Supply chains in 21st century!

Supply chain management (SCM) is the management of the flow of goods. More specifically it is defined as the “design, planning, execution, control and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.”

So, we can deduce that SCM draws heavily from the areas of operations management, logistics, procurement and information technology and it also strives for an integrated approach to maximize end results right? With the globalization and widespread use of information technology the SCM has become very complex and volatile in the 21 st Century. Earlier dependence on “warehouse management systems”, “product lifecycle management”, “or logistics management packages” no longer is enough to fully understand the complexities of the challenges of modern day SCM. Many huge companies are relying on material requirement planning (MRP) system in order to come up with suitable answers to the current demands.

Previous challenge with SCM was not having visibility into what is being moved and its status. But now, the modern tools have solved this problem. Now the problem is which specific items are being moved/made available for the manufacturing platform.

The 21st century challenges:

Ø  Customers demand shorter lead times, more variety and customization.

Ø  Due to advent of internet, transactional friction has reduced and hence competition can come from anywhere. Hence supply chain has become extended, vulnerable for disruption.

·         Old “push & promote” mode of operation has caused the following:

Poor inventory performance

                        Poor service levels

                        Higher expedite related expenses

The “push & promote” mode of operation has given rise to “position & pull” model called “demand driven MRP” (DDMRP). Similar model that is gaining increasing attention is “Vendor Managed Inventory” (VMI) which makes companies reduce / postpone inventory ownership but still have visibility into in-transit inventory.

It is Digitally-Driven Future.

Supply chain segmentation enabled approach is needed today instead of ‘ONE SIZE FITS ALL’ approach. RFID enabled retailers are needed to improve inventory accuracy. Now, RFID has moved to tagging up the source.

‘Cloud Information Technology’ is changing the way B2B interactions are carried out- Cloud based software is being adopted to the businesses.

I feel that more ways should be found to ‘free up cash’ in the supply chain. ‘Just in time’ inventory strategies should co-exist with global sourcing strategies with the cloud based supply chain platform. I urge the companies to buy the best IT platform to manage SCM.

Customer-centricity : Companies should align their supply chain strategies to broader business goals and build competencies around each stage of the product lifecycle to achieve greater customer centricity while also improving operational efficiency and driving growth in the market. Similar to supply-side mechanisms ( to reduce waste), focus should be laid on demand-side mechanisms (to reduce wasted opportunity) also.

There are various other challenges for executives in the field of supply chain such as:

Ø  Globalization and off-shoring…

Ø  Demand and supply volatility

Ø  Product portfolio explosion

Ø  Partner collaboration and visibility

Ø  Acceleration of market changes

Ø  Revenue and profit considerations

There are various other challenges for executives in the field of supply chain such as:

Ø  Globalization and off-shoring…

Ø  Demand and supply volatility

Ø  Product portfolio explosion

Ø  Partner collaboration and visibility

Ø  Acceleration of market changes

Ø  Revenue and profit considerations

As market challenges became ever more acute, sales and operations planning(S&OP) has become ever more critical. Yet, most organizations are stuck. Their technologies and processes are no longer working for them. Simply put, their needs have evolved past what their current approach to S&OP can deliver. And they are not quite sure what to do next. Technologies have improved and there is ample opportunity to fully leverage them to gain performance improvements, but it requires the organization to change their view on how to approach both the process challenge and the technology solution.

Given the increasing trend in outsourcing in all industries, there is great amount of interest in visibility. It is the ‘money men’ that have pushed us in the direction of outsourcing and off-shoring, largely to get expensive assets off the books and in pursuit of cheaper labor. No Operations person would have chosen to outsource because of the lack of direct control this implies. Activities that used to be under the direct control of operations have now shifted to a Procurement function.

I am not suggesting the ‘money men’ are wrong to focus on the company value. Far from it. The issue is that we have not replaced the direct oversight of an internal function with the required visibility to maintain the level of control necessary to manage an extended supply network.

Lora Cecere of Supply Chain Insights has weighed in on the supply network visibility discussion stating in a Forbes blog titled “Building The Extended Supply Chain: If Only It was Like Legos” that

The primary investments of today’s corporations are in Enterprise Resource Planning (ERP from major software providers like INFOR, SAP SAP and Oracle Oracle.) The average company has not one, but seven instances. (Imagine seven Lego blocks….) And, while the company would like to use these investments to connect to trading partners, the study substantiates that the only value that is being derived from these investments is visibility of internal manufacturing. As shown in figure 1, the gaps in logistics and supplier visibility are large.

So, what do you think can be done to connect these legos together?