Implementing the 3 V’s
Often called the three V’s of supply chain management: visibility, velocity and variability are key elements of successful supply chain strategy. No matter what the competitive priority, the goal of supply chain management is to increase visibility and velocity while reducing variability. The future of supply chain management lies in continued pursuit of that goal.
Increased visibility
Visibility is the ability to view and share important information throughout a facility or supply chain no matter where in the facility or supply chain the information is located.
Increased visibility along the supply chain is a benefit for supply chain partners and the end customer. With better visibility, a supply chain manager or employee can see the results of activities occurring in the chain and is made aware of minor, incremental changes via technological processes. Better visibility has resulted in greater velocity.
Increased velocity
The flows of physical materials and services, cash, information and returns (or the reverse flow) of products for repairs, recycling or disposal, all get a benefit from being increased in speed and efficiency. Supply chain management impacts the velocity of these four flows in a positive manner.
Velocity is a term used to indicate the relative speed of all transactions, collectively, within a supply chain community. A maximum velocity is most desirable because it indicated a higher asset turnover for stockholders and faster order to delivery response for customers.
Methods of increasing velocity
- Reducing the time in which inventory is not moving (idle time) by using Just in time delivery and lean manufacturing (the less time inventory spends at rest, the less likely it is to suffer damage or spoilage. Increased velocity reduces the expenses involved in warehousing inventory.
- Eliminating activities that do not add value, thus reducing the time required to accomplish goals.
- Speeding up the flow of material demand. Information about demand changes is crucial when the competitive strategy is responsiveness.
Reduced variability
Variability is the natural tendency of the results of all business activities to fluctuate above and below an average value, such as fluctuations around the average time to completion, the average number of defects, average daily sales, or average production yields. Supply chain management works to reduce variability in both supply and demand as much as possible. The traditional offset against variability is safety stock. If greater visibility along the chain results in greater velocity, supply chain managers should also be able to reduce the amounts of safety stock required to match supply to spikes in demand.
It is true that it is a never ending story by checking every single week how the demand changes or keeps the same for a considerable period of time. The performance of both material planner and supplier(s) is measured of how the material arrives on time and in the quantities needed. Times are changing so fast, great times are coming for manufacturing and services industries and the question is… Are you ready?
All right. See you next time. In the meantime, take care and keep walking on my friend.
j.maldonado.gtz@gmail.com
Jorge Maldonado. Egresado de la Universidad Autónoma de Nuevo León como Ingeniero Administrador de Sistemas. Cuenta con una Maestría en International Logistics and Supply Chain Management en la Universidad de Glamorgan South Wales en Reino Unido. Profesionalmente se ha desarrollado en empresas de manufactura y tecnologías de información.
