End-to-end Supply Chain Management

What is an end to end supply chain?

End to end (E2E) supply chain involves an entire integrated process. From product design and procurement of raw materials then scheduling, production and then final delivery of finished product to the customer. It is further extended to after-sales service and reverse logistics depending on the nature of the business.

End to end vs traditional supply chain

A traditional supply chain focuses on each function where every step in the process is siloed and handled separately. This results in an inefficient and limited overall performance.

Whereas, E2E is a holistic view of a supply chain that integrates all supply chain functions. It provides greater customer experience and process efficiency by having visibility across the supply chain.

Where does the supply chain end?

As discussed above, the E2E supply chain starts at product design and can go until the product returns. However, this is depending on the nature of the business. In order to understand where the supply chain ends, it would be better to break it down into the main components of Supply Chain Management (SCM).

The main components of an end-to-end supply chain management are:

• Demand/ Supply planning – stocking strategy and sourcing based on product/ service forecasting
• Procurement – sourcing plus purchasing
  • Sourcing – vendor/ supplier selection and supplier delivery agreements
  • Purchasing – purchase orders based on supply planning/ order management
• Production / Manufacturing – making the product (by hand or industrially)
• Warehousing – resources and space required for managing inventory
• Delivery/ Distribution/ Transportation – strategy based on retailer or customer
• After-sales service – maintenance and managing returns from customers
• Reverse logistics – product return, reuse, or repair

How to optimize the end to end supply chain?

To optimize the E2E supply chain, the above components need to be well integrated. It requires an enterprise resource planning (ERP) system that provides real-time information with visibility across the supply chain.

The following approaches can help to optimize the supply chain:

• Better prediction of customer needs by implementing a demand planning tool.
• Lean approach to inventory management to reduce waste and unwanted actions. This will speed up the order fulfillment process and increase inventory accuracy.
• Human resource planning to respond to sudden changes in the supply chain.
• Root cause analysis to identify issues in the current process and design effective solutions.
• Implement E2E benchmarking to measure the efficacy of the supply chain.
• Last, information sharing across the supply chain network (supplier – manufacturer – customer).

What are the benefits of an end to end supply chain?

With an integrated E2E supply chain design and visibility across the supply chain, businesses can better serve customers. The benefits are the following:

• Seamless flow of activities across the supply chain
• Reducing delays with the ability to detect any issues across the supply chain
• Better relationships with suppliers and customers
• Complete visibility can reduce risks, operating costs, and predict and plan to meet the needs of market changes
• Transparency and the ability to view “blind spots”
• Reduced labor and material costs, by removing waste in the process

What are the trade-offs in Supply Chain Management (SCM)?

When dealing in an E2E supply chain environment, it is very important to understand how one decision can impact the performance of the other. Supply chain management involves complex interactions between many factors. Therefore, a trade-off analysis is required to find a balance to achieve the business objective(s).

Simulation is a very useful technique to evaluate the impact of changes to the E2E supply chain due to decisions being made at one function of the supply chain. Often, businesses think that achieving functional goals can lead to the overall business goal. But this is not the case when it comes to supply chain. Each functional decision in a supply chain comes with a trade-off.

For example:

Cost:

Finding a cheap supplier to lower the raw material cost may impact the material availability due to low supplier reliability.

Quality:

Bad quality sourcing to reduce costs can impact the production plan due to a higher defection rate impacting machine downtime.

Inventory:

Due to lower supplier availability and bad quality, the safety stock of both components and finished products needs to adjust to counter the low-cost strategy at first. But increase in safety stock will eventually increase the overall cost due to holding, handling, and possibility of damage and obsolescence.

Service level:

An increase in promised service level to customers to get higher revenue increases the risk of customer dissatisfaction due to the inability to deliver in full on time (DIFOT).

Working capital:

Improving the cash-to-cash cycle may result in procuring material at a higher than usual cost, as the supplier will take away any discount due to paying them late. This is the same when it comes to the customer side where business asks them to pay early as a result of giving some customer incentive which will impact the overall revenue.

Promotions:

To increase sales, promotion is one of the strategies. However, it comes with a cost of creating disruption in production and inventory due to volatility created by intermittent demand.

Experience the trade-offs

Experience the trade-offs in the end-to-end supply chain yourself. In our business game, The Fresh Connection, you need to manage the end-to-end supply chain with a team of four. The trade-offs are often cross-functional. It is imperative to communicate and discuss the trade-offs in the team. Aligning the team around the trade-offs is a critical success factor in all our business simulation games.