Tuesday, October 15, 2013

How Cloud Technology has transformed the international supply chain management?

At the age of globalization, more and more European and American manufacturers move their manufacturing plants offshore to take advantage of the much cheaper labor in Asia and Africa. This has helped them save tons of money, but one of the main disadvantages is the significantly longer and more complex supply chain necessary for moving products to the end customers in North America and Europe.

While it makes sense to expect delivery of domestic goods to doorsteps within 2 days, it is highly likely to take 3 to 4 weeks to deliver the same products from offshore to the end users. The lack of a robust transportation system and relevant logistics data in some developing countries have further compounded the challenge.   

An international shipper may connect to hundreds, or even thousands of trading partners including Manufacturers, origin draymen, consolidators, ocean carriers, customs brokers, pier draymen, stack train operators, destination draymen and freight payment companies, as is shown blow:

International supply chains involve complex relationships with multiple trading
(Source: Accenture)

The tricky part is: many trading partners are small and unsophisticated, and thus lack the abilities to get connected to the other trading partners seamlessly, which will compose a threat to the smoothness of of global supply chains.

The solution to this challenge is a cloud-based, social-media-like platform where shippers, receivers and service providers are all virtually connected to each other. Just like how it works on Facebook, manufacturers can "friend" any air carrier, truck line or ocean carrier, and service providers can "friend" its clients and customers. All the news announcements, changes, contacts, scheduling, public pricing, service options are visible to anyone in the community, and thus allow anyone in the supply chain to make a timely response. 

UPS has set a great example by introducing a cloud-based platform to improve international supply chain management. UPS Order Watch - the cloud-based platform has streamlined the management of vendors and facilitated PO-specific communication between vendor and customer. It is a good trial before getting the cloud-based system to roll out to other industries. Many jobs still need to be done, but I personally buy into the power of "clouding" in supply chain management. What do you think?


Sunday, October 13, 2013

Can China's Maker Movement change the Shanzhai phenomena?

In a recent article from Wall Street Journal called "In China, Lessons of a 'Hackerspace'", the author mentioned a Maker Movement which is becoming more and more popular in China. 
Xinchejian, China's first formal "Hackerspace", is a community-run workshop where ordinary people tinker with everything from art objects to robots. [1]
And the article feature one lady called Ms. Peng who wanted to make a tree that could talk. With the encouragement of others at Xinchejian, she learned to drill and solder and to work with arduino, an open-source microcontroller board that is user-friendly. Her new skills helped her to attach sensors and colored lights to an actual tree so that it would react to human touch. The tree spoke both English and Chinese: The more you interacted with it, the more it talked, its sound growing richer and its lights flashing vividly.[1]

This is just one example of how Maker Movement is gaining ground in China which contradicts the traditional view that China's limited capacity to innovate. 
With the advancement of technology, people with great ideas can start from scratch, turning ideas into 3D models and then product objects in 3D-printers. The cheapest 3D-printer from MakerBot is only about 2000 dollars. 
And this kind of Maker movement also gained the support from the government. Local government also wish to take advantage of this maker movement to nurture the innovation among the grassroots. 
China, as literally the factory for the whole world, started its electronics manufacturing about two decades ago and now are gradually transforming from a manufacturing economy to an innovation hub which has lots of potential for software/hardware design. If we do a quick math, out of 10 million workers in China, if 1% of them start learning advanced skills, then the whole country will have 100 thousand workers. If they continue doing the work for a few years with adequate education, maybe 1% of them will become designers. This will help evolve innovation. 
In Shenzhen, where you can find nearly everything you need to make an electronics device,  a lot of people who have great experience in manufacturing are beginning to leverage their design talent and work with partners overseas with the help of platform like Kickstarter. 
The success of Xiaomi is a great example of Maker Movement. Xiaomi first started as a community to bring deeply customized Android ROM called MIUI. Then the founder saw the potential for providing device to the community running their ROM and they designed the hardware of the phone,  got the prototype based in Shenzhen. Compared to the Samsung phone or the Apple device, the Xiaomi cellphone has great advantage in terms of price and localization. It became an instant hit. And the Xiaomi phone has launched its third generation. The company not only offer cellphone but also TV box, smart TV, all at great affordable price. Most recently, Xiaomi topped the headline around the globe since the Hugo Barra, Android Product Management VP of Google joined Xiaomi. The company's market valuation is to be 10 billion dollars. [2] 

