Understanding Supply Chain Management
Before we address what makes it thrive, what exactly is Supply Chain Management? To start, these essential concepts must be noted:
- Each product that makes it to an “end user” signifies the cooperative effort of numerous organizations. These specific organizations are collectively identified as the “supply chain”.
- Although supply chains have been present for many years, most organizations have only recognized them on a partial or internal basis. A limited number of businesses have actually distinguished – much less supervised – the complete succession of endeavors which finally delivered the product(s) to the “end customer.” Naturally, this gap in the process has resulted in supply chains that lacked order and effectiveness.
One could argue that our modern economy needs the supply chain process as much as Henry Ford required his assembly line in the early 20th century. Without a successful supply chain, ecommerce, manufacturing, and a myriad of industries would simply falter.
Moreover, a truly successful supply chain must include several crucial elements. Read further for expert perspectives on the subject.
EY’s global and Americas supply chain leader, Glenn Steinberg stated, “To thrive in today’s transformative age we encourage companies to focus on creating a supply chain that operates as a holistic ecosystem.” He continues, “With emerging technology such as blockchain, machine learning, and the internet of things, markets themselves are evolving and becoming super-fluid, frictionless and fast moving. Given the convergence of events we are seeing with trade wars, tax reform, Brexit, EU anti-dumping rules and the like, companies are re-evaluating their supply chains.”
Considering this notion, Steinberg indicates that “flexibility, data and future planning are integral to successful supply chain management.
1. Maintain Flexibility
Steinberg recommends trading the “one size fits all” archetype for a more customized “fit for purpose” supply chain model. “We’ve found that a supply chain can be agile and responsive, efficient and low cost or innovation driven, but it likely can’t be all three. The ideal scenario is to align the supply chain with the company’s corporate strategy and operating model, determining which of the previously mentioned qualities are most important for successful execution. When these priorities are in conflict, the supply chain is set up to fail from a strategy perspective,” says Steinberg.
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2. Draw Upon Data
Data analysis is essential to a successful supply chain, Steinberg reiterates, as data is a vital foundational element – rather than an addition – to the conventional model. Without accurate master and transactional data, a supply chain cannot succeed. Steinberg continues “… analytics – descriptive, predictive and prescriptive – not only supports decision making, but can help guide the decisions in amore evolved supply chain.”
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3. Forecast What’s Ahead
A truly sustainable supply chain includes responsible forecasting of where the process will lead. Keeping the future in mind requires constructing efficient and updated methods that are created to withstand employee turnover, as opposed to designing a basic clannish intelligence. “Gone are the days of lifetime jobs,” Steinberg notes. “Supply chain companies should focus on creating enriching positions and career development programs that care for the most important asset a company has; it’s people.” This is one of the most important ways for businesses to remain adaptable to an ever-changing workforce.
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4. Don’t Lose Sight of the “End Customer”
“Before you invest in assets, processes, systems and people, you need to deeply understand the requirements of your end customers,” advises one of PwC’s main strategy principals, Rob DeNardo. He maintains, “The end-to-end supply chain needs to work in harmony to meet those requirements.” An example can be made of services such as Amazon Prime, wherein fulfilling their 48 shipping policy requires the coordination of many roles, including, planning, logistics, production, sales, and warehousing.
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5. Integrate Through Technology
DeNardo points out that a supply chain can’t simply be integrated throughout the company itself, but across co-manufacturers, suppliers, third-party logistics sources, and even customers and consumers. This is where data comes into the picture. Products, containers, pallets, trucks, etc. can be equipped with sensors to facilitate real-time “track and trace”. This process aids integration via planning procedures which consolidate internal and external data from the entire set of connections in order to enhance forecasting, planning, and execution.
“Technology is a critical enabler, allowing companies to analyze and predict changes much more effectively than in the past, which automation of tasks freeing supply chain staff from transactional work to focus on solving complex challenges which arrive,” says DeNardo.
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6. Keep Innovation Alive
In the world of successful supply chains, innovation is a powerful component, DeNardo observes. “When new products are developed, supply chain functions need to be included in the early stages to make sure the product design comprehends supply chain implications. For example, when designing the product and packaging, it is important to consider how the product will be shipped to optimize those costs.” He continues, “If a tractor can be one inch narrower so it doesn’t require special road transport during delivery, the logistics cost savings can be massive compared to a design change which might be inconsequential to the user.”
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7. Quantify Performance
Organizations must maintain a clear insight into the processes involved in supply chain and how they correlate with the enterprise in order to objectively evaluate, compare, and manage supply chain performance, explains Marisa Brown, the principal research lead for supply chain management at APQC. Brown maintains, “A standard process framework for classifying and defining processes is a good starting point. Process groups (supply chain planning, procurement, manufacturing/production) can then be broken down into processes, activities and lower-level tasks where accountability and responsibility can be established.”
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Once the processes are delineated, organizations can create “performance measurements” for quality, cost effectiveness, process efficiency, staff productivity, and cycle time.
Likewise, Key Performance Indicators (KPIs) should be introduced based upon operational goals, adds Brown. Just below KPIs, organizations are encouraged to isolate the supporting markers that permit leaders to tunnel further for more meaningful supply chain performance insights.
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