Global Supply Chain

This PwC Global Supply Chain Survey 2013 is worth a very close look. It provides insights into the why, how, at what will drive supply chains to excellence in the foreseeable future. It is predicated on the basis that the macroeconomic cycles are becoming more volatile and unpredictable and make supply chain planning and management much more challenging.

As part of the survey PwC looked at 6 key industries:
Automotive
Chemicals and Process
Industrial Products
Pharma and Life Sciences
Retail and Consumer Goods
Technology and Telecon

6 key findings:
1) Companies that are committed to strategic supply chain management achieve significant operational and financial advantage over their peers.
2) The leaders are focused on customer needs and requirements. But they are also focused on delivering high levels of service at lower cost and maximum flexibility.
3) It is not good enough to be the same. Tailored solutions set the leaders apart from their peers.
4) Core competencies are not outsourced because they are strategic.. This requires an understanding of what are the core competencies of the company.
5) Leaders are constantly investing in differentiated supply chain capabilities. This means extending their capabilities to take advantage of real-time demand and supply signals and collaborating more effectively across all supply chain partners.
6) Constant improvement in technologies to support their supply chains is endemic to the leaders as is a concern with sustainability.

The survey is full of important supporting information that provides context and content. For virtually all companies, large or small, it is worth studied reading. Every company has a supply chain that they must manage. From the PwC study the clear impression is that companies that are focused on their supply chains as strategic weapons are decisively winning the battle in the trenches.

These opening 2 paragraphs from a McKinsey Quarterly report (https://www.mckinseyquarterly.com/Operations/Supply_Chain_Logistics/Building_the_supply_chain_of_the_future_2729) clearly enumerate the challenges that companies face in managing their global supply chain.  How they deal with these challenges will determine their success in the future.  The BRIC countries (Brazil, Russia, India and China) are radically changing the playing field and affect everything in the supply chain from raw material availability to logistics capacity to currency exchange.   How successfully organizations deal with the rapidly changing global environment will depend on creating and implementing agile global supply chain strategies and executing the mechanics of those strategies.

The integration of strategy with mechanics is so inextricably linked that it can be easily argued that one without the other will ultimately lead to limited success of the former.  Which come first – the global supply chain strategy or the supporting mechanics that provide the infrastructure?   While having a global supply chain strategy provides companies with powerful differentiating plans of action, lacking comprehensive supply chain execution mechanics leaves the organizations highly vulnerable to failure in carrying out the strategy.

Executing agile global supply chain strategies is dependent on information that provides transparency into all aspects of the global supply chain.  As a company moves further away from its basic manufacturing paradigm – both physically and geographically – it depends more and more on information to provide insights into events and their outcomes.  This requires a comprehensive set of tools designed to support the gathering, synthesizing, contextualizing and reporting of the information into meaningful and easy to access analysis and reports.  However, without the ability to execute the tactical activities in support of the overarching strategy limited success is the most likely outcome.  It is being able to rapid execute change across their global supply networks that ultimately delivers the success of the strategy.

In our white paper, Lean, Agile and Adaptive Global Organizations,
http://blinco.com/casestudies/whitepapers/leanagile02206.pdf we present a comprehensive roadmap on how it is possible to build a lean, agile organization that will be able to support whatever agile global supply chain strategy the organization implements.

In many instances, 25-40% of an organization’s business is transacted internationally. This number has risen dramatically over the past five years and is predicted to reach anywhere from 35% to greater than 50% within the next decade.

With this continuing seismic transformation to a global economy, the complexity of a company’s supply chains increases geometrically if not exponentially. The ability to manage inventory, costs, and compliance effectively and efficiently across a network of global supply chains is being severely compromised when using traditional processes and technologies. Rising levels of inventory, misunderstood total cost of product ownership, increased regulatory business compliance and the risks associated with international business have brought an unprecedented level of awareness to the C-level executives.

With this growing percentage of global activity in a company’s product mix, the way a company constructs and manages its global supply chain has a significant and growing impact on its financial results and strategic competitiveness. The inability to effectively manage these complex supply chain networks, places organizations at significant risk. Whereas the ability to command, streamline and control the global supply chain environment brings with it incredible opportunity and strategic advantage.

Synchronizing Your Supply Chains

The key challenge to developing a comprehensive 21st century global commerce management capability (the management and synchronization of international physical, financial and information supply chains) is rooted in the basic architecture of information systems that are poorly integrated across functional business silos and units. Lack of synchronization limits the ability to predict and respond to events across the supply chain, resulting in sub-optimal results. With many activities across the global supply chain being outsourced to contract suppliers and service providers, the level of direct control over results is limited. To achieve and assure high levels of performance in this less controlled environment, companies must have the appropriate tools in place to influence partners and service providers to deliver the highest levels of compliance to contracts and commitments. To achieve a best-in-class global supply chain capability requires integrated solutions that synchronize activities and information across multiple participants in the supply chain.

