The future of collaboration in supply chain processes appears bright. However, collaboration is definitely a long-term project, with elements of both revenue generation and cost elimination. Forward-looking manufacturers will continue to work together toward a single, "extended" supply chain to overcome challenges and achieve their ultimate goal - to deliver the "right product, in the right place, at the right time, at a fair price with zero defects."
Simon Ellis Practice Director, Supply Chain Strategies
Implementing Collaborative Demand and Supply Planning Solutions
June 2008 The future of collaboration in supply chain processes appears bright. However, collaboration is definitely a long-term project, with elements of both revenue generation and cost elimination. Forward-looking manufacturers will continue to work together toward a single, "extended" supply chain to overcome challenges and achieve their ultimate goal to deliver the "right product, in the right place, at the right time, at a fair price with zero defects."
The following questions were posed by SAP to Simon Ellis, practice director of Supply Chain Strategies at IDC's Manufacturing Insights, on behalf of SAP's enterprise customers.
Q. What are the emerging supply chain challenges that today's manufacturers need to address?
A. The expanding use of outsourcing, both offshore and near-shore, has resulted in highly distributed supply networks that require multiple partners, direct and indirect, to bring products and services to the global market. Consequently, global supply networks have become highly complex, involving a myriad of touch points that range from obtaining raw materials to delivering finished goods. These global supply networks must exhibit a high degree of adaptability, responsiveness, and collaborative capability (not just the willingness to collaborate but also the systems facilitation to be able to do so efficiently), or they quickly become chaotic with poor service levels and high inefficiency and costs.
At the same time, global demand is growing and companies are finding that the fundamentals that create high-performing supply chains within countries or regions don't necessarily translate easily to global environments, including business process pressures on the supply chain, poor or infrequent communication with language (and potentially technology) barriers, and an exponentially greater numbers of partners. But these global supply networks still need to properly balance the basics: cost, service, and productivity.
Thus, the globalization and the resulting variability of both supply and demand can quickly degrade service and cost performance if companies are not able to respond quickly, decisively, and profitably to these inevitable changes. We are also seeing growth in customer demands for diversification and broader variety in both product and product delivery which is driving higher-than-ever levels of supply chain complexity. An interesting example is
IDC_664 the levels of out of stocks in consumer packaged goods, which have remained largely consistent at 10% over a number of years. Are companies' efforts to improve the capabilities of their supply chains not effective, or have the gains exactly offset network complexity growth (i.e., number of SKUs)?
Moreover, we should not lose sight of the fact that there are enormous cost pressures on the supply chain to increase productivity and reduce inventory levels, and that these pressures are in great part responsible for the distributed global supply networks that many companies now operate. These cost pressures are not going away, so it is incumbent on the supply chain organizations to continue to eliminate waste and improve productivity.
Q. How are manufacturers managing their supply chain application selection and deployment?
A. A number of factors are influencing supply chain application selection and deployment. The first significant influencing factor is the combination of the year-on-year shrinkage of IT budgets and the challenges CIOs face in balancing "maintenance/break-fix" with "capability development." While we see outsourcing deals for the maintenance aspects of IT (noncore operations), we also see a focusing of activity around key supply chain pain points and a focusing of strategic priorities. It's often instructive to look at manufacturers' key performance indicators (KPIs), generally those metrics tracked at the board level, as a barometer of strategic priorities forecast accuracy, time to recovery, inventory cover/turns, and the perfect order/on time in full (OTIF). Unsurprisingly, these key metrics revolve around better demand and supply planning, but they also reflect cost and service.
The second significant influencing factor is... [download for more]
