Is the supply chain finally being recognized by the mainstream as a strategic capability of a company?

TrevorMiles

Supply chains are getting good business press lately.  On a daily basis, I come across quotes like the one in a recent BusinessWeek article stating, “The ones [companies] that manage supply chains best will come out ahead as the recession eases.”   Is the supply chain finally being recognized by the mainstream as a strategic capability of a company, rather than merely a function to execute?  And is there agreement that it’s not just a cost center, it can be a revenue generator too?

In this particular article, it quotes the Chief Executive of Nokia as saying “We would have sold more phones in the third quarter without the capacity constraints.”    Because production was lowered dramatically during the recession, some companies – in consumer electronics in particular – are now seeing spot shortages due to unexpected demand increases.  As the article points out, “ The coming months could be tricky…Manufactures must gauge demand accurately among economic uncertainty.”  Therein lies the rub: How to balance the opportunities to capture all demand while mitigating against the risks of excess and/or obsolete inventories.

Demand planning is going to be key without a doubt, but equally important will be demand responsiveness – acting quickly to the unexpected – and overall supply chain agility.  Even before the recession, companies struggled with demand volatility because of increased competition, decreasing customer loyalty, constant new product introductions etc.  But in today’s grave economic climate with major demand swings and declining spending overall, planning for future demand based on historical data is now virtually impossible.  With inventories at an all time low, retailers and suppliers will need to respond rapidly to actual demand.   Companies need the ability to detect demand trends early so that they can ramp up production accordingly in order to avoid the situation Nokia described in the article.

Solving the rapid response challenge will require:

  • accurate and timely demand sensing to quickly understand demand shifts
  • collaboration: both with customers to gain consensus on true demand, and with internal colleagues and supply partners to develop and analyze resolution alternatives; and
  • decision support that drives profitable responses through shaping demand and allocating finished goods supply as appropriate

I believe achieving excellence in responding to changing customer demands has become the number one challenge facing enterprises today and can represent the largest opportunity for companies to increase customer service, enhance margins and attain more predictable revenue across the entire value chain.

TrevorMiles

As vice president of Thought Leadership, Trevor serves as an expert source for Kinaxis customers, prospects, industry analysts and journalists. Known throughout the supply chain field, he has published many articles, presented at various industry events, and is the primary contributor to the Kinaxis 21st Century Supply Chain blog. Trevor helps Kinaxis seek new market opportunities within the company’s distinctive competence and is instrumental in the company’s competitive and market intelligence. He helps key customers achieve the operational control tower vision, guiding their priorities and architectures to realize the full potential of RapidResponse.

Having lived, worked, and studied in Canada, the United States, Europe and Africa, Trevor brings a global perspective to market needs and customer requirements. Prior to joining Kinaxis, Trevor worked for i2 Technologies where he held a number of sales & marketing roles and worked with global industry leaders such as Continental, Volkswagen, Nokia, and Thomson. Previous to i2, he worked for Coopers & Lybrand performing several studies in supply chain reengineering for companies such as Levi’s, Burmah Oil, TNT Logistics, AGA Gas, and Schneider Electric, among others. Trevor has degrees in Chemical Engineering and Industrial Engineering.

More blog posts by Trevor Miles

Discussions

  1. I think companies are finally starting to realize that they ARE their supply chain, they are not just a company that has a supply chain. So, responding to changes on the customer side, as well as the supply side, is the only way to stay in phase with the outside world. Thanks for highlighting this.

  2. Great blog Trevor. I agree with your statement that accurate and timely demand sensing is required to quickly understand demand shifts and respond appropriately. However, I feel that applying that back to Nokia, even with a demand sensing capability/system in place, they would not have been able to sense the demand shift quickly enough. For further details, please read “Demand sensing- is it a solution for capacity planning or near term deployment planning problem?” http://www.infosysblogs.com/supply-chain/2009/11/demand_sensing_is_it_a_solutio.html#more

  3. Most companies talk of supply chain being important but do not act so even today. When capacity enhancement is discussed, it is all about inhouse capacities and supply chain is frequently taken for granted. At most the company’s tier one supplier is considered and it is assumed he will look into his sub tiers. Also, commodity suppliers are frequently ignored as it is assumed they can supply any quantity required. Another weak lisk is overseas suppliers, as it is difficult to have first hand information about them – till they fail to supply as they have gown down under in the recession. These are some of the failure modes we are seeing, more so in recent past.

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