[1] In China, Lessons of a 'Hackerspace':  http://online.wsj.com/article/SB10001424052702303722604579111253495145952.html
[2] Xiaomi, What Americans Need To Know:

Saturday, October 12, 2013

Optimizing Warehouse Management Systems through RFID Application

In today's business environment determining the level of inventories in real time is crucial to maintaining a competitive advantage in the marketplace. The process of understanding this critical piece of the supply chain process lays within the functionality of RFID (Radio-frequency Identification Device) along with the existing Warehouse Management System (WMS). The WMS delivers the tracking systems which optimizes supply chain management from the point of shipping up to receiving, picking, and eventually up to put-away of inventories in warehouse facilities. Radio-frequency Identification Device (RFID) is a technology that utilizes smaller computer chips to track items at a distance and offers similar functionality as the bar code or the magnetic strip on the ATM or the credit card. However, the striking edge RFID has over a bar code or the magnetic strip is its potential to detect an items/object at a relative distance from a scanner plus its unique identifier qualities.

My choice for this article "How warehouse automation can be tightened up RFID" is to fully understand the opportunities and challenges posed by technology in shaping today's supply chain management decisions. In this article, the authors described how companies can create optimal WMS while counting on functionality of RFID plus it inherit benefits. The increasing demand for goods and services nowadays create a beachhead for companies to automate their warehouse management so as to response robustly to supply and demand aisle of the economy. With RFID, companies can find solutions to the daunting task of maintaining inventories within comfortable bandwidth and speed up their production operations with reasonable visibility. The article also stated is due to the cloud systems integration and low cost of implementation, RFID can be deployed to deliver a full automation across warehouses and concomitantly improve multiple tasks performed in the warehouse setting. The tasks to be improved upon are: picking items, verifying quantities, validating customers information and identifying locations of stockpile of inventory inside the warehouse.

The RFID functions seamlessly in delivering accuracy at the portal of receiving, inventory control and shipping of goods to and fro multiple destinations within the context of the supply chain management. At the receiving point of the supply chain, the RFID tags are placed on pallet goods as well as individual items and scans both pallet inventories and individual inventory at which the information flow into into an automated system. After the goods are scanned, they are verified against the order quantities, customers order numbers, and the inventory are validated to ensure authenticity. Lastly, the inventory form of transportation is verified to complete the process of check and balance in the stockpile of goods in the warehouse. In so doing, the RFID tags record and update inventory levels by order number, pallet number and item number so ensure accuracy in the system. This process is implemented in the within the WMS to ensure effective and efficient inventories movement across warehouses and destination points.

RFID has gone beyond the utilization of just tags in optimizing WMS to including alternative auto identification capabilities to deliver higher visibility, efficiency along with innovation in the supply chain process. The range of options presented by RFID has given companies the ease to use it to optimize their WMS. These options range from its lower-price features, higher density tags and real-time information availability and sensors. These options have positioned RFID as a strategic tool to deliver solutions to the cumbersome tasks of WMS. In so doing, companies have the capability to catch up with mounting demand from customers in a flexible and effective manner.

The use of RFID has enhance the logistics movement capacity of manufacturing firms and large department chains globally. For example, Walmart, Macy's, Dell, Apple, etc, are capable enough to replenish its inventories in real-time without customers noticing prolong shortfall in a particular commodity from the store shelves. These large companies and even smaller business outfits are counting RFID to reduce the lapse in maintaining a wholesome functioning warehouse facility. The RFID is helping to minimize the number of false reads and concomitantly allowing for proper update of the WMS. From a financial perspective, companies are shifting to RFID because it is smart way through which return on investment (ROI) are maximize due to falling prices of the RFID tags nowadays.

