As the use of supply chain strategies to gain market share and competitive edge is on the upswing, the spending and activities in this area have also augmented to a great extent. In today’s dynamic business world, various technologies and process upgrades used at the forward-thinking companies accentuate the applicability of supply chain management as a crucial element of overall business strategy. It is also pointing towards the fact that increasing customer value is everyone’s business rather than only management’s.
From the observation of the trends in key industries in the world- the FMCG, high tech and industrial manufacturing industries, six key trends – demand planning, globalisation, increased competition, and price pressures; outsourcing; shortened and more complex product life cycle management (or PLM); closer integration and collaboration with suppliers-have been very evident as driving the management of supply chain in today’s enterprises.
Demand planning
To influence and manage demand more efficiently, companies are now shifting their focus from plant-level production planning to demand-driven focus. In adopting a demand-driven model, it is very critical to decide what a firm is best at selling, making and delivering and align firm’s sales force according to that. Ultimately, this demand-driven approach can improve demand planning and management by creating a more customer-focused mindset. Besides, advanced demand planning helps a company uncover data and identify important trends buried in a company’s information systems. But to best achieve this, agreement among company’s internal stakeholders- sales, marketing, finance, product development etc. - upon a consensus demand plan is imperative.
Globalisation
Mostly due to improvements in communications, globalisation is bringing change in the ways business is done, managed and transacted. Today Manufacturing, distribution, sourcing of materials, invoicing and returns have all been significantly impacted by the increased integration of a global customer and supplier base. So, undoubtedly, supply chain is the area in an organisation mostly affected by globalisation. In managing the changes incurred by rapid globalisation, the right Supply Chain Design is important. A well thought-out Supply Chain Network Design can optimise the network and the flow of materials through the network.
Increased competition and price pressure
As the extent of commoditisation (less differentiated products) is increasing in today’s marketplace, weapons like pricing, product features, brand recognition are ceasing to differentiate a product. Hence companies are in search of better ways to distinguish themselves. With this respect, the idea of significant cost improvement through effective use of supply chain is gaining increasing strategic priority in today’s businesses. Here companies are mainly making cost improvements around inventory management, logistics operations, material management and manufacturing costs, including raw material and component acquisition. To do this, companies are resorting to improvements in Sales and Operations Planning (S&OP), transportation & distribution management, product life cycle management or PLM and strategic sourcing and procurement management. But besides using supply chain for cost improvements, companies should also increase their capabilities and streamline processes to stay competitive.
Outsourcing
Due to advantages around product design capabilities; cost and quality of global manufacturing and distribution; and information media and systems, companies are increasingly choosing to outsource parts or all of their supply chain from a more capable third party. But to minimise the underlying risks associated with outsourcing, companies must develop right systems, processes and organisational management structure. In an outsourced supply chain environment, the need for information, controls and excellence from the “information worker” becomes a high priority.
Shortened and more complex PLM
Today, industries are under pressure to develop innovative products and bring them to market more rapidly, while minimising cannibalisation of existing products, which are still in high demand. To ensure this, companies need more efficient product life cycle management or PLM processes including new product introduction, discontinuation, and design for manufacturability and leveraging across entire product and infrastructure characteristics. This can benefit companies by helping to design products that can share common operations, components or materials with other products and thereby reducing risks of obsolescence write-offs and also increasing the investments in purchasing key raw materials and infrastructure development.
Collaboration between stakeholders in the extended supply chain
The ultimate goal of collaboration is to increase visibility throughout the value chain in an effort to make better management decisions and to ultimately drive down value chain costs. As supply chains continue to develop and mature, a move toward more intense collaboration between customers and suppliers has occurred. Today, collaboration is not limited merely to linking information systems; rather it is stretching out to fully integrate business processes and organisational structures across companies comprising the full value chain. The expansion of Sales and operations Planning (S&OP) provides the real life examples of collaboration.
S&OP processes include upstream and downstream value chain partners as regular participants and help maintain a well-coordinated and valid plan in support of customer demand, a business plan and a strategy. The resulting operating plan provides the management of each partner with a complete picture of forecasted demand, supply capacity, corresponding financial information with financial implications and allows them to make informed decisions. Companies using the S&OP thus have greater visibility across their value chain, gain the agility necessary to improve the Product Lifecycle Management (PLM) process, improve promotional planning, minimise unnecessary buildups of inventory, increase revenue predictability and execute customer service expectations.
But to enjoy a sustainable improvement in overall supply chain performance, businesses must have the right balance of investments in organisation, processes and technology. As a company’s business drivers change, business processes, SCM technology investment and the overall approach to supply chain management must change and keep pace.
