Tuesday, February 25, 2014

A Peek at the 21st Century Supply Chain Management System – Challenges and Opportunities

The Present Scenario

In today’s fast paced world, it is important for Supply chain managers to modernize their supply chain to meet the challenges of the 21st century.  Consider the manufacturing world: Twenty-five years ago, most manufacturers owned their own factories and controlled their own production. They had complete, detailed knowledge of the capacity, schedules, and costs of manufacturing. Companies could adapt quickly to changes in the marketplace and restore the supply/demand balance more easily.

The below figure shows the once-linear relationship companies had with their captive factories and sales offices. In the days before e-commerce, consumer demand fluctuated relatively slowly. With complete visibility into their own factories and sales offices, companies could easily find the status of inventory, work in progress, and customer orders currently in the supply chain.

The following diagram shows how today’s supply chains consist of multi-faceted and globally distributed relationships that exist across different time zones, cultures, and technologies. On the left is the brand owner, perhaps a typical consumer electronics firm based on the west coast of the USA. The green arrows show predictable and planned exchanges of information such as forecasts, orders, and engineering changes. The red dotted lines show the unpredictable challenges of today’s market, such as short supply and late deliveries. Many manufacturing firms now have little visibility or control over their supply chain partners. And that means less agility to respond to any changes in supply or demand. With limited visibility into the operations and constraints of third-party partners, it becomes more and more difficult to make decisions or take action on urgent demand spikes or natural disasters.

What Companies Should Look For in the 21st Century

Companies today need technology that provides quick decision support for managers seeking to maintain an effective balance between demand and supply.
In particular, Supply chain Managers should look for three key strategic elements:
1. Agile response. This allows team members to react in a timely manner and move toward event-driven planning.
2. Live collaboration. This creates an online forum where human intelligence can help capture all the nuances of business partner relationships.
      3. Flexible “what-if” testing. This allows decision-makers to weigh the consequences of various decisions       more precisely, with all the information they need at their fingertips. 

In addition to this, firms, especially manufacturing companies should consider incorporating critical features such as web based access, live scorecard, spreadsheets, personal alerts and have an effective response management system. The key here is to Innovate.

My Take on the idea of Innovation and Technology in SCM
It is good to constantly innovate and use cutting edge technologies in supply chain practices.  In complex global supply chains, the balance of innovation and sustainability is a double edged sword. Being sustainable demands creativity in business operations, but innovation also carries the risk of creating unsustainable practices and products. Unproven technological innovation for the wrong reasons can lead to disastrous results. A high profile example is Boeing's continuing nightmare regarding the development and introduction of its 787 Dreamliner aircraft.

Having mentioned that, I think it would be fair to state that companies can distinguish between the steady and step change varieties and understand what it takes to implement them in terms of the organizations strategic objectives, but at the same time not redefine markets. Reconfigure known methods and technologies to improve effectiveness, rather than invent new ones.

The main question of concern to be contemplated here is:
How effectively will companies be willing to adopt technology that would innovate and increase efficiency, but not be disruptive to their existing practices?


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