It has been said that the key to low costs in an e-commerce environment is through the adoption of a focused supply chain management strategy.
In fact, many companies have begun to incorporate this into their outsourcing plans to contract manufacturers all over the world. In a bid to remain competitive, these companies are trying to achieve the lowest manufacturing costs while maintaining or increasing quality standards. This can only be achieved by distributing the production of different component parts to multiple vendors, often in multiple countries.
Implementing this can be a tall order as coordination amongst many parties of different countries, sustaining lead time standards, inventory levels and maintaining customer satisfaction levels all require great efforts to ensure operability across all tiers of the supply chain. Moreover, traditional linear supply chains just do not have the capability to support such a complicated production process.
Virtual supply chains may hold the key. These systems are designed for flexibility, complexity and speed in managing networks of suppliers, manufacturers, distributors and warehousing agents virtually. Common system protocols which allow efficient communication, collaboration and coordination amongst the different vendors will let everyone work together as if they were one large business.
Apart from that, Internet-enabled infrastructure allows ease of implementation of cross-checking of inventory levels, order status as well as expected product delivery schedules. In fact, problems can be spotted and addressed with speed to minimize downtime or effects on production schedule. Ultimately, customer satisfaction is paramount and everyone is working towards that one goal of ensuring that their best is provided.
Another benefit of a virtual supply chain is its ability to decrease the time to market for a product. Once the ball starts rolling at the top of the supply chain, the short production schedules, punctual transportation timing and just-in-time inventories all contribute to the finished product to be ready within the shortest time possible. As visibility into inventory levels across all stages is clear, the returns on assets attained will also be increased.
Finally, a virtual supply chain that networks all parties together is something that is inevitable in order to increase profitability and reduce costs. Collaboration amongst different parties is necessary in the virtual world as this is the only way in which businesses can thrive. Failure to adopt new and better management strategies will only be detrimental to the business as competitors take over and are able to do a much better job than you. In fact, these practices will be more of the norm in the near future.
Ken Town is VP Research and Technology at Invendia, a leading provider of Vendor Managed Inventory (VMI) and Web-based Inventory solutions.