The synchronization of global supply chains is comprised of four elements, each of which is critical to effectively managing your global supply chains. This synchronization is imperative if superior supply chain and organizational performance is to be achieved:
1. Developing a global network of suppliers and service providers
2. Retaining people with the right level of expertise to manage the global environment
3. Creating the right processes
4. Providing the information infrastructure that enables controlled global supply chain execution and management

Integrating the Physical and Financial Supply Chains

Within an organization, operations handles the physical supply chain while finance manages the financial supply chain. Whereas management’s focus is on setting strategic goals and overseeing the activities to ensure these goals are met or even exceeded. Virtually all see their world through the presentation of tangible assets in digital format. In a perfect world, information represents the physical and fiscal worlds as they are, in as close to real-time as possible. Accurate and real-time information that is available for collaboration across an organization’s supply network (internal or external) and that supports timely execution of tasks and responsibilities, tactical problem solving, and strategic decision-making, is the fundamental underpinning of optimal global commerce management.

Information and visibility, while important in and of themselves, are limited in their potential unless put into meaningful context. Contextualized information allows users to understand the implications of an action within the supply chain and its effect on a specific activity. It empowers users to make optimal decisions.

Contextualized supply chain information enables users to see where an item is in its supply chain life-cycle and understand its effect on distribution or manufacturing. Contextualized financial information allows users to see the impact a physical event has on the cash and asset position of the company, and to optimize financial asset allocation and execution. With intelligent contextualized supply chain information, management has 100% visibility into where any department, business unit or organization is at any point in time.

In our blog Supply Chain Execution Convergence – What does it mean?, the ‘What’ of SCE (Supply Chain Execution) Convergence was discussed. Here I’d like to follow with the ‘Why’ of SCE Convergence because of its critical role in achieving global commerce excellence.

Convergence is a critical concept and practical cornerstone of both global commerce management and global supply chain execution.  It is the dynamic connection of information across the global supply chain, providing a singular truth from multiple perspectives.  Convergence fully integrates operations and finance through the synchronization of information across affected functional business units, management levels and 3^rd party suppliers and service providers.  Global commerce management convergence brings together all elements of an organization’s international supply network so they are fully orchestrated to achieve their global sourcing and fulfillment objectives.

The number of parts {activities (stationary and moving), players, and items} to be managed and controlled in the global supply chain is many.  Even in relatively small organizations, the level of detail associated with each part significantly increases the amount of information to organize, which often becomes unmanageable. With global supply chain information convergence, these volumes of information are integrated and synchronized, analyzed, targeted, and distributed to the user community which requires this information in real, or near real time. With convergence, there is only one view of the truth as information provided through the multiplicity of sources is first validated and reconciled for accuracy and then distributed to the user community.  Convergence eliminates information duplication and liberates information from its silos.

There is no doubt that a singular, accurate and timely view of shared information is extremely powerful.  Analysts and consultants have long held that having “one view” is the Holy Grail for supply chain management.  The reasoning behind this belief simply is that one shared view is a critical component to help support business decision making at the operational, tactical and strategic levels.

One example of convergence is in the critical area of Cost Management.  Cost Management is dependent on internal and external cost sources and is essential for multiple constituencies across the organization.  Those required cost elements supporting purchase planning and execution are the same as are required to support customs duty calculation and filing, payment auditing and authorization, financial planning and budgeting.  In many systems, the cost elements required to support each of these functions reside in different internal information silos and in “clouds” of 3^rd party partners.  In order to properly manage and organize this information, a solution is required which can converge data from multiple sources in order to normalize, analyze and report the information in a manner that is easily understood by the targeted user community.

Another dominant example of convergence can be found in Iinventory Optimization.  Inventory Optimization is an organizational quest to ensure the correct amount of product is in the right place to meet customer or consumer demand.  It requires convergence of information from multiple players in multiple disciplines within and external to the organization.  From within, the actors involved are both on the demand side (sales, marketing, ops planning, etc.), and on the supply side (purchasing, inbound logistics, compliance, inventory management, etc.). Externally, suppliers, carriers, DCs, and customers all have an impact on product availability and therefore on the levels of inventory.  Optimizing inventory requires a system that supports the convergence of information from all sides.  Convergence enables the acquisition, maintenance, and analysis of product data from all players across the supply chain, in near real time, so that events affecting either supply or demand can quickly be observed, the impact analysis reviewed and decisions and action plans created, and executed.

