Keys to stellar supply chain management
ISE Magazine –Volume: 49, Number: 08
By Diana Berry
Innovation, technology, the environment and regulatory compliance all play a role
Supply chain management is three decades old and still evolving. While there is no standard definition, BusinessDictionary.com defines supply chain management as the “management of material and information flow in a supply chain to provide the highest degree of customer satisfaction at the lowest possible cost. Supply chain management requires the commitment of supply chain partners to work closely to coordinate order generation, order taking and order fulfillment. They thereby create an extended enterprise spreading far beyond the producer’s location.”
Over the years, the supply chain management field has changed significantly, global markets have evolved and business complexity has increased. In previous years, supply chain management focused solely on reducing cost. Today, the purpose of supply chain management also includes creating and maximizing customer value. Supply chain management allows companies to differentiate themselves and create competitive advantages.
The supply chain of the future will need to be managed in an era of constant change and uncertainty. Today, we live in a very dynamic world. In the past, forecasting was easier because demand was more stable. The modern supply chain will need to become more responsive to demand change. Let’s examine some practical tips for managing your supply chain efficiently, taking into consideration current trends in the industry. Successful supply chain management requires organizations to embrace innovation, leverage technology, incorporate the principles of green supply chain management and implement a strong regulatory compliance program.
Innovation is the use of a new method or technology that results in more productive and efficient processes, and embracing innovation is an important key in supply chain management. A good example of a company that embraces innovation is Cardinal Health, a healthcare service organization. Cardinal Health is committed to reducing healthcare costs while supporting caregiving services.
Cardinal Health opened a supply chain innovation lab employing the internet of things (IoT) approach dedicated to reducing $5 billion in waste in the healthcare device supply chain. The new lab serves as a hub for innovation, such as smart sensors and near-field communication, to bring creative and care-centered technologies to the most challenging healthcare issues.
Innovation needs to be nurtured in an environment of trust among all parties involved in the supply chain. Collaboration between suppliers, transportation providers and manufacturers is a critical aspect of a well-managed supply chain, with all groups working toward a common goal. Increased collaboration between supply chain buyer and seller leads to increased efficiency. Richard Markoff, corporate supply chain standards and audits director at L’Oréal, said the success of the L’Oréal supply chain depends on collaboration with its partners, both upstream and downstream, to react quickly to changing market needs. Collaboration also creates an environment of innovative problem-solving in the supply chain.
Leading manufacturing and retailing companies leverage technology for supply chain efficiency, translating into cost savings. A variety of software programs are available to help improve supply chain efficiency. The key is to select the right software based on need. Some companies still use different applications for different areas of the supply chain (procurement, transportation, etc.). This can lead to integration issues and adversely impact supply chain efficiency. However, these days software applications that can address the entire supply chain are available.
Pies in the sky
Selecting the right software application can help the supply chain become more agile and reduce processing times. Supply chain management must consider that consumer buying patterns can change rapidly. Agile supply chains are flexible to consumer demand. The transportation industry could become more agile in its practices. The industry could upgrade its IT systems to automate more of its operations, include comprehensive shipment information and streamline its business processes.
Big data analytics is playing a large role in supply chains today and is revolutionizing the industry in several ways. It is enabling complex supplier networks to collaborate and create knowledge-sharing networks. In transportation, big data analytics is being used to optimize delivery routes. The systems plan truck delivery routes based on historical traffic patterns. Recent advances in geo-analytical mapping techniques allow companies to analyze millions of data points and model hundreds of potential route scenarios.
Amazon uses big data analytics to fulfill orders quickly by linking with manufacturers and tracking their inventory. Big data analytic systems select warehouses nearest the consumer to reduce shipping costs by up to 40 percent. In addition, graph theory (the study of graphics) is used to help determine the best delivery schedule, route and product groupings to reduce shipping costs further.
Going green with supply chain management
Today, consumers are becoming more aware of environmental or green issues such as pollution and global warming.
They want to know more about the goods and services they consume, and companies should answer their questions in terms of green supply chain management. Companies also have a good opportunity to take care of the environment and earn profits at the same time. Green supply chain management can be defined as integrating environmental logic into supply chain management.
The successful implementation of green supply chain management concepts would not be possible without positioning the right talent in the right places to drive effective execution on daily operations. Excellence requires outstanding competencies. Competencies required in supply chain are expertise in transportation, warehousing, inventory management and production planning. Other needed skills are strong business acumen, global mindset, technical savvy, analysis and influence. Many supply chain practitioners come from business backgrounds and are not well-grounded in logistics theory. Most of the supply chain practitioners in the future have probably never experienced working in a manufacturing setting. Employees in house will need training in the form of simulations, games, attending industry events, learning from their peers and exposure to different supply chain areas to understand how all the pieces fit together.
Strong regulatory compliance
The role of compliance has become more important in today’s supply chain. Government agencies around the world continue issuing rules and regulations that affect supply chain operators. Companies need to make sure they have a strong and well-implemented program in place. The cost of noncompliance can be high, with fines and penalties assessed. Other costs can include returned items and customer complaints for noncompliant products, which also points toward the need to implement new tracking systems.
As emerging economies continue to grow, manufacturers are finding new markets that they did not know before; however, with this opportunity comes a clear need to stay up to date with import requirements. A strong compliance program should include a formal process to answer import and export requirements to ensure regulations are met. Organizations can benefit from implementing trade management databases that include:
- Classifying products across businesses
- Maintaining a compliant file of sensitive bills of materials
- Expediting customs clearance and centralizing and controlling global trade logistics
Four steps to a better supply chain
In summary, the keys to stellar supply chain management include:
- Embracing innovation
- Leveraging technology
- Incorporating green supply chain management principles
- Implementing a strong regulatory compliance program