10 STEPS TO GENERATE PROFITS, - Coggle Diagram
10 STEPS TO GENERATE PROFITS
PERFORM REGULAR DEMAND AND COST-TO-SERVE ANALYSIS.
The foundation of segmentation is data-driven analysis of demand dynamics and the profitability of customers and products.
This analysis provides the information needed to tailor service agreements and supply chain policies in order to raise the overall profitability of the portfolio while providing reliable and suitable service.
The objective here is to understand which customer/product combinations are winners and which are losers, and then to structure supply chain policies such that some or all of the losers are turned into winners.
This may require changing
the replenishment model and service-level agreements for a specific customer/product combination.
IMPLEMENT DIFFERENTIATED DEMAND POLICIES IN CORE FUNCTIONS.
Demand signals can come in the form of orders, forecasts, and safety stock, and that they can come from different channels (retail, Web, distributors, and enterprise) and from different sources (original equipment
Furthermore, demand signals can come from different customer types, as discussed in the previous section (large, highly profitably customers versus small, unprofitable customers).
In order for the supply chain to align with segmentation strategies, the demand signals within core supply chain management functions—such as master planning, transportation planning, distribution planning, and factory planning —must be prioritized in a way that aligns with those strategies.
The demand priorities must be driven by the overall
segmentation strategy that is tied to the service/profitability framework discussed in the previous section.
IMPLEMENT DIFFERENTIATED INVENTORY POLICIES.
Inventory optimization has progressed during that period to become a process-driven discipline of regularly determining what inventories to carry, where, in what form, and in what quantities across a multiechelon network.
Based on this information, companies use analytic tools to evaluate the entire network
and determine the stocking policies for each product at each stocking location.
This process will include determining how much finished-goods inventory to carry downstream at regional distribution centers (DCs), upstream at central DCs, and at factory locations.
IMPLEMENT DIFFENTIATED CUSTOMER REPLENISHMENT PROGRAMS.
Enterprise customers might be served through a combination
of configure-to-order and build-to-stock strategies. Retail customers, meanwhile, could be served through build-tostock along with a combination of distribution resource planning (DRP); vendor-managed inventory (VMI); collaborative planning, forecasting, and replenishment (CPFR); and emerging point-of-sale (POS), analytics-driven
IMPLEMENT DEFFERENTIATED SUPPLIER REPLENISHMENT PROGRAMS.
supplier replenishment programs should be segmented based on
Many companies today use a combination of owned and outsourced factories as well as a combination of shorter-leadtime, nearshore capacity and longer-lead-time, offshore capacity
These different supply modes must also be
synchronized with the ordering and customer replenishment programs on the front end of the supply chain.
IMPLEMENT REGULAR TOTAL-LANDED-COST SOURCING ANALYSIS
companies today have integrated workflows across engineering, procurement, and supply chain organizations to incorporate total-landed-cost analysis into engineering and procurement decisions. These decisions are based on a
holistic view of cost, including:
Transportation costs, including fuel surcharges
Inventory carrying costs
Inventory obsolescence costs
Duties and taxes
Product rework and damage costs
Customer service penalties
Furthermore, sourcing decisions have a large impact on the cost to serve discussed earlier. Accordingly, supply chain managers are ensuring that sourcing decisions are made within the overall segmentation strategy for serving customers
IMPLEMENT DIFFERENTIATED ALLOCATION AND ORDER PROMISING.
Allocation is the process of reserving inventory and/or capacity for certain customers or
groups of customers, or for other entities, such as sales groups or geographies.
The intention is to provide preference
for certain customers based on objective criteria such as volume, profit, and service-level agreements. Order promising
is the process of providing a date by which a product will be delivered, with a high level of reliability.
With integrated allocation and order promising, companies can achieve many of the operational goals of supply chain
segmentation. Leading companies, in fact, have employed integrated allocation and order-promising techniques to
provide highly reliable and profit-driven customer service.
Incorporate monthly and weekly tradeoffs into S&OP
Sales and operations planning (S&OP) is a tactical process for end-to-end coordination, collaboration, and alignment
with a single plan for the enterprise.
The process occurs over a monthly cycle, with weekly updates and adjustments.
S&OP is critical to the success of a segmentation strategy because it is the process by which an enterprise aligns its decisions with profit and customer service plans. These plans are then executed within the policies that have been
deployed to support the segmentation strategy.
Automate policy management
Leading companies today are starting to automate the administration of segmentation policy.
The policy is then automatically deployed into the relevant systems on that date. Concurrently,
various automated workflows ensure proper communication and approval.
Implement a business optimization center for continuous learning
Its mission includes establishing, implementing, and monitoring segmentation policies, and then continuously learning as such policies are executed over time.
The center is also responsible for the workflows associated with deploying these policies to the appropriate functional business processes.
The business optimization center typically reports to a high-level executive, in most cases the chief operating officer
(COO). In some companies the center reports to the chief executive officer (CEO).