The supply chain is tightening up again. We are hearing about this in high tech and automotive and most likely in other industries as well. While we never seem to avoid the cyclical nature of demand and supply, it is refreshing to see the level of interest in making good decisions with limited supply.
In working with clients, I have never seen so much interest in supply allocation options, demand prioritization and customer segmentation. Companies are realizing that the FIFO approach to customer demand isn’t good enough anymore. However, you do find some companies that think that they need VERY complex rules.
Supply chain doesn’t have to be complex to be effective. In fact, I would argue that the opposite is true. Companies all want to maximize revenue and minimize stock levels. I believe that global competition has also had a significant influence on the need for supply allocation options. If you can’t satisfy everyone on time, which customers are most important and what impact will not satisfying some customers have on your business?
Many companies have top tier customers that represent such a significant portion of their business that they always need to satisfy. Other companies are rewarding their customers with the best forecast accuracy. Supply is being allocated at either the finished good level or the material component level. If you are managing the finished goods side of the business, you may need a combination of automated supply allocation rules and also the option to manually allocate or create firm allocations to distribution centers or regions.
There is no one rule however for supply allocation. These are collaborative decisions that need to be supported by software but not decided by software. What has been your experience with limited supply? How are you solving this today and do you need a better way? I would be really interested in hearing your comments.
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