An end-to-end supply chain can have several benefits such as reducing labor and material costs. But what other benefits does an end-to-end supply chain have? And what are the trade-offs in supply chain management? Read everything you need to know about end-to-end supply chain in this article.
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.
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.
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:
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:
With an integrated E2E supply chain design and visibility across the supply chain, businesses can better serve customers. The benefits are the following:
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.
Finding a cheap supplier to lower the raw material cost may impact the material availability due to low supplier reliability.
Bad quality sourcing to reduce costs can impact the production plan due to a higher defection rate impacting machine downtime.
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.
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).
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.
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 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.
Now you know everything about the end-to-end supply chain. An end-to-end supply chain is a supply chain that involves an entire integrated process. It provides a greater customer experience and efficiency by having visibility across the supply chain. The main components of the E2E supply chain are demand planning, procurement, production, warehousing, distribution, after-sales, and reverse logistics. There are also different approaches to optimizing the E2E supply chain such as having a demand planning tool, a lean approach to inventory management, benchmarking, and more. Furthermore, having an E2E supply chain results in many benefits, but each functional decision in a supply chain also comes with a trade-off. Therefore, in creating alignment it is critical to discuss the trade-offs and to ultimately have an integrated E2E supply chain.
A high-performing value chain needs the collaboration of team members from across the organization. Tearing down silos and creating the right cross-functional mindset, however, can be a serious challenge. So, what do you need in order to achieve success? Ideally, you’d like your team to experiment with different scenarios wherein they learn to overcome various obstacles.
Understanding what a logistics footprint is, and why it should be as small as possible can make the decisive difference in competitiveness for a company. But how can a business tackle the size of its logistics footprint? And why does a good warehouse strategy play an important role in doing so? In this article, Inchainge discusses everything you need to know about the logistics footprint.