Category Archives: Supply Chain

What Is a Smarter Supply Chain?

Late this summer, while most of you were on vacation, the Supply Chain Digest asked a good question — What Is a Smarter Supply Chain?. They attempted to answer this question using the 2009 IBM Report which said that the supply chain of the future needs to be instrumented, interconnected, and intelligent, which is right, but instrumentation and interconnection alone, even enabled by AI workflow management, does not make an intelligent supply chain.

Only one thing makes an intelligent supply chain: smarter people. I’m probably the biggest fan of supply chain technology that there is — focussing primarily on the technical capabilities of the products and platforms when I cover a vendor — but even I recognize that even if you spend millions implementing end-to-end best-of-breed solutions throughout your supply chain, it will all be for nought if your people don’t have the education, experience, and EQ to use it!

Let’s face it. To take full advantage of a spend analysis tool, your sourcing analysts need to understand how to cube, slice, dice, and identify meaningful trends in PO, invoice, and T&E data to identify true savings opportunities. To take full advantage of an e-Negotiation suite, the sourcing professional needs to know when to use RFX, when to use e-Auction, and when to do a fact-based negotiation with the incumbent supplier(s). To take full advantage of optimization, you have to know how to break the cost structures down, what constraints are necessary, and what constraints are unnecessarily imposed by the business. And contract management is more than electronically filing a contract in an electronic vault, it’s ensuring the terms of the contract are adhered to — especially the pricing. I could go on through each stage of the procurement cycle and each stage of the global trade cycle and so on, but the simple fact remains that if you don’t hire smarter people, you won’t have a smarter supply chain. The days of high-school drop-outs pushing paper in the back office are long gone. Time to modernize!

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Want a Successful Supply Chain Enterprise? Architect It!

As per Wikipedia, an enterprise architecture is a rigorous description of the structure of an enterprise that describes the terminology, the composition of the subsystems, their relationships with the external environment, and the guiding principles for the design and evolution of an enterprise. The goal of an enterprise architecture exercise is an operational description of the organization that is comprehensive and includes enterprise goals, business functions, business processes, roles, organizational structures, business information, software applications, and computer systems that are in alignment.

Done right, an enterprise architecture provides the logical framework that establishes the links between business strategy and organizational structures, processes, databases, and technologies and improves organizational performance by decreasing organizational cost, reducing complexity, reducing risk, and increasing organizational agility — keys to success in today’s tough economic climate.

Furthermore, the integrated view of business and IT architectures not only allows for improved performance, but limits operational risk by allowing for the controlled coexistence of old and new processes. It’s a great recipe for success as it allows for the controlled evolution of the supply chain function from good to great.

As proof that it works, consider this recent article in Startegy + Business on Strategy by Design which discussed how even a large (UK) government agency, which had been largely paper-based with fragmented workflow processes and outdated IT systems, was able to reduce the average time to process claims by more than 70% while slashing the number of processing centers by 60% by adopting the discipline of the EA process.

So how does one master Enterprise Architecture and build a successful supply chain enterprise? According to the article, the organization focusses on the dimensions of:

  • Strategic Alignment

    that focusses on achieving real business results

  • Leadership & Staff Development

    where top management communicates the intended value throughout the organization

  • Performance Measurement

    that accurately captures the impact of the EA initiative on a regular basis is critical to strengthen the message

  • Organizational Structure and Formal Processes

    that provide a strong foundation

It’s a good message, and a good plan.

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You Don’t Need a Genie to Fulfill Your Wish!

Nor do you need the CFO to give you a big fat check either! If you want more automation in your supply chain, and according to the recent A.T. Kearney Indirect Procurement Study titled “Higher Visibility, Greater Expectations”, most of you do, all you have to do is call up one of a few dozen e-Procurement providers with a (new) SaaS offering and tell them you’re ready. Not only can you start for a small monthly fee, but the savings will pay for the system many times over.

And if you don’t know what system is right for you, just re-read SI’s recent series that provides A Hitchhiker’s Guide to e-Procurement. It will assist your organization in determining what is really important, what functionality the organization should be looking for, and how the solution compares to other solutions in the marketplace.

Stop waiting, and start buying. Considering you can pay by the drink, quit any time, and take your data with you … in the worst case, you select a system that only enables part of the efficiencies that are available, but that allows you to determine the full extent of the efficiencies the organization could reach with a system more in tune with the best practices the organization identifies as appropriate for adoption. In this case, you simply cancel the monthly contract and migrate to the new system, and triple the organization’s savings.

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McKinsey Insists that Five Global Forces Will Reshape Your Supply Chain

… but are they right? Let’s take the five global trends they have identified as key transformational forces one by one:

  • The Great Rebalancing

    The emerging market countries will contribute more growth than the developed ones.

    Once emerging countries increase their standards of living across the board, they will no longer be low-cost countries. If you rely on low-cost countries to power your supply chain, you’ll have to find new low-cost sources of supply.

  • The Productivity Imperative

    Developed economies will need to generate pronounced gains in productivity to power continued economic growth.

    In addition, an average company will need to generate pronounced gains in productivity and efficiency to survive — including enhanced efficiency and productivity in the supply chain. As a result, an average company will have to accelerate its adoption of new processes and technology.

  • The Global Grid

    The global economy is becoming increasingly connected with increasingly complex flows of capital, goods, information, and people.

    The supply chain will have to become increasingly connected as well. This will require more communications and information technology at each and every stage of the supply chain.

  • Pricing the Planet

    Demand for resources is rising, supplies are becoming constrained, and changing social attitudes are heightening the focus on environmental protection.

    Supply chains will have fewer top talent resources, will have to focus on helping engineering identify designs that require less of those raw materials in short supply, and will have to be redesigned to decrease their environmental footprint.

  • The Market State

    The contradictory demands of market growth and safety nets is putting governments under extraordinary pressure.

    • As a result, supply chains can expect to be subjected to an onslaught of legislation in the near future as governments attempt to adapt.

In other words, McKinsey is right and the five global forces will have an effect on your supply chain. In the short term, you will have to:

  • streamline your processes,
  • adopt new technologies,
  • implement lean and minimize waste,
  • improve your ability to comply with regulations, and
  • start looking for new low cost sources of supply.

And then you’ll have to get creative.

Supply Chain Problems? Look North for a Solution!

I was thrilled with the results of the recent IACCM worldwide study that found “Canada is ‘Top Dog’ when it comes to World Trade”. It just confirms what I’ve known all along … there’s no one easier to work with than us canucks and no one more eager to help you solve your supply chain problems.

Furthermore, as Tim Cummins notes, with companies and public sector agencies worldwide increasingly concerned about reputation risk, it’s ethics, fairness, integrity that really matter. If there’s one thing us Canadians tend to have in spades (politicians excepted), it’s ethics, fairness, and integrity. The reality is that Canada is the sort of environment that can be trusted and where risks can be managed effectively. So come north. We’ll be glad to help you out!