Public service announcement….
Came across this article here saying that a corporate consortium is co-sponsoring an initiative beginning today to gather information on the state of supply chain management education and supply chain talent in the field. The article contains a link to an online survey and the article indicates that the results are to be made publicly available.
SupplyChainDigest featured a dialog with various industry experts (here) on their thoughts on supply chain trends in 2008. A couple of interesting comments that caught my eye:
Gartner’s Dwight Klappich says conditions may force companies back to basics in 2008.
“Supply chain management organizations will be forced to divert their attention away from strategic initiatives like innovation; instead they will have to focus more time and effort on tactical and operational issues driven by economic and competitive pressures”.
Dr. Larry Lapide of MIT agrees – and says this may mean a reversal of some current trends.
“With oil and logistics costs over the past few years, we’ll see more effort in trying to keep these costs down. Many companies will ’slow down’ their supply chains by using less expensive and slower transport modes,” Lapide said. “This will, of course, mean that inventories will increase - especially in-transit and at just-in-time sites.”
He also thinks there may be some return to in-house manufacturing over both quality issues and the need to be more reactive to demand without inventory build-ups.
I’m seeing a shift as well, one to more an emphasis on operational challenges. As the economy slows, most companies will focus more tactically at how they can execute better. How do we execute to the plans we have in place? This is a significant challenge given the volatility and cost challenges that manufacturers face today. Companies need to figure out how to leverage their assets more effectively and people are one of their most valued assets. Empowering people to respond more effectively to change is a key to gaining leverage and driving breakthroughs in operations performance.
Sustainability is a hot topic these days. I attended an AMR conference last year that featured several speakers highlighting their sustainability initiatives. Their presentations not only detailed the environmental and social advantages of their programs, but also explained how the companies were profiting from these efforts.
Aside from the environmental and social reasons driving sustainability initiatives at manufacturers, there’s the regulatory requirements in many industries (and this is expected to grow substantially in the coming years). These requirements, such as RoHS and WEEE, mandate certain sustainability steps be taken. Of course, one problem with these mandates is that they are geographic in nature, which creates substantial challenges to supply chain professionals.
No matter what the driver of your sustainability initiatives, you need to fully integrate them into everything you do. It just won’t work to treat these as standalone initiatives given how pervasively they impact every aspect of the business. Think about this in the context of managing responses to unexpected events.
As an example - for a variety of reasons, you’ve seen an unplanned uptick in demand in North America. The natural desire is to satisfy all of this demand to realize a revenue and profit bump, but the uptick was never in the plan. You may determine that the only way to profitably meet this new demand is to re-allocate supply that was destined for Europe to North America. Except, sustainability mandates differ geographically, meaning that the “same” product really isn’t the same across all geographies.
One way to combat this, of course, is to take a more global view in your sustainability initiatives - to drive consistency across all geographies. The advantage of doing so is to get ahead of the curve based on the realization that these requirements will increasingly be adopted globally. While geographic differences are bound to exist, the bar will continue to rise and the further you’re ahead the better off you’ll be.
This simple example illustrates the depth by which these issues need to be thought through and the impact that sustainability initiatives can have on responsiveness. I think the key is looking at these situations as opportunities rather than barriers. By proactively making sustainability requirements a core part of your business, you retain a high degree of responsiveness while being able to differentiate your offerings in a positive way.
I came across this post today which features information on some interesting research. The research covers some interesting areas. This comment particularly caught my eye:
The pace of change in supply management is more likely to increase rather than the decrease in the future, as evidenced by changing market factors, globalization and the ongoing march of technology.
The research covers the market forces and makes recommendations for coping. Might be worth checking out.
Found this very interesting article based on research done as a joint effort between CAPS Research, A.T. Kearney and the Institute of Supply Management. The research poses the question “what will a typical supply management organization look like in 10 years?” and concludes that “it’s hard to say for sure, but it likely will be complex, high-tech, supplier network-driven, and spread out across the globe.”
This particularly caught my attention. The report identified four areas future supply managers will be expected to tackle:
1. Delivering more innovation from suppliers
2. Contributing more broadly to revenue generation
3. Anticipating and managing supply risk to ensure business continuity
4. Expanding the breadth and impact of cost management efforts
These are themes I’ve talked about frequently here. The trends are clear; increasing demand volatility, shortening product lifecycles and the increasing globalization of supply chains is creating an environment where collaborative response to unexpected events is required to compete and win.
Interesting article at the Enterprise Decision Management blog citing new research from Forrester on what they call “The Dynamic Business Applications Imperative.” According to the research, decision management will be at the heart of future enterprise applications. The authors provide insights into how to determine which areas of the business would benefit most from these decision management applications.
We’re already seeing strong validation for this in manufacturing operations. Our Response Management solutions, which are decision management applications, help to empower front-line decision makers with the visibility and tools they need to make faster and better decisions. The driver behind this increasing need is constant change. If you combine increasing demand volatility, shortening product lifecycles and increasingly distributed and complex supply chains, you get an environment where demand management and supply management is significantly more complex than ever before.
