Ecommerce, manufacturing and many other industries rely on a successful supply chain, which is as critical to today’s economy as the assembly line was to Henry Ford.
A successful supply chain includes many elements. We asked experts which ones they think are the most important.
“To thrive in today’s transformative age, we encourage companies to focus on creating a supply chain that operates as a holistic ecosystem,” said Glenn Steinberg, EY global and Americas supply chain leader. “With emerging technology such as blockchain, machine learning and the internet of things, markets themselves are evolving and becoming super-fluid, frictionless and fast moving. Given the convergence of events we are seeing with trade wars, tax reform, Brexit, EU anti-dumping rules and the like, companies are re-evaluating their supply chains.”
With that in mind, Steinberg cited flexibility, data and future planning as the most important elements of a successful supply chain.
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“We encourage clients to build a 'fit for purpose' supply chain rather than use a 'one size fits all' model,” Steinberg said. “We’ve found that a supply chain can be agile and responsive, efficient and low cost or innovation driven – but it likely can’t be all three. The ideal scenario is to align the supply chain with the company’s corporate strategy and operating model, determining which of the previously mentioned qualities are most important for successful execution. When these priorities are in conflict, the supply chain is set up to fail from a strategy perspective.”
A modern supply chain needs to be data driven, Steinberg said. “Today, data is a key foundational building block rather than a supplement to a traditional model. It is critical that both master and transactional data are accurate. In addition, analytics — descriptive, predictive and prescriptive — not only support decision making but can help guide the decisions in a more evolved supply chain.”
3. Future Thinking
The most sustainable supply chains will be built with the workplace of the future in mind, Steinberg said. “This includes building streamlined processes that are designed to handle employee turnover, in contrast to developing tribal knowledge. Gone are the days of lifetime jobs. Supply chain companies should focus on creating enriching positions and career development programs that care for the most important asset a company has, its people. By doing this, businesses remain agile with the evolving workforce.”
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4. Keep the End Customer in Mind
“Before you invest in assets, processes, systems and people, you need to deeply understand the requirements of your end customers,” said Rob DeNardo, a principal with PwC’s strategy consulting arm, Strategy&. “The end-to-end supply chain needs to work in harmony to meet those requirements. For example, delivering an online shipment within 48 hours requires synchronization across many functions, including planning, production, warehousing, sales and logistics.”
5. Full Integration
In today’s data-driven world, supply chains need to be integrated across not just the company, but across suppliers, co-manufacturers, third-party logistics providers, customers and even consumers, DeNardo said. Sensors on products, pallets, trucks, containers, etc., enable real-time track-and-trace to aid this this integration, with planning processes pulling together internal and external data from across the ecosystem to better forecast, plan and execute.
“Technology is a critical enabler, allowing companies to analyze and predict changes much more effectively than in the past, with automation of tasks freeing supply chain staff from transactional work to focus on solving complex challenges which arise,” DeNardo added.
“Innovation and supply chain are tightly linked in well-functioning supply chains,” DeNardo said. “When new products are developed, supply chain functions need to be included in the early stages, to make sure the product design comprehends supply chain implications. For example, when designing the product and packaging, it is important to consider how the product will be shipped, to optimize those costs. If a tractor can be one inch narrower so it doesn’t require special road transport during delivery, the logistics cost savings can be massive compared to a design change which might be inconsequential to the user.”
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7. Measure Performance
To objectively assess, manage and compare supply chain management performance, organizations need to have a clear understanding of the processes involved and how they relate to the enterprise, said Marisa Brown, principal research lead for supply chain management at APQC. “A standard process framework for classifying and defining processes is a good starting point. Process groups (supply chain planning, procurement, manufacturing/production) can then be broken down into processes, activities, and lower-level tasks where accountability and responsibility can be established.”
Once the processes are defined, the organizations can establish performance measurements for cost effectiveness, staff productivity, process efficiency, cycle time and quality.
Similarly, KPIs should be established. They should be based on operational objectives, Brown added. Below KPIs, the organization should identify supporting indicators that enable leaders to drill down for deeper insights into performance.