Transportation used to be about minimising the cost of routing and scheduling;
Logistics used to be about finding the least-cost network design;
Purchasing used to be about minimising purchased costs;
Manufacturing used to be about scheduling production to achieve the greatest fill rates at the least cost; and
Customer service used to be about minimising customer complaints.
Although each function has evolved to be more complex in purpose, they each retain a strong historical legacy of their original purpose.
We believe the central dilemma that Supply Chain Management addresses is that of balancing the supply and demand with the least risk and cost of over- or under-fulfilment.
Demand and supply are currently in imbalance since they are separated by time, distance and a host of uncertainties between the source and the point of consumption.
The biggest cost for companies is not the cost of salaries, or the rentals or even the marketing expense. The biggest cost for companies is the gap between the demand and supply at SKU – Store level. Around 40% of shelf is wasted by stock which is not required and at the same time around 20% of stock which is ‘sure shot’ seller is unavailable.
Proper focus on reducing the imbalance between demand and supply is the single most effective action leaders in a company can take.