Don’t just manage your supply chain – supercharge it!
The new supply chain is an interdisciplinary system driven by real-time information, which will transform the way companies work together. Supply chain executives need to be aware of the importance of real-time data, in addition to the traditional emphasis on statistical process control, lean manufacturing and theory of constraints. The new era of the supply chain solutions marks a shift from supply chain control to managing product flow by relying on automation, visibility and speed.
Speed drives all financial benefits and increases customer satisfaction – customers receive products sooner and innovation hits the market faster. Speed moves out excess inventory and accelerates the cash-to-cash cycle, which keeps our business moving.
Here are five new principles to embrace in the quest for speed, as outlined in the book “The LIVING Supply Chain: The Evolving Imperative of Operating in Real Time.”
1. Connected supply chains improve visibility and velocity
You can no longer “control” a supply chain – you can only know it as deeply as possible. To control means to deploy processes that can limit your supply chain solution’s performance and speed. If a company focuses on visibility, it can increase velocity instead of adding steps that can slow down the process. To achieve visibility, companies must increase connectivity across their supply chains.
2. Cloud computing is a must to centralize knowledge
Cloud computing is becoming the single most important component of running a global supply chain, with its ability to support business process convergence by bringing diverse sources of information to one central platform. In the past, companies had to automate separate business processes that were based on commercial invoices, purchase orders and transactional documents. As these automated processes start to link with one another in the cloud, traditional, time-consuming transactional steps are becoming streamlined, providing more information on where everything is in the supply chain. Down the road, distributed ledger technologies like blockchain may expedite transaction verification even more than cloud systems.
3. Proximity equals speed
Moving forward, labor arbitrage will no longer be as relevant as companies move to more regional manufacturing for targeted markets. Even if raw material costs and oil prices go back up, the demand for faster product cycles will continue to grow. When this happens, proximity will gain new advantages for global supply chains. To source locally and quickly, companies may need to find alternative raw material sources. This will take time and engineering; smart companies will begin to tackle this challenge now, before possible future shortages have an impact on orders.
4. Unpredictability is the only predictable thing
As things accelerate, this also opens up the supply chain to new impacts, ranging from inclement weather to changing trade laws. To adjust, we need to focus more on tools that respond to unpredictability, including real-time tracking, global supply chain visibility and expanded communication with suppliers. If the speedometer on your supply truck only showed how fast it was going yesterday, it wouldn’t help you understand your speed today.
5. Real-time alerts are critical
The rise of real-time information allows for enhanced predictability from live visibility. A good supply chain solution should let you know when you’re under your minimum order quantity and send a signal, like a tire pressure light on your car that only lights up when something is wrong. You must be notified of issues in your supply chain, whether it’s a late delivery, a quality issue, a capacity problem, a transportation delay, a holdup at customs or even a major storm at a production site.
This blog was adapted from the book The LIVING Supply Chain: The Evolving Imperative of Operating in Real Time.