As recently as 20 years ago, supply chain management was seen as something that took place behind the scenes without dedicated staff and resources. For many, it was regarded as a necessity for only the largest brands or companies with international distribution. When there was a disruption to the supply chain, the fix was easy-a company would pull a couple of people from whatever they were doing and put them on the problem. Once the kinks were ironed out, those people could go back their regular jobs.
In those days consumers were less demanding, less aware and certainly more patient, as they weren't familiar with online ordering with the ability to track shipments to a timely and expected delivery date. Even items that were custom built, beginning when an order arrived via the U.S. Postal Service, were handled with an understanding that completion and delivery would be unpredictable.
Supply chain management has been around at least as long as the assembly line, but until recently, the concept of a chief supply officer has been foreign. Now that role is seen as a highly strategic one that is increasingly valuable from both a customer service and a business perspective. As the role has evolved it's become a critical one, as managing a supply chain is complex, fraught with risk, subject to complex regulations, fines, competition, international shipping restrictions, and more.
As the internet, email and other technologies have become ubiquitous, the expectations of consumers have grown correspondingly. Today's companies are increasingly global and complex, with competition growing on every front and acquisitions that change business processes taking place with astonishing frequency.
At the same time, roles and responsibilities within companies have expanded and become more specific. With new technologies skills have become more specific, and companies are much less likely to want to pull people from important jobs to focus their attention on supply chain problems. The supply chain itself has become increasingly complex, with a higher number of ingredients and components leading to a finished product, and with a broader and more widespread base of suppliers. It's clear that monitoring the path of goods using tacks on a map no longer works.
Technology has crept into SCM step by step, beginning with electronic invoicing, computerized shipping and tracking and automated notifications that were advanced by companies like FedEx and UPS. Initially intended for business-to-business interactions, it took time before that level of tracking and accountability was provided to consumers. But even in those early days it was clear that the ability to notify everyone along the chain was important.
It wasn't until customer-focused companies like Zappos, the online retailer with the tagline "Powered by Service," came on the scene that consumers got a taste of how involved they could be with their purchases. Online natives like Zappos, didn't start with brick-and-mortar stores, so rather than having to adapt to new technology, they were born into the arms of it.
Consumers love these businesses because they can see immediately that their orders have been received, they are notified when orders are shipped, and they can track their purchase every step of the way. Before they order, they can read extensive reviews of the products they are about to purchase, as well as the company they are about to purchase from. This has set a new standard for online customer service; companies that can meet or exceed that standard have a distinct competitive advantage. Companies like Apple and Harley Davidson use that advantage to further personalize the purchase experience by taking custom orders, then building a product to the exact customer specifications.
That same kind of tracking and accountability can be applied to virtually every link in the supply chain to provide a moment-by-moment snapshot of how goods are moving around the planet. This is the aim of a supply chain manager, to know where inventory is and to anticipate delays and hitches before they affect the final assembly line. And just as technology has provided the business landscape with many more capabilities; it has contributed to a new recognition of supply chain management as a profession and a discipline. Today, knowledgeable supply chain managers command respect and correspondingly high salaries. Modern supply chain managers understand that technology provides increased visibility and accountability; therefore, a stronger competitive edge and tight control of the supply chain is worth the investment.
Key to this kind of efficiency is the ability to notify everyone along the supply chain when things aren't going exactly as planned. Notification technology has adapted along with SCM to provide an easy way to send one message to many at once, by a wide variety of devices. So employees at desks will get a call and an email, and someone out in a plant will get a text sent to their smartphone. When the information is shared in real-time, it allows teams to adapt and change to suit the situation, helping to keep manufacturing lines on time and on track.
As an example, one company that manufactures condiments that are packed in glass jars received a shipment of bottles that seemed fine, but revealed a visible flaw after being filled. The product was packed, labeled and shipped to retailers before the flaw was discovered, and the entire lot had to be recalled. With notification technology in place, the complicated task of issuing a recall was completed in minutes. The manufacturer notified everyone along the chain by sending a single automated alert. Whether the goods had shipped to a dozen or a thousand customers, tracking ingredients and notifying customers would still take just minutes.
Unfortunately, even though the SCM profession and the technology are burgeoning, many companies are still entrenched in outdated, monolithic systems, using phone, fax and email to communicate throughout their lengthy and complicated supply chains. But even these companies feel the pressures of competition and keeping costs down pushing them towards more and better technology and automated processes that provide a way to notify everyone along the chain.
