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Industry Updates

How to Add Flexibility to Your Supply Chain

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Have your organization’s investments in enterprise resource planning or forecasting systems not yielded the supply chain improvements you had hoped for? If you are a low-volume, high-mix manufacturer, then maybe it’s time to consider taking a segment, stock and plan (SSP) approach.

“As its name suggests, the approach focuses on three elements: improving part segmentation, increasing the accuracy of stocking algorithms and building flexibility into the planning process,” say the authors of a new McKinsey & Company white paper. “One major change is that the SSP approach calls for manufacturers to create virtual kits that contain the parts needed for specialized products.”

The authors don’t claim that SSP is a panacea. However, companies that adopt it “typically reduce part shortages by 50 to 90 percent while shrinking inventory by 15 to 35 percent below historical levels.”

Curious? McKinsey spells out in detail how to adopt SSP. “While no forecast will ever be entirely accurate, companies can improve their predictions and achieve greater flexibility by following the segment, stock and plan approach,” the paper says.

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