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It feels so good: that one standard sequence of familiar processes in your company's supply chain. A one-size-fits-all approach that allows you to almost effortlessly serve your largest, most valuable stream, while also handling other product flows. Yet, this happy flow starts to falter when new circumstances, different customers, and new market demands emerge.
Of course, with such a one-size-fits-all approach, 70 to 80% of your total supply chain will run smoothly. But… we are now operating in highly dynamic times and markets. With global unrest, trade restrictions, and scarcity of raw materials, new sales channels emerge, and in most markets, a variety of customer and product demands are arising. Take the example of a manufacturer whose supply chain has been fully designed to deliver large volumes to a major retail chain, but now sees future growth in demand from smaller specialty stores, webshops, and other customers with their own specific needs.
If, as a manufacturer, you stick to that one dominant flow, it becomes difficult to adapt. There is no room for flexibility. Before you know it, you'll be stuck in a complexity of exceptions. As a result, you'll experience constant ad hoc adjustments to production lines, inefficient processes, capacity problems, time loss, frustration, and additional costs.
The solution is to switch to a differentiated approach. A flexible and scalable supply chain where the chain is divided into separate, well-defined modules. This means each module performs a specific function or task within the supply chain, including purchasing, production, storage, distribution, and delivery. You can combine different processes and services and continuously adapt them to the specific needs of various customers and markets. For example, the manufacturer we mentioned earlier: standard modules for mass production and efficient distribution of large volumes to supermarkets, while simultaneously specialized modules for retail markets, offering a more personalized and flexible approach.
An integrated, modular approach provides you with a flexible structure that allows you to respond more effectively to numerous changes. It makes it easier for you to shift, reconfigure, scale up or down, and offer customized solutions. It also simplifies critical decision-making. When do we opt for large inventories, and when can we manage with smaller batches and volumes on the purchasing side? How do we manage the standard flow, and how do we schedule other flows in a proper way? How do we create a fast lane while easily switching to other lines where we choose extra high efficiency over speed? Additionally, a modular supply chain enables you to integrate innovations and new processes faster and achieve economies of scale without needing large-scale restructuring. The result is a more agile and efficient organization that significantly reduces the complexity and costs associated with exceptions and adjustments.
Take a ‘snapshot’ of all your flows within your total supply chain. Where have the urgent questions, deviations, exceptions, and hiccups occurred recently? Which new customers, opportunities, and demands are emerging? Based on that, consider adding new modules. Or decide it’s time to phase out certain flows because they no longer add value. In short, what are the desired and undesired exceptions? Repeat this process regularly. It’s all about constantly monitoring, securing, and continuously improving.
Bastiaan Boers
Partner ARV Group