Therefore, it seems much clearer that the advancement of technology is important to the supply chain process and a significant factor in shaping the decisions of companies relative to supply chain management. Companies employing RFID benefits more from greater efficiency and effectiveness on how they execute the control and movement of inventories, goods shipment and response to real-time demands of consumers in a coordinated pattern. The end results of RFID application in the WMS leads to increased sales, accurate forecasting of inventories, increased customer satisfaction and higher profits which builds a distinctive competitive advantage for a company in the marketplace.









Cloud based Supply Chain Management

In our Week 6 class, we could not stop admiring the magic of cloud computing when we learnt that this technology can help in minimizing the supply chain risk and maximizing business performance.  The discussion in the class motivated me to find more information about cloud based supply chain network. I came across few articles that gives indepth analysis of how cloud computing can actually mitigate some of the supply chain risks. One of these articles is How Cloud Computing can mitigate supply chain risks by Frost and Sullivan.
Greater flexibility, scalability and lower IT costs are some of the key benefits that incentivizes businesses to adopt cloud computing. The lesser known but very significant benefit is the resilience it provides to the businesses that are vulnerable to natural disasters and face disruption to its operation in the event of such disasters. The development of lean manufacturing and increasing complexity in global supply chain has rendered many  business in Asia Pacific region increasingly vulnerable to natural disasters. Some of the examples are Chrischurch earthquake in New Zealand in 2011, the Japanese tsunami in March 2011 and major flood in Thailand and Australia in 2010 and 2011 respectively. These disasters disrupted various business operations, impacted their factories, warehouses and their IT systems. 65% of the affected organizations strongly feels that if they had accessed IT application via cloud, the impact of these disruptions would have been low.
40% of the organizations that were impacted by these disasters believe that cloud based solutions helps in settling the multiple subsidiaries in different location that have different currencies. Another one third believes that cloud based solution make decentralized business possible thus maximizing its outreach to multiple locations.
Cloud computing provides a resilience to the business to the risk of disruption to their operations resulting from natural disasters. This especially critical in the manufacturing, logistics and distribution industries where IT solutions such as ERP are critical for business operation.

Source: Frost and Sullivan, “How Cloud Computing can Reduce Supply Chain Risks:The Factors that are Driving Uptake of Cloud Solutions in the Manufacturing and Logistics Sectors

Big data and not ERP: A solution for Agriculture Supply chain challenges

Our discussion about ERP under week 7 topic, Role of Technology in Supply chain Management got me curious to learn more about ERP.  Being skeptic by nature, I am still not sure if ERP could actually be an answer to all kind of supply chain inefficiency related challenges. I came across this article, “Farm to Fork- Big Data and the Agriculture Value Chain “written by Hiral Chandrana, Global Head of Consumer Good, Wipro.
According to United Nations, by2050 many of the countries will lack enough arable land to ever-growing population. Consequently, the shift in eating habits towards westernized meat based diets leading to increased cost of food production and demands from consumers for affordable food stuffs will ring a loud alarm about  the urgent need to maximize efficiency. ERP  is what comes to everyone’s mind as  answer to this challenge of maximizing efficiency. But that is not true.
Supply chain from farm to fork generates volume of data from a variety of sources including weather reports, soil conditions, water resources, market demand etc. Unfortunately, this data is highly unstructured or at the best semi-structured. Supply chain efficiency, inventory optimization and high level of critical decision making are the key benefits that incentivize distribution companies to implement ERP systems. However, companies have realized that ERP works best for the standard volume and uniform data. Data along farm to fork supply chain is highly variable in nature.  That restricts ERP capability to actually increase efficiency and on contrary, decreases the flexibility and prevents business from adapting to fluctuations.
Big data may be an answer to this challenge. We just need to unlock its potential. Data from soil samples can be useful to (a) measure the potential yield of their farm land,(b) allow efficient and appropriate use of fertilizers (c) strategic use of pesticides and bring down costs (d) increase awareness around which produce will fetch the best return and inventory and logistics.
Big data analytic has the tremendous potential to improve farm to fork supply chain efficiency. It is just waiting to be tapped! Are you ready for it?
Learn more about how to use big data for supply chain optimization

