Managing innovation within firms
Answer1
Pushing inventory upstream is not just a network strategy, or an inventory strategy, or a fulfillment or manufacturing strategy. Rather, it is an end-to-end strategy for the supply chain that has implications for many areas, from the customer through to the supplier. To achieve maximum value from segmentation for both the customers and the enterprise, companies must have policies in each area that are coordinated to the value proposition offered to each customer/product combination.
1. Perform regular demand and cost-to-serve analysis The objective here is to understand which customer/product combinations are winners and which are losers, and then to structure supply chain policies such that some or all of the losers are turned into winners. This may require changing the replenishment model and service-level agreements for a specific customer/product combination. For example, a tire manufacturer that provides the same one-day lead time for both A customers and D customers may want to change the policy to three days for the D customers. This would move the inventory buffer point upstream in the supply chain, reducing overall inventory. The upstream buffer would hold a larger pool of inventory, thus increasing the odds that downstream demand will be satisfied with the exact product required. This change may have the effect of turning D customers into B customers.
Figure 1 2. Implement differentiated demand policies in core functions In order for the supply chain to align with segmentation strategies, the demand signals within core supply chain management functions—such as master planning, transportation planning, distribution planning, and factory planning—must be prioritized in a way that aligns with those strategies. The demand priorities must be driven by the overall segmentation strategy that is tied to the service/profitability framework discussed in the previous section. Supply chain management systems for these core functions
Pushing inventory upstream is not just a network strategy, or an inventory strategy, or a fulfillment or manufacturing strategy. Rather, it is an end-to-end strategy for the supply chain that has implications for many areas, from the customer through to the supplier. To achieve maximum value from segmentation for both the customers and the enterprise, companies must have policies in each area that are coordinated to the value proposition offered to each customer/product combination.
1. Perform regular demand and cost-to-serve analysis The objective here is to understand which customer/product combinations are winners and which are losers, and then to structure supply chain policies such that some or all of the losers are turned into winners. This may require changing the replenishment model and service-level agreements for a specific customer/product combination. For example, a tire manufacturer that provides the same one-day lead time for both A customers and D customers may want to change the policy to three days for the D customers. This would move the inventory buffer point upstream in the supply chain, reducing overall inventory. The upstream buffer would hold a larger pool of inventory, thus increasing the odds that downstream demand will be satisfied with the exact product required. This change may have the effect of turning D customers into B customers.
Figure 1 2. Implement differentiated demand policies in core functions In order for the supply chain to align with segmentation strategies, the demand signals within core supply chain management functions—such as master planning, transportation planning, distribution planning, and factory planning—must be prioritized in a way that aligns with those strategies. The demand priorities must be driven by the overall segmentation strategy that is tied to the service/profitability framework discussed in the previous section. Supply chain management systems for these core functions