Wednesday, February 1, 2012

Shifts and Trends in Supply Chain

The Latest State
The supply chain has changed significantly in the last decade. Demand is changing due to new business model with global trends and market. Information Technology then creates the opportunities for companies to serve this new business needs.

The shift in business focus

There is a new shift from an individual company to a whole view of a supply chain, cross multi companies in the network. The old thoughts about supply chain are to fulfill the orders, in other words, to deliver the right products in the right time. However, this new shift has made an impact. Now, supply chain strategy involves from product design, introduction, promotion, fulfillment and recycling.

This trend has shifted the business focus to new things: from cross-functional department to cross-enterprise, from supply focus to demand focus, from single-company work to collaborative and concurrent works from different companies. One key of this shift is to change the focus of a business from cost reduction to best value creation for customers. This not only includes better customer service or product design but also tailored offerings and new business models to serve customers better.

New Supply Chain Process

Figure: The New Supply Chain Process
Source: The Supply-Chain Management Effect, Kopczak L., Johnson M.

Required Attributes for Companies
To make this shift successful, Ketchen, D 2008 (Best value supply chains: A key competitive weapon for the 21st century) analyzed that there are 4 aspects: speed, quality, cost and flexibility. The competition game between companies is to try to balance these 4 aspects to attempt for the best value supply chains. One critical example is the competition between K-Mart and Wal-Mart in the late 1990s. K-Mart tries to challenge Wal-Mart by a price competition but then it failed soon after that. Wal-Mart has a very powerful and sophisticated supply chain and logistics network that helps them to withstand the war and win K-Mart.

Moreover, there are some key concepts that managers in supply chain need to understand and apply successfully: agility, adaptability, alignment, strategic sourcing, logistics management, information system and relationship management. If the companies can make a good system with these attributes, the company can maintain a good supply chain network that offers the best value.

How it applies in reality

In reality, there are human and natural disasters that affect strongly these supply chain networks.

Figure: Chip Manufacturing in Japan

The latest earthquake and then nuclear disaster was an example. Right after these disaster happened in Japan, managers immediately go into the meeting room and consider what the impact can be in their supply chain.
Japan plays a vital role in the semiconductor industry, chips and lightweight flash memory used in smartphone and tablets. Therefore, the impacts on any company’s supply chain were big and there was no certainty when these Japanese factories reopened.
However, HP and Apple reacted quite quickly to the situation with their own big inventories that can help them survive for the short time. In the long time, they have switched the suppliers to their backup suppliers in some few days. This helps these companies to survive this “Global Stress Test”.

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