Have you ever played The Beer Game? It is a supply chain management game developed by professors at MIT. What a frustrating, though hilarious, exercise this was for me as I played the game a few years ago. Like real life, the players are manufacturers, wholesalers and retailers who are each trying to manage supply and demand from their own perspective. And like real life, it is a wild ride that proves great costs for each of these players whether inventory levels are either over OR short.
Today, many technologies are involved in moving a product from supplier to end customers as each player of the supply chain tries to manage demand. The primary objective of a supply chain management solution is to fulfill customer demands through the most efficient use of data by forecasting future demand. The ability to manage the required days of supply means each player can significantly free up the working capital tied up in inventory on hand. If days of supply are on target, it also removes the risk for out-of-stocks which will in turn, improve sales.
Carrying cost of inventory for all players is likely the biggest cost incurred for the supply chain. So we have to get this forecasting right. Are you considering systems and automated processes to forecast demand or to provide computer assisted ordering and receiving? This is a hot topic for Impact 21. Let us know what you are up to…
And remember that if the supply chain were a game, we could stop here. We would not have to talk about all the other costs associated with distribution of products, theft and damaged goods. But it’s not a game guys, it is real.