Supply chains have now evolved into complex beings, which are networked at multiple levels. These “supply networks” are complex not just in terms of the number of entities, but also in terms of their length. It is not surprising to see these modern day networks extending across the globe, delaying the process and information flows involved. To worsen the issue, an over-reliance on forecasting at each level, for the large variety of products has increased lead times and added costs. As a result, modern day retailers are expected to negotiate between losing sales or meeting customer needs with a loss in margin.
Slow speed to market networks are costly
Speed to market refers to the time taken by a firm to respond to a customer demand. Though all demand facing industries may have this issue, it is most relevant to the retail sector, which faces highest unpredictability of demand. The cost of slow speed to market is evident in lost sales, decreased customer loyalty and high cost of expediting logistics.
Factors leading to low speed to market
Though there is an added pressure on retailers to get products to market quickly, so as to protect their market share and meet customer expectations, there are multiple reasons why your supply network might be slow to react, like:
- Supplier failures to meet the changing demand expectations
- Having an incorrect inventory mix at various supply chain nodes, with too much of wrong inventory and too little of the right inventory
- Unavailability of options to expedite inventory
Our experience has shown us that these reasons are majorly a result of three core issues:
- Low visibility across the network
- Archaic processes, geared mostly towards a lean supply chain rather than an agile one
- Poor organisational structures, with a lack of expediting strategies
Improving speed to market
Aligning sales, operations and finance teams; and implementing systems to integrate supply chain partners can allow organisations to confirm capacity, forecast and order expectations across the supply chain. This will enable collaboration on proposed order changes to ensure available to promise dates are met, and monitor and track finished goods.
Though modern day supply chains require agility to meet unpredictable demands, this adds cost in the chain. Organisations need to work out the right mix of leanness and agility, by building process postponement into the chain. This can also be attained by mass customising products to an extent and devising proper replenishment processes in collaboration with suppliers
Organisation structures need to be revisited so as to support expedition of decisions. This can also be achieved by decentralising processes and by utilising ‘management by exception’ as a rule. Optimising processes through identification and removal of non value adding activities and proper treatment of bottlenecks can also help in improving the speed to market.
With an improved speed to market, organisations typically see a reduction in freight costs and material costs. There is also a considerable reduction in lead times and the corresponding working capital. The improvement in visibility also allows companies to share forecasts and commitments across the chain, allowing suppliers to meet changing demands and manage any potential disruptions. But above and beyond, having the capacity to hold right inventory and make quantity decisions closer to the market helps reduce stock-outs, loss of sales and thus preserve customer loyalty. The improved inventory mix helps in increasing sales and protect margins.
In a nutshell, improved speed to market can not only help in improving response to demand fluctuations and operate more efficiently, but also can help compete better in a fast paced environment.