Make Supply Chain Constraints Work for you, Not Against You
Companies search for the optimal point in their supply chain that enables them to improve their bottom line and compete in the market...however, supply chain constraints can be a barrier to profitability.
Sales and operations planning is a great starting point for you to rethink your optimum, execute your strategy into the market and accelerate business performance. But how do you derive truly optimal results from your supply chain? Is it really about balancing the equation between operational efficiency, customer demand and inventory?
Yes, sales and operations planning helps your company balance operational efficiency, customer demand and inventory, but the challenge is this: You cannot optimize one element without hurting the other two.
In this juggling act, many companies tend to balance the equation with inventory ― because the sales team will not notice a missed customer delivery and the operations team will not know if inventory utilization has been adjusted. Essentially, nobody owns the inventory management process.
Let us go back to a basic question: Why do you do business? If you ask Clay Christianson, a professor at Harvard, it is to manufacture tons of cash. So how do you find the optimal point in your supply chain?
According to Eli Goldratt who introduced the theory of constraints in the eighties, you need to measure the throughput, which is the rate at which the system generates cash through sales.
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