No longer can companies afford to have silos, even those that have existed for many years. And it will be technology that breaks them down.
Analyst insight: Planning is often a silo, kept separate from operations. Even operations themselves have silos, such as transportation and warehousing. Breaking down the silos is a difficult task that is best facilitated by systems, such as one that ensures supply plans can be cost-effectively executed within an organization. The benefits are significant. In addition to reducing freight costs and warehouse overtime, there are gains in customer service and carbon emission reductions.
One of the biggest challenges in supply chain management is the existence of silos among different functions, such as planning, warehousing and transportation. These silos often result in sub-optimal performance, inefficiencies and conflicts, as each function pursues its own goals and metrics without considering the impact on the others. For example, planning may try to maximize order fill rates by pushing a large volume of products from a plant to a customer-facing distribution center without taking into account the transportation costs and the warehouse capacity constraints.
As a result, there may not be enough space, so shipments may wait days to be unloaded. This also leads to higher freight expenses as the transportation group’s reluctance to ship fewer loads for fear of being blamed for a stock-out ends up going deep into its carrier database, virtually without concern for cost.
How can we break down these silos and achieve a more integrated and collaborative supply chain? The easy answer lies in leveraging technology to enable cross-functional visibility, coordination and optimization. Technology can align the goals and metrics of different functions. Balancing the trade-offs between cost and service, and respecting the operational constraints of each function’s technology can create a deployment plan for a 30-day time frame, enabling all metrics to be met.
One company that has successfully implemented this approach is a large consumer goods manufacturer — using a cloud-based software solution that considers supply plans, warehousing, and transportation costs and constraints. The software uses advanced algorithms and artificial intelligence to generate optimal deployment plans for a month. These plans consider and manage the inter-dependencies and impacts on all players.
The result is a streamlined transportation plan that reduces volatility, lowers transportation costs, and speeds up deliveries. The company has also achieved higher levels of employee satisfaction and engagement because the “silos” now work together as a team. Much of the work within these operations could be automated, making for smoother workflows and greater productivity.
Breaking down silos in the supply chain is not easy, but it is possible with the right technology and mindset. By using technology to integrate, coordinate and optimize different functions, companies can create a more agile, efficient and responsive supply chain that delivers value to customers and stakeholders.
Outlook: While it hasn’t happened yet, and many have written about it, there is a convergence between planning and execution. No longer can companies afford to have silos, even those that have existed for many years. And it will be technology that breaks down these silos as, with a very decentralized workforce, it’s challenging to coordinate otherwise. The technology will leverage AI, but also add mathematical optimization, which means leveraging capabilities that have existed in the operations research toolbox for many years.