Thursday, October 10, 2013

How Lending Club found success with Cloud ERP

According to Week 6 topic: The Role of Information Technology and the Web on Global Supply Chains, we learned that information plus technology have provided a new perspective and visibility on how companies shaped their decisions around different forms of supply chain processes in their production operations or line of business. More particularly, the availability of information and technology assist companies to leverage competitiveness around outlining optimal inventory policies (Inventory), determining the type of transportation networks, modes (Transportation), etc and formulating strategies concerning trade-offs between efficiency and flexibility, level of capacity and so on. This topic was interesting given the level of technological advancement existing around us and how utilizing such advancement can scale-up companies's supply chain process. My search for an article that link seamlessly with week 6 discussion ended up with this online story titled: "How Lending Club found success with Cloud ERP".

Foremost, Lending Club, founded in 2007, is an innovative, data-rich, high-growth online financial marketplace firm that create the enabling environment for creditworthy borrowers and investors to trade products and services that are beneficial to both parties. The end result of the transactions is financial rewards that both parties get out of the market interactions. Lending Club provides the platform that foster smooth transactions void of the complexity of lending services associated with traditional banks thus generating a smarter. faster and safer way to invest. To date, the firm has disbursed total loans worth over $2.6 billion dollars and paid out total interest of over $233 million to investors.

However, with the relative success of in short period of the firm had a problem and that is ho does it deals with the massive data flow and processes carried out in its back office operations. Specifically, the firm had outgrown its current General Electric package and was seeking to migrate to a more robust automated accounting systems that will delivers seamlessly solutions in handling the massive flow of data as it grows overtime. On that premise, Lending Club elected to go for Oracle ERP Cloud Service as the portal that will provide the solution to its huge data flow processes and its decision to select the Oracle ERP system was based on numerous counts. First, Oracle ERP Cloud Service has a dynamic analytics and reporting potential, embedded data intelligence at will handle its massive data flow overtime and it embedded across the supply chain. The third reason for the selection of the Oracle ERP cloud system was based upon its cloud feature and scalability features.

Enterprise Resource Planning (ERP) Cloud System is an set of activities that assist companies manage critical business process such as purchasing and inventory management and comes with modules for financial and human resource management of a business. The ERP Cloud System, as the name denotes, utilizes cloud computing portals and services to deliver more flexible business process transformation. These features signify that indeed the ERP cloud system is such a powerful tool for generating a distinctive competitive edge in business operations and facilitates efficient and effect supply chain process.

Therefore, the key take-way for this article is that the ERP Cloud System will deliver vital business process information such as revenue forecast, long-term integration with existing Oracle based database and handles the rigor of large scale data flow process manages all in real time. This in turn will boost revenue, decrease cost and generate visibility in the supply chain process for optimal productivity. Overall, this speaks to the importance of information technology as a key drivers in integrating and providing a coordinated front-to-back end of the supply chain process for companies.






