Tuesday, February 25, 2014

Coordinated Supply Chain Networks – The future and the obvious

Many global supply chains are not equipped to cope with the world we are entering. Most were engineered, some brilliantly, to manage stable, high-volume production by capitalizing on labor-arbitrage opportunities available in China and other low-cost countries.
-McKinsey Report
These words exactly portray the current status of supply chain systems across the world since the modern corporations are more dependent upon the economic and demographic differences among geographically distributed regions. It is quite blatant that this imbalance leverage is smoothly losing its context because of the rise of the emerging economies. Organizations with forethought are handling the situation in two possible ways – splitting their chains into smaller and more dynamic units and the other way is by restructuring the existent supply chains to forecast and handle a range of possible scenarios. Though both have their pros and cons based upon the business context the former is gaining prominence because it has the stronger potential to cater well to the challenges that the supply chain systems of the world are facing – complexity and uncertainty.

The increase in the number of supply chain systems raises the demand for better coordination of the various networks thus created. This only makes senses because of the factors that we saw above and the ever rising customer demand and shortening product cycles both of which demand faster responsive rates. Though the concept of data aggregation and coordination with strategic partners is quite obvious for the industry, the execution of the plan has lacked depth and incisiveness.

“Coordination is managing dependencies between activities”
-MIT Journal
The process of coordination has the following dimensions of information aggregation, process coordination and sequencing and standardization. Each of these dimensions need a definition based on the organizational structure. Technological facilities like Electronic Data Interchange (EDI) are playing a key role in the development of innovative supply chain networks.

For example, companies like Cisco save about 12% of their net income by connecting its customers and suppliers to an e-Hub through which it achieves forecast sharing, order and component availability communication. Similarly, Dell has achieved revenue gains through supply chain integration addressing its cost and service level challenges.

The current state of supply chain networks is one of the information age. It is just based on the information shared but not the intelligence that could be gained from it. Further, collaboration and optimization of the networks is at a very rudimentary level and its implementation intensity reduces as the number of units that are involved in the process. Logistics and information systems should assume lead roles rather than being adjunct third party facilitated operation which is what they are now in majority of the organizations. To tackle these statuses and enhance them we might need to think of cross-functional training, some coordinating frameworks and reduced product cycles. Once we set ourselves in this mode other aspects like selection of network partners and the potential realization of benefits could be derived from them. Such an approach would be again information based but at a higher intelligence level. But the problem with the current systems is though we what is in place what is required we do not see an urge to run up the hill and fill the gap despite their obvious proposition.

Why do not we have numerous improvised and diversified supply chain network models from which every organization could choose from? Could such definitions by associations within every industry help them grow their networks right from the start? Can the rise of technology despite its redundancy within selected sections of supply chain be used to generate and customize these models (via new supply chain software tools, big data storage, Hadoop processing, etc.)?

References and Readings:


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