Expert explains how to improve supply chain efficiency — Thomas Roemer

MIT Sloan Senior Lecturer Thomas Roemer

MIT Sloan Senior Lecturer Thomas Roemer

From Supply Chain Opz

Companies seeking to further improve their supply chain efficiency will have to continue fighting their old foe – variability – albeit in a set of new clothes.

One emerging way to combat demand variability is to locate (some) manufacturing closer to the customer. By reducing lead times due to shorter delivery routes, inventory and waste in the system can be reduced without sacrificing service levels. Much of the recently observed reshoring efforts fall into this category.

Highly flexible manufacturing goes a step further by moving from a Built-to-Stock to a Built-to-Order system for the most erratic demand pattern. Amazon’s printing and binding some of its demand at centers close to their customers while serving base demands from stock is one example of this approach.

If the final “manufacturing” of the product can be performed by the customer (such as downloading, storing, printing and, increasingly, 3D-printing of files), then this approach also solves the “final mile problem”. However, for less information intensive products, the sheer variety of final customer locations requires a more systemic approach. Amazon’s drone-based approach is perhaps the most illustrious and futuristic attempt to address this problem, while reception boxes and collection-and-delivery points are some of the current solutions. Companies that successfully overcome this challenge will not simply reduce cost and increase service levels, but also reduce their carbon footprint and open up revenue streams from selling carbon credits.

Read the full post at Supply Chain Opz.

Thomas Roemer is a Senior Lecturer in Operations Management and has served as the Executive Director of the Leaders for Global Operations (LGO) Program since July 2014.

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