1 Cent RFID- The Future

1 Cent RFID- The Future
“Manufacturing Cost Simulations for Low Cost RFID systems” did a cost analysis and simulated manufacturing and assembly processes to examine the feasibility of the 5¢ tag. They did so assuming large volumes are being manufactured – achieving which is, of course, another challenge entirely. They experimented with variations in process, throughput and component variables to estimate what will be required to approach the 5¢ goal. As part of this experiment, they examined both the semiconductor manufacturing and the assembly of RFID tags. Their approach consists of two steps: benchmarking the processes employed and the equipment used, and cost model simulation using this benchmark data. I won’t dive into the technology here.
The white paper I found here, incidentally by a CMU alumnus , who went on to do his PhD at UC Berkeley, Sanjay Sharma developed a model for costing RFID tags which is similar to the approach used in the semiconductor industry. His team speculated that it is indeed possible to achieve a 5¢/tag cost number at a sufficiently high volume of tags using even existing technology. The volume required to reach this cost metric is well within the reach of current fab capacities. Process innovations and improvements that drive down antenna costs will also significantly impact the cost per tag. These innovations are connected to each other. For example, lower powered dies will reduce the conductivity required of the antenna, enabling even lower cost printed antennas. In other words, aggressive thinking and innovations in RFID tag manufacturing will reveal numerous synergies which can play off each other in the coming years, providing additional cost reductions.
Further innovations may allow us to push the costs lower –a 20 mask, 2 metal process can possibly allow them to push the silicon cost below 1C. For the assembly portion, assuming antenna costs can be pushed as low as 1¢, it is possible to assemble the tag for 3.3¢ at very high volumes using a traditional assembly process and 2.08¢ using an innovative flip-chip manufacturing process. If the number of wafer starts is increased by a factor of 10 to a total of 3 million wafer starts per year, the silicon costs can be brought to under 1¢ as well.
Unfortunately, the industry today seems trapped in “catalog mode” where engineers are forced to pick inappropriate machines from catalogs rather than inventing solutions to critical problems. Volumes, roadmaps and, most importantly, orders will surely unleash a new cycle of much-needed innovation.
My question is, how big is big enough? What is the minimum volume of wafers needed to optimally minimize the total cost of a single wafer?

Wednesday, October 9, 2013

3D Printing: the future of SCM

The topic of our last SCM class is "21st Century Supply Chains: Challenges and Opportunities for Executives". In such a context, I decided to devote my blog to the newest technology that is developing very rapidly now and that is expected to bring a revolutionary change into many aspects of human activity, especially into industrial production. This truly 21st century technology is going to affect the whole SCM field and is definitely a huge source of opportunities and challenges for any company and any executive dealing with supply chain processes. I am speaking now of the 3D Printing.

First of all, it is reasonable to set the definition of 3D Printing. According to Wikipedia's article, "Additive manufacturing or 3D printing is a process of making a three-dimensional solid object of virtually any shape from a digital model. 3D printing is achieved using an additive process, where successive layers of material are laid down in different shapes. 3D printing is also considered distinct from traditional machining techniques, which mostly rely on the removal of material by methods such as cutting or drilling (subtractive processes)." In more simple words, 3D Printing allows to create the object of any shape and "on the spot" using the 3D image of this object (software) and the special machine (3D Printer, hardware) loaded with the material needed (now it is usually liquid plastic or rubber, but in future more materials will be available). This sounds really exciting, isn't it?

If we look today at the popular croudfunding website Kickstarter.com, we can see that the number of 3D Printing projects in technology section is very large, and most of those projects are getting successfully funded by the crowd. That shows how interested people (both creators and potential users) are and promises the great future for the development of the technology. Yes, there are many concerns about 3D Printing - mostly connected with bio printing (reproduction of human body parts) - but even more hopes. So, lets now speak of what SCM people are hoping for as far as 3D printing is concerned.

First of all, the possibility to produce objects of different shape and size by using only one machine (which is less complicated in operation and also smaller than traditional manufacturing machines) and without need to alter it (only loading the software model is needed) is going to solve a lot of problems connected with factory space, workforce and whole technological process. This will allow to place factories closer to the end-user (there are even thoughts that 3D printers will be used by end users directly - for example, to make simple kitchen stuff), eliminating transportation and buffer inventories. [1,3]

Second, 3D Printing will allow fast and cheap customization of products as well as easy shaping of products to changing demand needs. This will increase the responsiveness of manufacturers and will eventually lead to higher gains for producers and lower prices for consumers. Also, the choice of different designs available to customers will increase significantly.

