Wednesday, October 9, 2013

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. 

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