2010 is upon us. And much to our relief, economists are suggesting the possibility of an economic upturn somewhere in the next 12 months. But when exactly can we expect consumer behaviors to change? And how long will the entire recovery period last? There are plenty of guesses out there, but no one can say for sure. So while we cannot predict the exact timeline or nature of the recovery period ahead, what we can do is equip our supply chains with the strategic and tactical weapons that are most likely to position our companies for success.
2010 promises to be a year of recovery and renewal-but only for those companies technologically and operationally ready to capitalize on the many fruits of economic improvement. Corporate strategies should be painstaking, but they should also be deliberate, confident, and optimistic. The winning supply chains will be those that are able to recognize and respond to potential risk, and also be flexible and efficient enough to seize opportunities when they present themselves. Listed below are four strategic and tactical areas of growing importance for 2010 and beyond-coincidentally, they might also be considered four requirements for exiting the recession on top.
Focus on Multi-Tier Functionality
Multi-tier functionality is quickly becoming an operational imperative for today's best-run supply chains. As supply chains continue to sprawl into international demand-supply networks, more and more people, processes and inventories are located outside the four walls of the brand owner. And while this usually means lower-priced labor and parts, it also means significantly less control. After all, control requires visibility and data exchange-two things sorely lacking in an outsourced value network model. And while many of today's industry leaders have already caught on to the importance of multi-tier functionality, the majority lag behind.
Of course, multi-tier software solutions-including real-time visibility, collaboration, reporting and mapping, and data exchange-are neither simple nor cheap, but the cost of foregoing these technologies is far greater than the upfront deployment costs. This is particularly true for on-demand, SaaS solutions, which offer comprehensive multi-tier process capabilities, plus deployment, operations, community management, and 100 percent trading partner onboarding.
But what about ERP systems? ERP systems are still useful and relevant but simply don't cut it when it comes to managing today's multi-tier networks. Looking forward, multi-tier supply chain software is quite possibly your most important investment for 2010. Without it, you are neither prepared for the tail-end of the recession, nor the opportunities waiting on the other side.
Focus on Relationship Building
An important-and oft overlooked-aspect of supply chain management is the relationships developed and maintained across processes and enterprises. These relationships are at no time more valuable than during a recessionary period-when anxieties and risk-of-failure are high, and consumer behaviors are particularly erratic and fickle. As previously discussed, modern supply chains are more complex and interdependent than ever before. Brand owners and their trading partners simply cannot afford to work in operational silos. The failure of a single supplier can have ripple effects all the way across the value network-ultimately resulting in shortages, stockouts, and lost sales. On the flip side, close-knit, collaborative relationships can ensure mutual survival and success.
Trust, goal congruency, and collaboration are characteristics of the most "mature" supply chains because they demonstrate integrated business planning and a lean, adaptable infrastructure. Fully collaborative supply chains create a shared risk/reward, with all parties incentivized to reach common goals and mutual long-term benefits. However, effective relationship management requires constant monitoring and nurturing-not to mention the technological infrastructure to support trading partner integration and collaboration. But the business benefits of investing resources in trading partner relations are huge. The top supply chains of 2010 will be integrated, fast-paced and responsive. And that means symbiotic relationships aligned across a common, real-time, protocol-agnostic technology framework.
Focus on Demand Management
As important as healthy supplier/trading partner relationships are, customer relations are arguably more critical when it comes to reaching revenue goals and improving the bottom line. Customer-related challenges, however, are among the most difficult to solve for-in large part because "the customer is always right"-even when he's fickle or stingy or manipulative. This, of course, makes customer service and sell-side execution particularly tricky. Inefficient demand-side processes can translate into a myriad of supply chain problems, including inaccurate demand forecasts, poor channel and sell-through visibility, and ultimately stockouts or surpluses.
So while we'll never be able to perfectly predict our consumers' behaviors, we can bolster our sell-side processes with the resources and technologies needed to execute reliably, adapt quickly (to supply chain disruptions), and respond intelligently. After all, changes in consumer behavior are constant, and the inability to adapt and respond can have devastating effects on customer service levels and overall sales. Sell-side technologies will be another competitive differentiator in 2010, with industry leaders investing in applications designed to automate and streamline sell-side processes, including order management, inventory management, logistics visibility and demand planning. Sophisticated business intelligence and reporting capabilities are also smart investments, enabling enterprises to monitor, measure and analyze partner performance and demand fluctuation.
Effective demand management is particularly important in today's economic climate, where customers are hard to come by, and even more difficult to keep. But focusing on good customer service now-and in turn securing a loyal customer base-can pay back handsomely in the months to come, as the economy improves and consumers pick up their spending.
Focus on Sustainability
Yes, sustainability also makes the list. And not just because it's "the right thing to do," but because it's actually good-if not imperative-for business, too. Indeed, as government and retailer regulations continue to grow in number and severity, companies without sustainable (i.e., transparent and traceable) supply chain practices and operations will face serious consequences. Not only will they be vulnerable to hefty government fines, they will also run the risk of losing retailer partners and end customers. After all, increased regulations from government agencies mean increased regulations from OEMs and retailers, who are ultimately accountable for any environmental law violations.
Wal-Mart's recent launch of a Sustainable Product Index, and its refusal to partner with non-compliant manufacturers, is just one example. European government agencies and retailers are also striving to reduce carbon footprints, sticking to stringent reductions in electrical energy generation and automobile emissions despite complaints and lobbying by utilities and car makers. This means that it is fast becoming a core competency of companies to understand how their energy is being used and in what ways it can be more effectively managed. After all, the largest part of a company's environmental footprint actually lies deep within its extended demand-supply network-often involving hundreds or thousands of geographically disparate trading partners.
The bottom line? Mounting regulations and consumer pressures surrounding sustainable business practices ultimately translate to increased costs and lost revenues-something most businesses today simply can't risk. Fortunately, a big part of investing in sustainability is investing in integrated, multi-tier supply chain solutions, which provide real-time visibility into all tiers of the extended demand-supply network. And these solutions are something that modern supply chains require aside and apart from the mounting pressures to "go green." So at the tail-end of a seemingly relentless recession, it is time to get serious about investing in the futures of our supply chains. Opportunity and prosperity are on the horizon. Will you be ready?
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