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Smoothing Supply Chain Ripples

Supply Chain Ripples

Holding unsold goods is a risk in any business. The markets and customer demand can take a volatile swing and leave a seller of goods possessing a large amount of worthless or deeply discounted inventory. Traditionally, businesses involved in manufacturing and distributing components that other companies would use to create products would merely sell parts to their customers. However, if the product manufacturer predicted wrong and buys too many unused parts, both companies could take a substantial loss.

Generally, it is desirable to create a situation in which a supplier and a buyer work together to avoid losses by both parties. In addition, by stepping up and assuming some of the risks, the supplier can add value to the business relationship with the buyer. Thus, the question becomes how companies can best work together to balance the demand versus inventory equation.

Digital Systems Provide Consistent Inventory Management Opportunities

Technology drives a constant stream of new systems for inventory control that help companies maximize the advantage of computerized tracking and tracing processes. Using methods like bar code scanning to automate the input of individual part numbers, companies on both ends of the supply chain can closely monitor inventory levels, plan more effectively and head off shortages or gluts in the warehouse or stores.

Additionally, by using sensors to input parts data into a computerized manufacturing execution system (MES), companies can easily keep up with product specification changes requiring the update of parts kits. For instance, a vendor of aircraft hardware kits could offer an airplane manufacturer the service of having the small parts warehoused and changed as needed.

Designing supply chain relationships around new technologies helps businesses cut overall costs while providing a smoother, less chaotic manufacturer-to-consumer pipeline. As global supply chains continually increase their interdependence, it becomes more critical for companies to look for ways to improve services while reducing risks.

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