Shared supply management strengthens collaboration in logistics
03 January 2022
03 January 2022
To improve their quality of service, supply chain actors must now opt for collaborative practices. Considering today's challenges: reduction of logistics costs, environmental footprint, etc., distributors are looking for new solutions to gain in productivity.
Before talking about pooled supply management (PSM), it is appropriate to review the concept of shared supply management (SSM) because PSM is a variation of it.
Considered as a tool of ECR (Efficient Consumer Response), SCM is a supply management method by which distributors and manufacturers share the responsibility.
- Efficient Consumer Response (ECR) aims to bring together the retailer and the manufacturer to gain in productivity by working on the joint management of the supply chain and consumer demand.
Traditionally, it is the company's responsibility to manage its supply and inventory. But this is a financial responsibility that weighs heavily. Moreover, it is difficult for the supplier to anticipate the needs of companies and thus to foresee a satisfactory volume of goods.
In the SSM model, the supplier is in charge of supplying the merchandise by respecting as closely as possible the consumer demand, thanks to the information relayed by the distributor. The objective is to reduce stocks and increase the level of service, i.e. sales.
Shared Supply Management allows the manufacturer to have control over supply thanks to the information provided by the distributor in order to accurately assess the volume of supply required.
For the supplier, it is a way to move from a push-flow supply, where the product is manufactured upstream from an estimated number of orders, to a pull-flow logic that is triggered by the customer's order only. The manufacturer has access to information on actual demand and can thus significantly reduce inventory.
Such sharing allows for accurate and relevant forecasts based on the company's real needs. The supply is not fixed and is now done according to the needs.
The vocabulary of shared supply management:
- Vendor Managed Inventory: this is a derivative of the SSM method in which the manufacturer supplies the retailer without prior approval. This requires a high level of trust between the manufacturer and the retailer,
- Collaborative Planning Forecasting and Replenishment: this is a method based on SSM that integrates the concepts of planning and forecasting in the collaboration between the manufacturer and the retailer. They are developed jointly and managed in a participatory manner,
- Cross Docking: the goods are delivered to the grouping / ungrouping point and are directly forwarded to the point of sale. There is no storage step, etc.
The pooled supply management is a declination of the SSM which wants to group together several industrialists with for objective the starting of a logistic collaboration. In addition to the collaboration between manufacturers and distributors, the GMA wants a new collaboration between manufacturers and manufacturers.
Distributors find a way to keep their stocks low by having their products delivered more often and in smaller quantities. Manufacturers can meet this need by limiting logistics costs: even if deliveries are small, the trucks remain full because they are shared.
Benefits of GMA:
- ECR collaboration,
- Standardization of processes between organizations,
- Optimization of the inventory coverage rate,
- Economies of scale and increased delivery frequency for the distributor,
- Lower transportation costs, lower CO2 emissions and more stable competition for manufacturers.
Disadvantages of GMA:
- Difficulty of implementation,
- Increased importance of the industrialist in ECR negotiations for the distributor,
- Exposure to competition for manufacturers.
For an optimal operation, it is preferable for the distributors to work in the same sectors with the same types of products, even the same customers.
Monstock is the inventory and flow management solution that helps you optimize your supplier orders. Increase your productivity by working in collaboration with your suppliers.
To learn more, contact the Monstock team.