Amazon is propelling this age-old topic into a new realm. Since the CEO of the Ontario Airport Authority used the phrase “last mile” has become “last minute” on a panel I facilitated last year, I have shamelessly reapplied his brillant quote.
If customers don’t even know what they want, how can we? Interestingly, we have found that many customers, even the seemingly most confused and volatile ones, have a pattern to their demand. If we take a holistic view of their demand and inventory planning processes from beginning to end and from high level to the minute detail, solutions emerge.
One strategy that has proven quite effective is to “remove the middleman”, the customer himself. Instead, with access to demand information direct from the customers’ customer or end user, you can not only manage the extended supply chain inventory better for a happier customer but you also can improve margins, efficiencies and cash flow to boot.
In consumer products circles, this strategy often termed, vendor managed inventory (VMI) is usually dictated by the “big guys”. In aerospace, it is also expected but termed differently, customer-based ordering, min max and other names. It is also common in healthcare as we won “supplier of the year” for two years in a row because of what we accomplished with VMI for Cardinal Healthcare when I was VP of Operations at PaperPak. We decided to make it a strategy for key customers at PaperPak, even though Cardinal is the only one who requested it. Should you consider a strategy like this to get ahead of your customers’ demand? It is just another aspect in creating a resilient supply chain. Check out our series on the topic.