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How to tackle a supply chain transformation

Today's business and supply chain leaders understand they need to transform the supply chain. Here's a look at the tools and strategies they'll need to create success.

Supply chain transformation is a top priority as companies strive to satisfy customer expectations.

"Consumers expect their retail experiences to be increasingly convenient," said Abe Eshkenazi, CEO at the Association for Supply Chain Management in Chicago.

Technology to beat the Amazon Effect

Companies such as Amazon persistently push the marketplace closer to the consumer, Eshkenazi said. In turn, suppliers and logistics must work exponentially more quickly. This raises customer expectations even higher, as they expect an anytime-anywhere shopping experience.

"To stay truly innovative and efficient, supply chain managers will need to ensure that they have the right technology capabilities to easily adapt to the changing digital environment and respond to the consumer demand for tailored products and services," Eshkenazi said.

One way to do that is by capitalizing on AI capabilities, which can improve supply chain planning, customer order management and inventory tracking, he said.

Hardware wholesaler True Value is one company that upped its technology investments.

To modernize its supply chain and provide its retailers with the highest fill rate, True Value Co. is investing $150 million in part to revamp its demand planning and replenishment processes. Software was part of that investment.

True Value used JDA Software Inc.'s demand planning and fulfillment software to help manage forecasting and replenishment volatility," said Lyndsi Lee, vice president of global supply chain at True Value Co. in Chicago.

The software helps True Value more accurately predict when and where the company needs inventory and when to deploy that inventory, Lee said. It also helps the company react more quickly to changes in customer demand or changes in seasonal patterns.

supply chain management
At the heart of a transformation is a solid understanding of supply chain management.

A new supply chain model

True Value is in the middle of a multiyear plan to transform its supply chain. Some of that involves moving from a point-to-point distribution model to a hub-and-spoke model. The first model connects any given distribution point to any other point; the second uses a centralized location to serve as an intermediary distribution point for a number of other regional locations, or spokes.

As part of its move to a hub-and-spoke model, the company constructed a 1 million-square-foot distribution hub in Wilkes-Barre, Pa., Lee said. The new facility supports the entire Northeast region, which consists of more than 1,000 retail locations.

The hub-and-spoke model really helps us centralize some of those more volatile SKUs so that we can better service our customers.
Lyndsi LeeVice president of global supply chain, True Value Co.

"In our previous model, we were basically stocking the vast majority of our portfolio in each … distribution center," Lee said. "The hub-and-spoke model really helps us centralize some of those more volatile SKUs so that we can better service our customers."

The new Wilkes-Barre distribution center serves as a central Northeast delivery hub, and a handful of distribution centers serve as hubs for other areas of the country.

Supply chain transformation as business initiative

Many leaders need to take a fresh look at the relationship of the business and its supply chain.

In today's world, enterprises must realize that supply chain transformation is really a business transformation, said Dave Hagen, director in the strategy and business transformation group of The Hackett Group. And that means the transformation has to start with top business leaders and supply chain leaders working together.

"It's no longer the supply chain leader who's driving this independently," he said.

When it comes to tackling supply chain transformation, it's important not to put the cart before the horse, Hagen said. Some companies still struggle with inconsistent processes, departmental silos and infighting. They have to take a step back and first focus on process standardization and employ best practices to provide the foundation to move their transformations forward.

For example, a company that wants to move to a global platform for ERP or supply chain planning before tackling strategic issues is doing things in the wrong order, Hagen said.

"You've got to get everyone on the same page," he said. "Know what direction you want to be heading in terms of what your operating model is and what the supporting best practices are for that before you start throwing technology at the problem."

Stepping back, looking at the big picture and asking the right questions are critical for business leaders who want to transform their end-to-end supply chains, said Lisa Anderson, founder and president at LMA Consulting Group Inc. based in Claremont, Calif.

"Is your sourcing, logistics and manufacturing infrastructure set up to best support customer requirements, bottom-line results and cash flow?" Anderson said. "Have you taken stock of what is changing and at what pace? Is flexibility and resiliency built into your supply chain?"

Leaders should take the time to reevaluate their supply chains from a new lens, she said.

"Instead of thinking about delivering in three months, think about how to transform your supply chain so that you can consistently deliver in three days," Anderson said. "Incremental continuous improvement is no longer enough."

Change management is critical

One of the major challenges with supply chain transformation is around change management, said Michael Dominy, VP analyst at Gartner Inc.

There are two key elements to address change management, he said. One is having a clear business case that defines the strategic and tangible aspects of the transformation -- the why.

The other element is communication and stakeholder engagement, Dominy said. It is critical to build a communication plan to inform stakeholders about the company's supply chain transformation strategy.

A lack of communication can stall the transformation process, as leaders focus on resolving miscommunications rather than the steps to transform the supply chain, according to the "Supply Chain Transformation Guide," a Gartner report written by Dominy. To counter this danger, change management should include continuous communication loops with internal and external stakeholders.

As part of these efforts, companies can implement a center of excellence that drives the best practices across the enterprise, Dominy said.

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