Supply-chain nirvana is an adaptive network that responds to demands—and new markets.

Just-in-time delivery is great, but even better is a supply chain that reacts quickly to changes in demand and can customize products for end users with no hiccups in the process. This concept is known as postponement. Instead of sourcing product components from various locations, bringing them to a plant to be assembled, and then shipping them to various distribution centers, products are assembled at the last minute, based on demand. "For example," says AMR's Hillman, "it's difficult to forecast how many units of 12-ounce versus 16-ounce ketchup will be consumed in a particular region in one week, so you forecast the aggregate demand across all the retail locations but postpone the final packaging until the last minute, based on real-time demand." Postponement is particularly well suited for products such as computers and automobiles.

To take advantage of postponement, companies may need to physically re-architect their supply chains, moving manufacturing plants and reorganizing business processes. AMR's Hillman suspects that companies will begin reevaluating their supply-chain infrastructures within the next few years.

And with the eventual spread of RFID to help track shipments, companies will have even greater insight. "It's gotten a lot of hype, but it's actually working," says CSC's Poirier. Wal-Mart, for example, cites a 16 percent reduction in out-of-stocks on items that have been tagged because the company can alert suppliers when stocks dip below a certain threshold.

Global supply chains will also make entering new emerging markets less painful. "Everyone knows that consumption is increasing around the world," says Poirier. "If you aren't thinking about selling into those new markets, you're missing the bet of the century."

That may be, but it'll still be a culture shift for many firms, as Lexington's Merritt can attest. "It's been hard for us," he admits. "Everyone is signing on with the WTO, and if you want to be a part of that 300-pound gorilla, you have to compete on that level. Companies don't see how badly they are going to get burned if they think they aren't going to play in the global market."

Ask your chief strategist:
  • Are we prepared to enter new global markets?

    Tell your COO:
  • Postponement will give us greater flexibility and control over our supply chain.

    To download a Fact Sheet, click here.

  • This article was originally published on 03-06-2006
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