Supply chain is considered part of every broad and little aspect of business (including raw material acquisition, product distribution, and customer service) and the Supply Chain function has added tremendous value and strengthened operational efficiency. It has also embraced a lot of uncertainty, including demand fluctuations, to support continuous improvement and deliver return on asset employed. Unfortunately, the last two years have put a lot of strain on the overall supply chain, and this has re-ignited discussion around scenario planning in supply chain, especially related to demand variability.
Businesses are dealing with very uncertain times in supply chain management, as every aspect is under a microscope. For supply chain executives dealing with these challenges and the resulting disruption, it has become important to manage unpredictable demand efficiently and optimize inventory in the network to support these demands. Over last 2 years, the pandemic has truly challenged traditional processes and shown the importance of optimal inventory across multiple echelons of the supply chain, as effective inventory management is critical to support organizational growth, impacting both top and bottom lines. The strategic understanding and execution of optimal inventory levels not only helps manage unpredictable demand, but also helps mitigate risk, manage disruptions, and support timely and effective decision making. To address these issues, a strategy that allows for improved performance is called multi-echelon inventory policy, where inventory levels of each echelon support enhanced inventory management coordination.
Per Gartner, an analyst firm, a financial key performance indicator (KPI) is a leading high-level measure of revenue, expenses, profits, or other financial outcomes, simplified for gathering and review on a weekly, monthly or quarterly basis. This information truly projects the health of the organization, both in the short and long term. As mentioned in my earlier blog,” why finance should push for improved supply chain planning”, it is becoming important for most organizations to integrate supply chain planning and S&OP (sales & operations planning) in their financial planning and budgeting processes to have a better view of all the impactors. These financial KPIs are valuable and are used by all stakeholders to evaluate business success.