Effective Channel Disintermediation, Supply Chain Optimization, and Mitigation of Sub-Optimization

Effective Channel Disintermediation, Supply Chain Optimization, and Mitigation of Sub-Optimization

?What are some of the challenges in supply chain channel disintermediation? What are the key elements of supply chains? How do firms optimize their supply chains? How do firms mitigate sub-optimization in supply chains? The answers to these questions are pertinent to effective supply chain optimization and strategies designed to mitigate sub-optimization to create agile, resilient, and customer-centric supply chains that drive business success by optimizing the profit-producing capacity of the enterprise.? In this series on supply chain management, we will ponder these conceptual frameworks, postulate some practical guidance, and suggest current industry trends and best practices.

?Operations management, logistics management, and supply chain management are related concepts and integral to the effective procurement of raw materials, the transformation of raw materials into finished products, and the distribution of products to the final consumers.

?Operations management focuses on the production process, managing resources and activities to create goods and services. The emphasis is on efficiency, productivity, and quality. The operations manager manages production planning and control, inventory management, quality control, and process improvement.

Logistics management focuses on coordinating the movement and storage of products, and resources. The emphasis is on getting the right product to the right place at the right time. The logistics manager is responsible for managing transportation, warehousing and storage, order fulfillment, and freight forwarding.

Supply chain management focuses on integrating all activities, from sourcing to delivery, to create a seamless and efficient flow of goods, services, and information. The emphasis is on creating value for customers and stakeholders. The supply chain manager manages sourcing and procurement, production planning and control, logistics and transportation, inventory management, supply chain visibility, and analytics.

?Cycle time in supply chains is the time it takes for a product to move through the entire supply chain, from raw material sourcing to delivery to the end customer. It measures the efficiency and speed of the supply chain. Some of the key elements of the supply chain include suppliers who provide raw materials, components, or services, manufacturers who produce products, distributors who store and distribute products to customers, logistics providers who manage transportation, warehousing, and delivery, customers who receive and use the products and information systems that enable data exchange and visibility across the supply chains.

?Some of the key objectives of supply chains include cost reduction- minimizing costs while maintaining quality and service, improved delivery performance-increasing speed, reliability, and flexibility, increased agility-responding quickly to changing customer needs and market conditions, enhanced customer satisfaction-meeting or exceeding customer expectations, reduced inventory levels-minimizing inventory costs and maximizing inventory turn-overs, improved product quality-ensuring high-quality products and reducing defects, increased supply chain visibility-providing real-time insights and transparency, risk management- identifying and mitigating potential risks and disruptions, sustainability- reducing environmental impact and improving social responsibility and innovation-staying ahead of competitors through innovation and continuous improvement.

?Supply chain channels disintermediation is the removal of intermediaries in the supply chain, allowing companies to connect directly with customers and reduce costs. Several opportunities and challenges derive from disintermediation. The opportunities include reduced costs by removing intermediaries, greater efficiency by reducing the time it takes for a product to move from production to the customer, ability to build a direct relationship with the customer, greater control over the customer experience, greater agility, and ability to respond to changes in the market, and ownership of customer data.? The challenges include upfront investment in technology, logistics, marketing, and customer support systems, increased marketing and advertising expenditures, increased complexity in operations, increased difficulty in competing with established players, and the need for substantial investment in hiring and training knowledgeable and competent staff.

?Supply chain optimization involves streamlining and improving the efficiency of the entire supply chain, from sourcing to delivery, to maximize value and minimize costs. This can be achieved through process optimization-streamlining processes and eliminating unnecessary steps, inventory optimization-managing inventory levels to reduce costs and improve availability, network optimization-optimizing the physical supply chain network, including transportation and warehousing, supplier optimization-selecting and managing suppliers to improve quality, cost, and reliability.

?Supply chain sub-optimization challenges occur when individual departments or functions optimize their performance at the expense of overall supply chain performance. ?Some of the challenges include siloed thinking and departments prioritizing their own goals over overall supply chain objectives, lack of visibility and limited visibility across the supply chain leads to inefficient decision-making, misaligned incentives and performance metrics and bonuses driving sub-optimal behavior, insufficient collaboration and poor communication and coordination among departments and partners, inadequate data analytics and limited insights and poor data quality hinder informed decision-making.

?Some Practical Guidance, Industry Trends, and Best Practices:

?-Map and analyze your supply chain to identify areas for improvement and collaborate with third-party logistics (3PL) providers or consultants for expertise and effective support.

-Implement a transportation management system (TMS) to optimize transportation costs and routes and utilize data analytics to optimize inventory levels and reduce stockouts.

-Develop strategic partnerships with suppliers to improve quality and reduce costs and consider implementing a cloud-based supply chain platform to increase visibility and collaboration.

-Digitalization and automation of supply chain processes, increased use of data analytics and artificial intelligence (AI), adoption of cloud-based supply chain platforms, and greater emphasis on sustainability and environmental responsibility.

-Increasing focus on customer experience and personalized delivery and implementing cross-functional teams and collaborative decision-making processes.

-Establish clear, aligned performance metrics and incentives and invest in supply chain visibility technologies and data analytics tools.

-Conduct regular supply chain assessments and optimization initiatives and foster a culture of collaboration and continuous improvement.

-Define and communicate clear supply chain objectives and strategies and provide training and education on supply chain optimization and collaboration.

-Implement process integration and automation to reduce siloed thinking and utilize data analytics to identify and address disintermediation and sub-optimization challenges.

In sum, there may be some benefits from supply channel disintermediation, however, there must be effective mitigation strategies to keep the challenges from becoming crises and exacerbating sub-optimization. Effective utilization of transportation management systems (TMS), warehouse management systems (WMS), inventory management software, supply chain visibility platforms, and predictive analytics and AI solutions is critical to supply chain optimization strategies. Finally, effective supply chain management involves coordinating and integrating all these functions to create agile, resilient, and customer-centric supply chains that drive business success. By optimizing their supply chains, addressing these challenges, and implementing mitigation strategies, firms can overcome supply chain sub-optimization, achieve greater efficiency, reduce cost, improve their sustainability and customer-centricity to build and sustain competitive advantage in the global marketplace, and optimize the profit-producing capacity of the enterprise.

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Prof James Gaius Ibe is the Chairman/Managing Principal-At Large of the Global Group, LLC-Political Economists and Financial Engineering Consultants, and a senior professor of Economics, Finance, and Marketing Management at one of the local universities. The Global Group, LLC is familiar with the effective use of theoretical and conceptual frameworks. As reflective practitioners, we seek the creative integration of rigorous academic research, industry trends, and best practices.