These two main points show that the 3D Printing technology will be definitely disruptive to the SCM processes existing now. The supply chains will become much smaller and the inventories will be considerably reduced. Here is a nice simple example of car manufacturing SCM of the future I found in HBR article: "Whereas cars today are made by just a few hundred factories around the world, they might one day be made in every metropolitan area. Parts could be made at dealerships and repair shops, and assembly plants could eliminate the need for supply chain management by making components as needed."[1]

One of the global SCM changes brought by 3D Printing will be the decentralization of global industrial production from developing countries to all-over the world. Indeed, the price of expensive workforce and huge rent needed for the 3D printing facility in developed country will be much less than the one associated with shipping goods from China. So, as the result, we will have more small factories located near end-users and much less shipping and warehouses.[3]

All in all, here is a nice infografic which illustrates how the future SCM with 3D printing will look like:

However, this all is only the discussions of the future and no one knows how it will be for sure. For me everything described above sounds very convincing, but I wonder if it does same for you. Do you also believe that 3D Printing will significantly change the SCM? Or maybe there is something else which is even better than 3D printer?


1. D'Aveni R. (2013, March 01). "3-D Printing Will Change the World". HBR.

2. Hessman T. (2013, July 15). "The Impact of 3-D Printing on Supply Chains [INFOGRAPHIC]". Industryweek.

3. Sheffi Y. (2013, July 18)."Does 3D Printing Doom the Supply Chain?". SupplyChain@MIT.

Hello, Home Depot? Can you print and ship a dozen office tables for me by tomorrow?

This summer, I interned at a manufacturing company which makes metal cutting tools. I saw a 3D printer and my first thought was “Yeah, it’s kind of neat”.  But I was quite surprised by a “printed” piece I saw right next to it – the piece had a fairly complex structure of interconnected gears – and they all moved when you moved one of them. They currently use the technology to develop plastic prototypes but are exploring ways to utilize it for mainstream manufacturing.

In fact, it is not just the manufacturing enterprises that have access to the technology; we see that it is coming closer to the end user. The Kitchen-Table Industrialists talks about DIY manufacturing cooperatives and kits. In August this year, UPS announced that it would offer 3D printing in store, to help startups and small businesses develop models and prototypes of the products. In May, an engineer in Wisconsin developed a gun using a $1,725 3D printer. The gun uses materials worth a mere $25, and you can see it in action in the below video. The fact that a cheap home-made plastic gun can stand the impact of 9 rounds of firing suggests that the technology enables sturdy products.

I would like to mention a recent experience I had with custom development of a product. I wanted to give someone a personalized gift and found a website that lets you design an entire book – cover to cover. They provide thousands of templates for pages, depending on the occasion, your hobbies, etc. The cooler part is that every element in the template is customizable. The coolest part is that they ship overnight.
If a product manufacturing company can extend the business model to include 3D printing, I can imagine a world where it takes online orders from customers, then makes and ships the products. Or a model where one can call the store when they are leaving for work, and on the way pick up the just-in-time manufactured stapler.

Such technology can potentially impact every aspect of the traditional supply chain. The customer may or may not provide the design, but there is a huge scope for design customization. The manufacturing is based entirely on customer demand, so cost of storing finished inventory is reduced. The manufacturing is much closer to the customer, thus the lead times will be much shorter.

So within a 5-7 year horizon, it will be realistic to call Home Depot and say, “I have emailed you the design, can you print and ship a dozen office tables for me by tomorrow?”

Trends of Future Supply Chain management

The Future of supply chain management is a simple dilemma that every supply chain organization faces, many companies understand that firms who can improve on their supply chains to meet the every growing demands of the market, and uncertainties associated with the future market almost certainly would remain successful.
I came across a blog written by Adrian Gonzalez, talking about the a presentation titled "A vision of supply chain evolution" by  Tom Linton the Chief Procurement Office and Chief Supply Chain Officer at Flextronics, he talks about future Supply Chain trends and how their impact.

