The quirks of supply chain management

on 22 January, 2015

Every retail, wholesale and manufacturing supply chain has its own quirks, and if you manage inventory and supply for a builders’ merchant, you’ll be all too familiar with those you deal with.

Product families
Quite often a chain will carry the same – or very similar – products from different suppliers that are interchangeable, such as nails, screws bricks, tiles, sand, and cement. This needs to be taken into account when ordering as there’s a risk that stores could end up with excessively large inventories. With a good system support for replacing products and product families, handling these items efficiently is quite straightforward.

Warehouse space
Storage space is at a premium if you have depots in cities or in expensive regions like South East England. Builders’ merchants typically handle a lot of items where the value-to-space ratio is quite low (sand, bricks or timber, for instance, as opposed to power tools).

Most of our clients have used supply chain management systems to factor storage requirements into account, tracking both the space requirements for particular products and also the availability of space at different depots. This allows for a sophisticated approach to stockholding, whereby larger depots can hold stock as a back up for smaller ones in their area, and customers can be supplied from a variety of locations or orders consolidated at larger depots.

Demand peaks
Very high peaks in demand are pretty standard. This might happen because a firm working on a large capital or housebuilding project places a massive order. Smaller orders typically even out – there’s a ‘smoothing effect’ – but very large ones are hard to forecast.

Different supply chain management systems address this issue in different ways. The builders’ merchants we work with have solved this problem with the help of RELEX’s own business rule engine, for instance.

Depending on the product and the importance of the account, different sales-row-based rules have applied. They may decide to set safety stock levels so that, for critical items, the third largest order from the last 180 days could be met from stock or, for non-critical seasonal items, safety stocks might be based on the median value of the last 365 days.

Because every business, and indeed every branch within a business, is different, any demand forecasting and inventory management system needs to be able to respond to those differences. However, all too often, technology is either designed on a ‘one-size-fits-all’ basis or it relies on the system provider to make many of the changes the client requires.

By ensuring that the system users are able to make any and all the adjustments they need to the system, it puts control in the hand of the people who know the business best. That avoids the problem of the client constantly having to explain to the provider how the business works.

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