What’s in store in 2016 and beyond?
According to an article by Sigi Osagie on the Supply Chain Management Review website, globalisation, risk management and the quest for talent are just a few of the challenges that will confront supply chain managers in the coming years.
Global economic turbulence and geo-political factors are increasingly positioning supply chain management (SCM) as a key agenda item in boardrooms across the world. Recent media stories exposing slave wages, child labour and questionable supplier management tactics are examples of the added socio-economic challenges companies have to contend with in their supply pipelines.
Undoubtedly, SCM capability will remain a critical concern for senior executives in 2016 and beyond; not least because it is a vital element of the value chains of many organisations.
Supply chain professionals face a myriad issues in managing supply pipelines effectively. Some are traditional problems, like good IT systems capability.
Others reflect the evolution of SCM in a more globalised world. The jet engine, the internet, and falling telecommunications costs have combined to create a global village; a new playing field offering many new opportunities and challenges. Supply chain professionals must keep abreast of these trends, some of which we examine here.
The global village has been driven, in part, by the continued push for better shareholder returns and higher business efficiencies. This has created a colossal move to exploit low-cost geographical areas.
It has also created an outsourcing industry that has mushroomed beyond anyone’s imagination. Outsourced and offshore operations have, in turn, created extended supply chains, which inherently entail increased complexity and risks.
The ability to manage supply chains effectively in this more globalised playing field will increasingly become a critical source of competitive advantage.
SUPPLY CHAIN RISKS AND CORPORATE SOCIAL RESPONSIBILITY
Risk impacts – in terms of intellectual property, quality, lead-times, supply continuity and inventory-holding – will be familiar to seasoned supply chain professionals.
Now they must also contend with the growing importance of broader issues; with corporate social responsibility (CSR), including ethics and sustainability, probably topping the list. The reputational and financial damage CSR issues can create cannot be over-emphasised, irrespective of the truths behind such incidents.
Resilient and agile SCM capability, which incorporates sound risk management and good CSR execution at the coalface, will become one of the hallmarks of effective corporate leadership.
SCM is one of the areas of enterprise activity seeing the biggest impact from technology. While laggard organisations continue to grapple with their enterprise resource planning (ERP) requirements, the more nimble players have extended their leverage of technology in different domains, with significant benefits in operational performance, organisational capability and cost efficiency. Some application examples include:
• E-commerce – From e-auctions for sourcing a wider range of supplies to click-and-collect in retail supply chains. Also, integrating the use of radio-frequency identification (RFID) into broader e-commerce capabilities is enabling seamless flow of data, with greater accuracy and timeliness, even across organisational boundaries.
• 3D printing – This offers massive opportunities for personalisation of products, enhanced rapid prototyping, and time-to-market for new product launches.
• Supply chain analytics and “big data” – Supply chain analytics software offerings continue to evolve in leaps and bounds, providing better end-to-end pipeline visibility and spend management.
• Cloud-based software applications – This has a massive impact on organisations, largely through much lower capital investment requirements, significantly reduced total cost of ownership and, hence, greater return on investment.
• Human factors – Technology is also likely to have a huge impact on jobs and human interactions in the supply chain arena. Some conventional SCM job roles are already being supplanted by technology; for instance, tactical planning and purchasing activities now require less manual intervention, and headcount, with reliable IT systems capability.
SUPPLY BASE MANAGEMENT
Despite the impact of social media on human interactions, the requirement to “eyeball” key suppliers at periodic intervals remains crucial. Sound supplier relationships are the wellspring of harnessing great performance and increased value from the supply base to support enterprise goals.
Sound supplier relationships are underpinned by good interpersonal chemistry between procurement buyers and supplier personnel.
Organisations will need to embrace robust supply base management, with structured supplier performance and relationship management (SPRM) and formal supply risk management at its core.
To successfully harness the power of the supply base for competitive advantage, senior executives and supply chain managers must shift their traditional perspectives and recognise suppliers as extensions of the enterprise value chain.
The requirement to shift perspectives is a key aspect of developing enhanced SCM “people capability”; for instance, enhancing the competences of SCM professionals. The benefits of developing better SCM processes and leveraging technology enablement are obvious, but these approaches can, and will, be replicated by others. Talent cannot be copied; it can only be acquired and nurtured, through effective recruitment and employee development and engagement.
Many organisations have previously focused investment at process improvements and system enhancements, yet people are the soul of any organisation. The new playing field demands greater investment in developing the capability of people for sustainable success. This is already becoming apparent in procurement in particular.
As organisations continue to source more goods and services externally, the impact of purchasing spend on enterprise profitability has grown. With the need to robustly manage supply risk exposure and develop supply chains that are better aligned to corporate agendas, procurement has evolved from the conventional focus on “costs savings” to incorporate added critical requirements like SPRM; innovation; supply reliability; and value enhancements, where “value” exceeds financial benefits.
It demands a new breed of procurement professionals, who have business savvy and are adept at nurturing productive stakeholder relationships; they must be “supply business managers” rather than “purchasing geeks”.
The importance of talent as a critical success factor applies right across the SCM spectrum, because, ultimately, it is people that create performance, good or bad. Building robust people capability is central to enhancing SCM performance.
Although 2016 retains some of last year’s uncertainties, it also offers a new dawn with significant opportunities. For many organisations, exploiting these opportunities fully and securing the benefits on offer will only come about by enhancing their SCM capabilities. Getting supply chain functions firing on all cylinders will be vital in 2016, and beyond.