Role of Consolidation in Supply Chain Management - An Enterprise Architecture View Part 2
Now that that the impact of consolidation on people, process and technology in supply chain management has been analyzed,(refer my previous blog on this topic), the next area to focus on is role of consolidation of business architecture building blocks in supply chain execution.
A) Consolidation of Business Rules for effective Supply Chain Control
As supply chain organizations are becoming more and more global with greater customer focus, business functions and processes need to respond the changes appropriately. As a result of this business dynamicity, every day presents new challenges to the Enterprise Architect to maintain or improve supply chain effectiveness.
One of the key challenges among them is to provide better control by globalizing processes and technologies, but at the same time remaining flexible enough to accommodate local processes, language, compliance etc variations. This is not an easy task for Enterprise Architect since critical analysis of consolidated business rules, processes and governance is required to distribute them across the global and local boundaries.
To implement these ideas, whole organization needs to be divided into global (master or parent) and local (participant or child) enterprises. Master Enterprise defines global template by standardizing business process and rules for all the organizations and their participants, including customers. The participant organizations (child) either inherit the rules defined by master enterprise or override (based on permission) the global rule to incorporate local business needs.
Greater focus towards defining rules at the Master Enterprise level, ensures better governance efficiency in the supply chain. However, centralizing most of the rules to the Master Enterprise makes system monolithic and inflexible. Hence, effectiveness of supply chain depends on establishing right balance among consolidation factors (rules, process and governance) between global and local scope.
B) Business Processes Optimization by Consolidation
Core business building blocks of supply chain execution have been categorized into three areas: a) Order capture, b) Order management and c) Order fulfillment based on demarcation of broader business functions boundaries.
1) Initiate Consolidation at Order Capture point to Remain Focused until the Very End of Chain
Order is the prime entity in supply chain execution which plays major role in supply chain interactions and efficiency. Consolidation of order at capture layer plays a bigger role in determining level of efficiency in the supply chain execution, be it buy-side (in the form of purchase order) or sell-side (in the form of sales order).
In the most of my Enterprise architecture engagements, I have found that order capture system limitations are direct influencers in determining efficiency of supply chain system. Broadly, limitations in order capture layer, are based on the capabilities of supply chain elements - people, process and technology:
I. Process limitations - e.g. a) drop-ship delivery has to be captured in different order than normal delivery by carriers. b) Orders for food items should be captured in different demand compared to non-food items
II. People limitations- e.g. a) different orders are created due to delivery capacity and skill set limitations (not able to capture order due to unavailability of workforce etc)
III. Technology limitations- e.g. a) Different payment types need different orders. b) different orders due to scattered catalogue management system etc
Efficiency in the order capture decides efficiency of downstream business functions like order management and fulfillment. Minimizing these limitations, by consolidating customer demand in lesser number of orders, helps not only in enhancing the operational efficiency but also imparts lesser load in downstream processes. Finally, handling customer demand in lesser number of transactions directly ensures better usage of technology and workforce.
2. Global Inventory and Order Management - A Proficiency Platform to meet Customer Demand by Consolidation
In supply chain execution, Global Inventory visibility plays an important role in promising and fulfilling customer demand for delivery or pickup orders. Accurate picture of the Global inventory will be available only if the scope of inventory consolidation is clearly outlined between the Enterprise, Fulfillment centers and partners.
Next driver is the Order management system efficiency which is directly dependent on visibility and accuracy of snapshot of the global inventory. Order Management system consolidates the demand and supply to ensure effectiveness, in terms of inventory visibility, resource allocation and capacity planning, carrier services and visibility of fulfillment points). The order management system also mediates between order capture and order fulfillment system. The effectiveness of order management lies in the seamless collaboration between order capture and order fulfillment systems to minimize gaps between order promise and order fulfillment. It evaluates global demand against available supply by consolidating latest inventory snapshot of different fulfillment systems (Distribution Centers, Warehouses etc). So the broader the scope of order management the more effective the supply chain will be for demand variations.
3. Consolidate the Fulfillment Process to Optimize their Operational Efficiency
Core responsibility of fulfillment system is to process the order delegated by order management system, to deliver as per customer request. Fulfillment of customer demand is measured and tracked in terms of the Shipment delivery time as per commitments made to customer at order capture. Shipment is a consolidation of orders that can be shipped together while ensuring compliance to business rules and demand promises. Subsequently, shipments need picking, packing, value added services, loading etc to ship-out from the warehouse. The trigger point of all these activities is wave process which is another consolidation engine which helps in grouping of various pick tasks. The grouping of pick tasks and their distribution decides overall warehouse/DC efficiency.
In a nutshell, consolidation is clearly a focal player in the effective functioning of the supply chain right from order capture to order management to, finally, order fulfillment. But the best practices described above on level of the consolidation would not be effective in isolation and they need to be evaluated in conjunction with technology and architecture consolidation approaches, which is the discussion point in my next blog on this topic. Please remain tuned...