#10: Cloud Computing: Low cost and reliable cloud solutions for global supply chains are starting to emerge; “apps” will transform supply chains.
#9: Business Process Convergence: Instead of automating inefficient processes, companies will eliminate them — e.g., replace inter-company business documents such as purchase orders with sense-and-response systems; companies will more seamlessly integrate inter-company functions.
#8: Global Labor Costs Equalize: Labor arbitrage is in decline as labor costs in Mexico match China’s, and India, Ukraine, and Indonesia become more cost competitive.
#7: Raw Material Scarcity is driving innovation in materials, with companies replacing copper with aluminum, gold with copper, and steel with resin in certain cases. Companies will also need to better manage conflict minerals and rare earth metals.
#6: Skill Specialization: New supply chain skills will emerge, such as managing supply chains in the cloud, and undergraduate and MBA programs will become more specialized.
#5: Regional & Local Sourcing will expand and supply ecosystems will emerge as economies grow; “Made in USA” and “locally-sourced” will drive sourcing.
#4: Emergence of Control Towers as supply chains become more virtual (few or no factories). Supply chain winners will have a global footprint and be transparent, reliable, and flexible.
#3: Predictable Unpredictability: Predictability becomes a competitive advantage; supply chains break through barriers to become faster, more cost efficient, and safer.
#2: Corporate Social Responsibility Becomes Fundamental: It won’t be an option any more, policies expand globally, emerging country laws catch up, and foreign corporations will follow global norms.
#1: “Non-Zero” Supply Chains Win: In other words, supply chains focused on greater collaboration between everyone in the ecosystem will win. This will result in end-to-end supply chain solutions that will create new value for customers.

After reading this excerpt I must say that I agree with the  trends listed above maybe not in the particular order stated. The evolution of the Global market  and the increase in demands of consumers would initiate many of these trends. For example Tom talks about Raw material scarcity this is a trend that for some industries can be considered a reality. Due to the scarcity of raw materials companies are starting to develop new and innovative materials, for instance the use of engineered or faux wood to reduce dependency on real wood.  This change in material has in turn affected the supply chain as faux wood undergoes a different process.  


Building the supply chain of the future

“Getting there means ditching today’s monolithic model in favor of splintered supply chains that dismantle complexity, and using manufacturing networks to hedge uncertainty.”

The future has supply chains with global complexity and new business models. We need to firstly change the old supply chain models by “ splintering” into smaller nimbler one and secondly by reconfiguring their manufacturing foot prints to bear a range of potential outcomes.
Problems arising in the future supply chains -

1) A more uncertain world:
In a recent survey conducted by Mc Kinsey – 68% of the people were of the opinion that the supply chains are going to become more risky in the 21st century. The increasing emerging markets are the top in this list. Retailing goods from countries like China is further adding to the complexities of a global supply chain.

2) Rising Complexity
It is becoming tougher for the companies to meet the diverse demands of their customers. For example the mobile phone companies launched 900 more handsets in 2009 as compared to 2000. Efficient distribution by incorporating creativity is the need of the time since retail outlets are now ranging from hypermarkets to mom-and-pop stores.

Meeting these challenges

The idea that a company can make one supply chain for all customers, products and circumstances is now indeed a fantasy! Having smaller more flexible supply chains and making them more stable in an uncertain world can solve this issue.

From One to Many

Splintering monolithic supply chains into smaller more flexible ones can save money and time as well as serve customers better. For example a company can form a matrix by grouping products by demand volatility and overall volume to shed light on how to optimize the supply chain. In this way the “one size fits all” supply chain can be divide into high volume products with stable demands, high and low volume products with volatile demand etc.

Second order benefits – Dividing a supply chain into many small flexible ones might seem complicated but in fact this approach allows companies to reduce the complexity level. Moreover it adds visibility to the supply chain, which helps the company achieve bigger efficiency gains.

For example a consumer durable maker lowers its inventory cost by moving production closer to customer demand.

Will splintering solve all the problems in the new models for the supply chain ? And the basic question here is that how many splinters should an organization go for ? Determining that can be a major part of the supply chain management strategy.