Front-line decision makers are inundated with exceptions to the plan that they need to deal with. In doing so, they need to balance the often conflicting requirements of customer satisfaction and internal operating metrics. And, increasing global competition means you need to act now or risk losing your customer to someone else who can deliver what they want when they want it.
For years companies have invested in solutions to plan the business better and ensure it can execute efficiently. But as organizations become more demand driven it’s becoming increasingly clear that you can’t plan the customer. The result is that operations is in need of decision management tools to support their critical need to make rapid and accurate decisions to deal with the pace of change.
Logistics Management is carrying an article here summarizing Carly Fiorina’s (formerly CEO of Hewlett Packard) opening keynote address at the Council of Supply Chain Management’s (CSCMP) Annual Conference.
I was especially intrigued by the following from the article: “The supply chain [improvements] were important in the ability to support customers, grow the company, and they became a unique differentiator,” said Fiorina. “Supply chains cut across the grain of how organizations are put together, whether it is a modern corporation or a government agency. And they all have an organization hierarchy and chain of command, which supply chains cut across horizontally.”
It’s great to see a CEO (ok, former CEO) of such a major company speaking about the strategic importance of supply chains. This is something I’ve talked about many times (see here and here). For too long supply chain management has been viewed as a necessary evil and a place where cost reductions were the sole focus. Today, there’s an enormous opportunity to leverage the responsiveness of the fulfillment network and supply chain to gain a competitive advantage in the marketplace.
To realize this, leadership is required from the top down. The strategic value of supply chain management needs to be championed from the top and then metrics need to be aligned with that vision to drive the full value of impact to the organization. Failure to do this will leave the supply chain as a tactical necessity where the only focus is on reducing costs.
I found this article here at World Trade Magazine to be quite thought provoking.
The basic premise of the article is that we are currently moving into the third era of global supply chain transformation that has occurred within the last 100 years. The article suggests that third era of supply chain globalization–the era of revitalized command–is already upon us.
I’ve talked numerous times about the challenges of orchestrating the desired outcome across a virtual enterprise (see here, here, here and here). With your ability to respond effectively to change being an increasing threat to competitive success, how you’re able to coordinate responses to those changes is essential. There’s no question that the move to a heavily outsourced model, while providing a lot of benefits, has complicated this process. We’ve seen research and heard first-hand how challenged many brand owners are at controlling their own destiny in these situations. This is because they are still accountable for the end result and the virtual enterprise means more players and more potential for hiccups.
This article is interesting in that it not only acknowledges these issues, but takes it a step further to suggest that companies are going to start rationalizing their strategies and actually moving a bit in the opposite direction to improve their ability to deal with the realities of complexity and change. I would be interested in hearing your thoughts - is your company thinking this way?
New research cited here at CNNMoney.com identifies characteristics of supply chain leaders. According to the article, the survey, which was completed by supply chain professionals in 21 industries, identifies collaboration as a major differentiator between leaders and those identified as “followers” and “laggards.” The survey findings also indicate a significant opportunity for financial officer involvement in supply chain efforts.
The focus on collaboration is certainly very positive and consistent with what we see in the marketplace. I’ve written about the importance of collaboration many times (see here, here and here).
I found the focus on financial officer involvement interesting and a potential catch-22. On the one hand, I think this has significant potential in that supply chain professionals too frequently take a unit rather than dollar viewpoint on supply chain management decisions. Involving the financial organization offers opportunities here. The risk is that this drives everything to be too tactically focused with decisions purely based just on the economics. The reality is that you can’t plan your customers today. So, there are a lot of decisions that are going to be high impact/risk to the business where tradeoffs need to be made. Financial considerations should always be a part of that - you need to make decisions that are aligned with your corporate objectives. But so too are customer satisfaction considerations essential to these tradeoffs - factoring in the impact of this one decision on the long-term relationship with the customer and the downstream implications this decision may have on future business opportunities.
There’s an article over at EDN here asking what impact the holiday season will have on the electronics supply chain. The article starts by saying that “consumers still hold the keys to the kingdom” - which is precisely why this will be such a challenging season from a demand management and supply chain management perspective.
** My comment **
I think the only constant this year is going to be change. The reality is, as you stated, that nobody fully knows. My expectation is that sales will be strong because consumer appetite for electronics continues to grow across a variety of products.
For manufacturers, the key will be flexibility and responsiveness. The holiday season represents a huge demand management and supply chain management challenge for all manufacturers. It’s become a reality that nobody can accurately plan out these events.
Manufacturers can’t afford to miss out on the sales this season represents. With the challenges associated with trying to accurately forecast true demand, the key will be those that can respond quickest and most effectively to demand volatility and supply hiccups.
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