Manufacturing Insights wants to modernize your supply chain

The last time I spoke to Simon Ellis, he was the supply chain futurist – one of those titles I would kill to get - at Unilever North America (www.unilever.com), a manufacturer of brands as diverse as Slim-Fast and Vaseline.

The other day, I had a chance to speak to Ellis in his new role as supply chain strategy practice director for Manufacturing Insights, an IDC Company. Manufacturing Insights provides strategic business technology and application advice to the manufacturing community.

What got us on the line together was Modernizing your Supply Chain: The Execution Imperative, a new report by Ellis and his colleagues that calls on manufacturers to implement supply chain execution systems that are of the same caliber as their planning systems. To learn more about supply chain management providers, check out Modern’s listing of the Top 20 supply chain management software providers.

The short version of the Manufacturing Insights’ new report is this: Ellis believes that manufacturers have spent a great deal of time and money upgrading their planning capabilities in order to transform themselves into demand-driven enterprises. “For many companies, that was entirely appropriate,” Ellis says. “A lot of companies needed to do that.”

At the same time, many of those same companies forgot that to be successful they have to execute against those plans. “What’s developed is a schism between the demand side of the supply chain, and the ability of the supply side of the equation to act on that demand,” Ellis says. “That’s really problematic as companies pursue low-cost sourcing in China with 90 day lead times.”

Ellis says he wants manufacturers to think about two things as they read the report.

The first is that supply chain execution systems, including warehouse, transportation and manufacturing executions systems have come a long way. “There have been dramatic improvements in the last five years, especially in transportation management systems,” Ellis says. “You really need to compare these new systems to whatever you’re using to see if you’re leaving dollars on the table.”

The second piece is whether or not the demand-driven, or build-to-order, model so highly touted since the e-commerce boom ten years ago, still makes sense for consumer packaged goods manufacturers in today’s economy. “Conceptually, a demand-driven supply chain makes a lot of sense,” says Ellis. “When you think about the supply chain in practical terms, you have factory-utilization and capacity constraints that you just can’t get past. If you’re talking about low volume, high margin products, a build-to-order model works, but I don’t know of any company selling fast-moving, low-margin consumer goods that has been able to make it work.”

While that may sound heretical – haven’t we all been told we have to satisfy a market of one – Ellis uses Dell – the poster child for the build-to-order model – to make his point. “The company is going to produce more preconfigured PCs,” Ellis says, leaving it to the reseller or retailer at the end of the chain to configure the machine to a customer’s requirements.

When Dell shifts gears because of a changing market, it might be time for all of us to take a hard look at how we make and distribute our products.

Let me know what you think about the demand-driven supply chain by posting a comment below or writing me at Robert.Trebilcock@verizon.net .