When implementing any kind of change in the supply chain, the three key areas for review are processes, people and technology. Changes in procedures, organisational structure and the use of technology must all be brought in together in an integrated way.
Pressure on Supply Chains to Change
The explosion of online business has put even more pressure to have change projects. Supply chains need to be more flexible, dynamic and rapid. And, as more organisations spread their operations across Europe and Asia, and/or globally, a flexible supply chain is particularly important.
To compete in evermore competitive industries, organisations need to reduce the cost of doing business and exceed the value and service offered by competitors — some of which would be completely new to the market.
Competitive pressure means you have to get the most out of distribution networks, reduce stock holding and stock-turns, and reduce warehouse facilities. These are classic improvement areas known about for years. But adding to the push for better efficiency are increased expectations around customer relationships, service and flexibility.
Benefits of Technology in Supply Chains
Technology, such as collaboration software, has played a major part in making improvements possible. It enables major service or supply-chains to collaborate between trading partners via the Internet. There is more scope to ensure that stocks, or services, are always available for customers and that wastage is reduced.
Through collaboration, service and supply-chains can become much more responsive and proactive, allowing for dynamic trade: the ability to satisfy current demand with a customised response.
The range of available technologies is vast and growing. IT solutions, incorporating forecasting, data warehousing, work management, technical architecture, etc are becoming increasingly complex.
Energy previously spent keeping costs down can now be focused on to making the supply-chain more dynamic, adding greater value and remaining competitive.
Technology is Part of the Answer
But new technology alone is not the single answer. The ideal solution lies in a complete re-evaluation of business procedures. You need to see how all processes can be developed and improved. Technology can be brought in to support and enhance the current method while keeping focus on delivering benefits.
Investments in technology should be made where they can directly impact key business imperatives. Organisations must have a clear idea of what they want to achieve beyond the supply-chain.
The initial focus should be on strategic imperatives for the business as a whole. The technology can then be fitted around these.
A technology choice should be a conscious decision based on the characteristics of the specific system and the organisation’s objectives.
- Many organisations under pressure to join the technology race are becoming focused on the cheapest and quickest solutions, without considering the issues surrounding the problem.
- Established organisations, struggling to keep their market position against new entrants to market, have to look at what value they currently offer their customers and then how they can communicate this.
Increasing Value to Customers
What is the driver behind their overall service? What makes people choose them?
In an era of stiff competition, companies need to add value or customers will take their custom elsewhere to competitor organisations who continually strive to make this switch as simple and attractive as possible.
It is no longer appropriate to employ mechanisms to tie customers in to your Organisation. Although it may sound simplistic, you want them to remain with you because you offer better value and service as opposed to just making it too expensive to switch.
As technology enables the partial automation of the supply chain, companies now have more time to get closer to their customers and to provide a more personalised service.
The more routine, tedious tasks of the supply-chain have become automated. For example, the calculation of stock position, and inventory management, previously a complex process, can be processed automatically.
Analysts are left to work on the true value-add areas such as assessing promotional impact, aftersales service, call centres and on-time guaranteed delivery.
Changing Employee Role
The employee role in the supply-chain has also changed. Adding value in a way that technology cannot replicate requires creative employees who are able to think outside the box.
For example, the task of sourcing raw materials can now be done in a number of different ways — such as through online auction or virtual marketplace — and it is up to the employee to decide upon the best method within the company guidelines.
In addition to having to think more creatively, employees now have to integrate their work with the IT systems installed. As a result, employees need to become more technically aware.
But, inevitably, some employees may be slow to adapt to new technology. Companies have a responsibility to ensure their employee understand how they and the organisation will benefit from new systems and processes.
Organisations need to educate their employees so that technology is as a job aid rather than an imposition. For many companies, education will include redefining employees’ job roles, and training is essential for this.
Technology has also made changes to the traditions relationships between customers and suppliers.
- Manufacturer for example, expect component suppliers to deliver the products in the right numbers, in a convenient format, direct to the shop floor.
- Retailers are continuing to push for responsibility for category management and replenishment up the supply chain to manufacturers.
1. Rationalisation of supplier networks
One effect of increased expectations is that most companies are rationalising their supplier network. This simplifies and reduces cost in the supply-chain.
The changing role of suppliers moves the boundaries. Technology has enabled processes to become simpler and easier to manage, allowing people to focus on relationships instead of mechanics.
2. Tighter integration across organisations
A second effect is that there is now a real need for tighten integration between organisations’ supply-chains, if organisations are to react swiftly and accurately to customer demand. It means that retailers, distributors and manufacturers increasingly need access to information held in partners’ IT systems.
Secure corporate networks, which are open to customers and suppliers, are an important part of this process. Using a web interface, users can browse through partners’ systems to check availability, make orders and schedule deliveries.
Using secure networks, organisations can begin to take a more flexible and creative approach to process design. For example, customers could look at production schedules, and book time direct.