The fact that technology with notification has influenced the SCM scene is evident by the increasing trend towards just-in-time inventory management. JIT is a great way to free up cash and increase working capital by letting inventory run down. This can free up many millions of dollars, not just held in the goods themselves, but in storage, security and management of goods. It also reduces the risk of inventory becoming obsolete while in storage.
JIT also comes with risks, many of which have been starkly illustrated by the earthquake and subsequent tsunami in Japan, which have left global manufacturers scrambling for alternative parts and materials that were impacted by the double disaster. The moment that tragedy occurred, alerts began. Supply chain managers quickly used notification to reach everyone along the chain, both suppliers and customers, to assess the situation and reserve materials they knew would soon be in short supply. Suppliers, in turn, could easily respond to these alerts, and those responses were logged, making it easy for supply chain managers to track materials and adapt accordingly.
Despite the risks, JIT manufacturing has become so entrenched that many companies simply can't afford to stock and warehouse as much inventory as they used to. So if the supply chain is impacted, orders are affected or downtime in the plant occurs. Successful JIT relies on a tightly managed supply chain, with the ability to alert suppliers quickly in the case of an increased need for materials or goods. This tight management is only possible when SCM technology is tightly integrated with notification capabilities.
Manufacturing is complicated, and supply chain interruptions can cause inventory levels to plummet precipitously. To maintain a steady flow of ingredients, components and finished goods there must clear communication all along the chain. That requires a solution that is more efficient and sophisticated than sending a mass email or pulling staff to make panicked phone calls.
When the earthquake and tsunami happened earlier this year, many executives around the world had emergency meetings to assess how the disaster would affect their companies and determine what they could do to minimize that impact. Those who had a notification system in place were able to do so quickly, notifying all top managers at once via phone, email, SMS and more, and connecting these decision makers using a conference call bridge that everyone could join with a touch of their keypad. This helped them share information, make urgent decisions and coordinate response efforts.
This disaster reminded us all that, when it comes to business continuity, it's important to plan for the worst. It also highlighted the fact that old systems and old ways of doing things just don't work in this type of extreme situation. When this kind of interruption happens, consumers start clamoring for information and solutions; expectations are higher than ever before. It's important to get ahead of consumer reaction quickly, as call centers will quickly be swamped with calls for information. With a plan in place it's possible to use a bad situation to build goodwill and trust with customers.
The situation in Japan reminded a lot of people that bad things can happen, and that an event can have a huge impact, even on those that are highly prepared. Sadly, many companies stop right there, realizing that they don't have a plan, and paralyzed about where to go from there. The survivors over the long term are those who have considered the what-ifs and have put solid plans in place for dealing with interruption. Wise companies will initiate the use of SCM technology and a notification solution. Any company that doesn't use technology as part of SCM is at a distinct disadvantage, no matter how good their business continuity plans.
According to supply chain experts, there are four major areas where SCM technology with notification will help. Those areas are global trade, supply relationship management, reverse logistics, and supply chain execution. Let's look at each of these areas:
• Global trade - Global trade is fraught with constantly changing regulations. A well-respected company recently received an exceedingly heavy fine for inadvertently side-stepping regulations and shipping night-vision goggles that eventually landed in the hands of terrorists. Automated notification, as part of SCM technology, could have kept everyone along the chain appraised of the latest updates and helped to avoid such a situation.
• Supply relationship management - In 2007, Mattel had to recall over 10 million toys because lead paint was detected. To stop the spread of tainted toys, the company had to work backwards along the chain to find out where the lead came from, and also forward to where the final goods were all shipped to effect a recall. With notification as part of an SCM toolkit, much of this communication could be automated, thus speeding the process and providing a reliable audit trail.
• Reverse logistics - Reverse logistics is the process of managing the return of goods, recycling of batteries and other components, disposal of products coming off lease, and the auctioning of those items, etc. When there is a sudden influx of new goods, manufacturers have to offload outdated goods quickly. Notification can help alert a variety of recyclers and other parties at once, allowing them to respond with times they are available to remove redistributed goods.
• Supply chain execution - One large discount retailer uses notification to make the delivery cycle more efficient. When a delivery arrives, staff has already been notified to be on standby to receive it immediately. If staff is not available, it's easy to alert truck to deliver to an alternate store and to reroute staff, saving both time and money.
As business complexity and global competition increases and consumer loyalty becomes more tenuous, more and more companies are exploring SCM technology to gain operational efficiencies. Using technology complemented with a reliable notification solution, they can establish a foundation for consistent leadership and secure a strong competitive edge.
William (Bill) Green, president of CDC Software Enterprise, assisted with this article.
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