can keep abreast of the dynamics of the supply chain and strengthen collaboration.
All in all, inventory management is a key part of supply chain management, and reasonable inventory management can ensure the smooth operation of the supply chain, reduce costs and improve customer satisfaction; Doing a good job in the overall layout of supply chain management, through data-driven, can better realize the optimal allocation and accurate management of inventory. In short, enterprises should be fully aware of the challenges of supply chain inventory management, adopt effective solutions, continuously optimize inventory management, and improve supply chain efficiency and competitiveness.
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