The following post is based on the Spend Matters Perspective, When Sourcing Becomes Supply Chain, which can be found here. Readers may also find of interest our Spend Matters Plus/PRO premium content covering indirect, direct and services sourcing (and e-sourcing), as well as our free research covering the e-sourcing market.
Imagine if the public face of your business was highly dependent upon a printed catalog that over 1 billion (!) people would flip through over the course of a year. Then consider how versions of this catalog would have to be sent to individuals in nearly 40 countries around the world – with regional languages, variations, and tastes accounted for – and showcased in hundreds of stores.
If one begins to deconstruct the supply chain, it becomes even clearer how many moving parts there are. Mills produce paper. Then the component parts are delivered to printers and binders (who in turn need to acquire ink, MRO parts, and other items to fulfill requirements as well). Then the finished product is sent to the distribution facilities. Finally, repeat the cycle for the next catalog.
Further, consider all the various constraints and requirements throughout the extended supply chain, including the following:
- Production scheduling for mills, printers, binders, and distribution facilities
- Distances and logistical decisions between raw material, production, and distribution centers – and inventory requirements based on those decisions
- Quality – including paper, ink, and related elements
- Localization and frequency – and its effect on sales
Talk about complexity! There are literally trillions of potential permutations of optimal supply chain designs to ensure the highest possible fill rates (without excess inventory), how to manage unit and total costs, improve sustainability metrics (e.g., carbon footprints), and so on. But there is only one optimal outcome based on all the possible inputs and all the business constraints that the retailer could opt to put into the sourcing and supply chain design equation.
Any solution needs to be accurate as well as manageable (e.g., smaller orders might be ideal on an inbound and outbound unit cost basis, but not when factoring in labor and other soft costs). Furthermore, all the participants and stakeholders on the buy side would need to see the cost of their requested demands quantified (so they can make the best decision for their own cost center and for the business overall).
To be continued. Download the full Spend Matters Perspective, When Sourcing Becomes Supply Chain here.