Supply Chain Innovation

Real Virtuality – Weaving the fabric of supply chain innovation

 

Enjoying a walk through an old tobacco farm on one of the first warm days of an early Spring I was fascinated by the remains of what had once been an animal enclosure. Examining the intricate mesh revealed what appeared to be two or three single threads creating a flexible but strong and secure fence. Further examination identified that several of the links on this particular piece of fencing had become unraveled, destroying the value of the construction and rendering it useless.

 

The failure of the single thread resulted in the unraveling of a whole section of fencing.  This is reminiscent of the interdependence of the various entities in the global supply chain. Unlike the implied sequential series of events that take place in a supply chain, in reality there are several key threads that tie it all together. These include:

 

• Information, flowing between all parties from purchase order to proof of delivery;
• Physical flow of goods – in many cases through a series of hand offs and physical locations
• Flow of funds, in many cases impacted by variations in predictability in related and interdependent events. Terms of payment, in traditional global trade, are linked to logistics issues, terms of purchase defining change of ownership, encompassed by what are internationally known as INCO Terms.

.

As supply chains become more fragmented, extending across multiple geographical locations, the implications of terms of trade and the need to secure strong supply relationships grow in importance. Evaluation of potential new supply locations, service providers and modes of transportation have an impact on the final outcome – a profit or a loss.  Also important to consider are implications of change in custodianship to political, social and insurance liability.

 

Strangers to the intricacies of global trade and transportation, many purchasing executives, operations personnel and related entities are finding out the hard way that, (with a little license on my part)  ‘they are not in Kansas anymore’.

 

In many cases, pressures to reduce costs have resulted in single threaded process improvements – for example manufacturing.. The reality is that manufacturing costs are only part of the equation – in many cases savings in labor rates are more than offset  by additional costs related to transportation, product shortages and increased inventory holdings to allow for variances in supply predictability. Responding to the challenges of a virtual market place requires new strategies and approaches. In addition, it is valuable to adopt best practices from established markets, translating these into a global context. Distribution and logistics options include:

 

·      Distributed delivery centers - a global network of distribution centers – owned and operated by the Brand Master

·      Partner fulfillment centers - a global network of distribution centers, owned and operated by suppliers who comprise the integrated supply chain.

·      Dedicated fulfillment centers - centralized distribution center, owned and operated by the Brand Master, at country or regional levels.

·      Third party fulfillment centers - centralized distribution centers, serving specific geographical regions

·      Build to Order - to include a combination of distributed, centralized and third party operations where products are assembled based on demand at a global and regional level.

 

Each of these models has its inherent challenges and benefits – an aggravating factor is the need for real time visibility across a global supply environment .One solution is to view the supply chain network as a single virtual enterprise. All constituents have a role but the focus is on the outcome – the customer experience and financial impact on all parties. Viewing this inter-related community based on outcomes versus activities enables a whole new paradigm.  Information technology is an enabler to weave the threads of supply chain processes into a single virtual entity. Real time sharing of information related to fluctuations in supply, demand and constraints creates an effective ‘digital nervous system’. This federated, ‘neural’ model sounds like something out of Star Wars – the reality is that the technology enablers already exist in order to facilitate this. The path forward includes an evaluation of the following:

 

• Roles and responsibilities – impact and outcome – of each of the supply chain participants
• Information needs and data sources
• Communications infrastructure – existing and required
• Security – data and product level
• Rules and regulations – regulatory and fiscal compliance
• Data capture and auto identification capabilities across the network
• Exception management, alerting and response requirements
• Delivery architecture – capability of players versus ‘reach’ required

 

Clearly defined and executed the creation of this ‘federated virtual supply chain’ will provide the richness and reach required to meet the challenges of globalization  Plus a unified capability to identify and reap the rewards of new markets and opportunities.

 

The future is NOW. Are you ready for it??

 

test Filed under Uncategorized |