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Increasing Supply Chain Resilience with Dynamics 365 Supply Chain Management
Supply chain strategy has long been centered on reducing costs and enhancing productivity. As a result, many businesses have relied on a single supplier for essential subcomponents, often located offshore to cut labor expenses. However, this approach lacks resilience as it creates a single point of failure. On the other hand, having many suppliers does not necessarily ensure supply chain resiliency unless there is a solid business relationship and communication. The best approach is to distribute the supply of critical components among several vendors, a tactic known as multi-sourcing.
Nevertheless, multi-sourcing comes with its own set of challenges. In this blog post, we will delve into the challenges of multi-sourcing and explore how the new multi-sourcing functionality in Microsoft Dynamics 365 Supply Chain Management can help you overcome them.
Specify multisource policies for supply resilience
Two challenges of multi-sourcing are how to split the supply of an item across multiple vendors and how to allocate the vendor for a particular purchase order. Both are now easy thanks to the multi-sourcing features in Supply Chain Management.
First, you can now specify a multisource policy that identifies vendors and sets targeted percentages for each of them. For example, you might want 80% of your supply to come from your main vendor and 20% from a secondary one. Or you might want to distribute orders equally to three different vendors.
You can also specify the period in which the policy applies. Then just assign the policy to a product or set of products.
When Planning Optimization creates a planned order, it chooses the vendor so that the targeted percentages are met over time. In other words, the entire supply is allocated to a vendor, but over time orders are balanced between the vendors in the group.
Some vendors require a minimum order. With the multi-sourcing feature in Supply Chain Management, you can set minimum order quantities for each vendor and Planning Optimization will respect them.
You can also review the actual percentages kept versus the targeted percentage in the policy to monitor your supply resilience.
Choose the products you should multisource first
The new supply risk assessment workspace makes it easier to find products that are planned to be purchased from a single supplier. These may be good candidates for multi-sourcing to start increasing your supply resiliency.
The following recommendations can help you achieve higher supply resiliency:
- Multisource products: Split the supply of components among a group of vendors. If you are starting to build this strategy, start with your most critical components.
- Diversify your supply in geography and size: Have both local suppliers with shorter lead times and offshore suppliers with higher lead times.
- Maintain good supplier relationships: Have a good business relationship and communication with your suppliers. When you are able to handle and adapt to disruptions together, you are more agile in fulfilling your customer needs.
- Build long-term partnerships: Your relationship with your suppliers must be sustainable over time and based on trust to be able to handle disruptions over the longer term. High supplier turnover is not beneficial in the long run.
- Assess your supply risk: Evaluate the performance of your suppliers using metrics such as purchase order deliveries as requested, on-time in-full deliveries, on-time deliveries, and in-full deliveries. Dynamics 365 Supply Chain Management makes this easier using the new supply risk assessment workspace.
2020 Nucleus Research Report on ERP Technology