Virtually every manager and operator requires information that has a source outside their immediate sphere of activity.  With separate information systems in place, information used in one area of an organization is often not in sync with similar information being used in other areas, or across that organization’s extended supply chain.  Convergence geometrically improves synchronization, accuracy and timeliness of delivery of the information.

Why is Convergence critically important to organizational success?   Because a lack of convergence makes it impossible to achieve a holistic view of an organization’s supply chain and therefore reduces optimal organizational performance.

Convergence dramatically improves the flow of information between all actors in the supply chain.

• Convergence improves the quality of information across the supply chain by immediately identifying any inconsistencies in the data
• Convergence improves financial performance by ensuring that subsystems such as inventory control, purchasing, sales, marketing, logistics and finance are all operating from the same page
• Convergence supports practical business collaboration by ensuring that all authorized actors (internal and/or external) share consistent information that is critical for performance enhancement, problem resolution, and planning.  Response times are reduced and decision support increased.

Without convergence, organizations and individuals can only approximate what is really happening across the supply chains.  Unfortunately, without consistent information one could never be certain that the decisions and actions they carry out will be optimal for the organization at that point in time.

While convergence does not guarantee ‘optimal’ supply chain management, an organization without convergence is certain to sub-optimize its performance.

May 26, 2010

Blinco Systems Inc. is proud to be selected as a leading supply and demand chain solutions provider in 2010.

The Honor:

Supply & Demand Chain Executive has identified leading providers of supply chain services and technologies who are customers/clients achieve supply chain excellence and prepare their supply chains for the post-recessionary return to growth. Based on submissions to the “100″ from end users and solution providers, the editorial staff of the magazine has compiled a list of leading supply and demand chain innovators.

“Our goal with this year’s ’100,’ as in the past, is to highlight a broad range of solutions and services targeted at a variety of industries, addressing the needs of companies of varying sizes, and assisting in the transformation of a diverse mix of the functions that make up the supply chain,” added Reese.

After receiving nomination forms, the Supply & Demand Chain Executive editorial staff identified applicants that best fit the stated criteria for the “100.” Final recipients are featured in the cover story of the May/June 2010 issue of Supply & Demand Chain Executive, as well as online at www.SDCExec.com/SDCE100.

In the Logistics Management magazine issue of 05/19/2010 Michael Levins (editor) published parts of interviews he conducted with four (4) supply chain analysts on current trends in Supply Chain Execution.  While a vast majority of the respondents to the Logistics Management 2010 Software User Survey are using some variation of supply chain software, the analysts imply that there is still a way to go for Supply Chain Organizations to achieve synchronization across their supply chains.

Of the four interviews, the interview that resonated most profoundly with me was with Dwight Klappich, Analyst and Research Vice President at Gartner.  He puts forward the concept of Supply Chain Execution (SCE) Convergence as the next iteration for companies that are moving toward supply chain execution excellence.  In a nutshell SCE Convergence is the cross functional integration and synchronization of processes, sub-processes and activities within the organization.

Dwight acknowledges that although companies have been able to gain improvements within silos from their current SCE solutions, achieving greater levels of excellence and the resulting benefit require the orchestration of end-to-end processes like selling, buying, making -to which could be added – accounting, finance, inventory control, transportation management, and compliance.

However, in order to achieve SCE Convergence, companies will have to significantly stretch themselves beyond what their current SCE systems offer.  SCE Convergence is achievable through a multi-functional supply chain architecture that supports the company’s end-to-end supply chain processes (operations), manages supporting data and information, and provides a comprehensive 360 degree view of the entire operation in an on-demand environment.

SCE Convergence requires system(s) that are designed to integrate, orchestrate, and enable (all) the processes and sub-processes that make-up the Supply Chain.  SCE Convergence enables operators across the supply chain to access information (push or pull) that is critical to fulfilling their functional responsibilities, provides managers with a comprehensive and contextual view of their sphere of responsibility, and supports organizational decision making and action.  SCE Convergence provides senior management with command and control of their business by providing information that is meaningful and actionable.

SCE Convergence is not new in practice.  However, few in the supply chain have successfully implemented SCE Convergence solutions because the mainstream ERP applications and the newer SaaS solutions have not approached the supply chain in a holistic, integrated manner.

Few truly supply chain organizations have implemented comprehensive supply chain execution solutions.  Those companies that have been successful have what Dwight calls SCE Convergence solutions that enable operators to work within their silos and insure that the validated information required for management planning, decision making and action is available when needed.

True SCE Convergence solutions enable companies to manage the entire Cash-to-Cash cycles within the context of their ERP solutions or independent of them.  They enable the streamlining of processes, the optimization of fulfillment with inventory, the control of costs, and the increase in compliance within one orchestrating software application.  True SCE Convergence provides the framework for intercompany integration and extra-company synchronization.