There’s a post at Cardinal Points Global Sourcing Agent talking about how to reduce supply chain costs. I’ve commented there and wanted to post my comment here as well.

There are some good suggestions in the post. Generally, the suggestions are focused on system-to-system collaboration, which is one piece of the puzzle when trying to increase collaboration with suppliers. As supply chains become more global and distributed, collaboration increases in importance. And, as demand volatility increases and product lifecycles shrink, the need to respond to change becomes essential.

So, in addition to the need for system-to-system collaboration, brand owners need to be in a position to coordinate an effective response to change with their supply chain partners. And this coordination requires people to get directly involved because it’s people that need to collaborate to determine the appropriate course corrections that need to be made in response to these changes. These people are both inside your organization and throughout your supply chain partners.

People are essential to this response process because the system-to-system collaboration will enable the automation of certain processes, but not others. Take the situation where a brand owner needs 100 more products by next week. Through system-to-system collaboration, that request can be pushed out to suppliers and their response can be automatically sent back to the brand owner. But what happens if their response is that they can only provide 50 and this request is coming on behalf of the brand owner’s most important and profitable customer? Now what? This is where people come into the equation because they have to figure out how to make it work, and that requires weighing opportunity vs. risk and evaluating alternatives for how to respond to this unexpected change.

So, system-to-system collaboration is certainly one key step to integrating supply chain partners and driving down supply chain costs, but Response Management is all about responding to the unexpected, and in these environments, the ability to respond to the unexpected is quickly becoming the key to market leadership.

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