As the old song goes, “the times are-a-changing”. I was captivated this weekend by a blog post from Lora Cecere who went to great pains to highlight the revolution (versus evolution) needed in supply chain management to take things to the next level. No prisoners were taken in this post when examining the actions of all the players, from the big name ERP’s to the analysts themselves.
As Lora so eloquently outlined, the move to an “outside in” demand management perspective with real time sense and respond capabilities would certainly change the game. What I did struggle a bit with was the argument that leadership to make the necessary changes will have to come from within the companies themselves rather than through consulting. If by consulting we mean those firms that that simply provide guidance, I would agree. But, if we expand the definition to include companies that can both advise and perform the necessary functions, then I believe that a new breed of service provider might be the superior solution. Let’s face it, the changes that Lora describe will require new processes, skills, data, and the tools to knit them together into a meaningful and sustainable model.
I think back to my own supply chain days when our vertically integrated CCA manufacturing operation was the number 1 source of our delinquencies and cost overruns. When we finally made the decision to outsource, it wasn’t purely for cost reasons, but with the expectation that delivery and quality would improve as well (and it did!). The contract manufacturers were very effective at selling that their expertise in manufacturing and managing the supply chain were superior to our own because it was their primary focus.
I think the revolution that Lora is promoting might herald a new breed of subcontractors that can provide outsourced SCM services that will achieve the new objectives in a more efficient and sustainable way then each company could individually. Subcontractors today are operating on razor thin margins and have therefore been more proactive in responding to change, although the changes are often a step or two from the source of real consumer demand. It’s not much of a stretch to see them actively promoting SCM outsourcing services that are built upon their growing expertise in this area.
Still, there is much work to be done before this becomes a reality, but wouldn’t it be easier to purchase a service (think about in terms of a desired outcome) than having to engineer, construct, and deploy a solution yourself. This is particularly relevant when you consider that the existing tools, skills, and processes can’t simple evolve to the new state required (lipstick on pig). Instead, the tools and processes need to be designed from the ground up to support a synchronized demand driven supply chain. On that front, I believe that more progress has been made on the tools side of this equation than the process side, simply because it’s easier to design capabilities than to deploy them. But a few inspired subcontract manufactures are seriously looking towards the future of SCM and the potential gains by providing a next generation type of service to their customers.
It’s clearly too early to tell if this kind of move will be embraced by brand owners, or if they will choose to “go it alone”, but I’m certain of one thing, those who embrace the changes will reap huge rewards in all areas of their business.