When we talk of supply chain excellence, the traditional focus has always been on how to reduce operating costs for companies. This involved using supply chain levers to lower processing costs, increase asset utilisation and reduce inventory to realise higher margins.
Lately, however, innovative companies have used supply chain excellence to support new business development, resulting in more market share and revenues, increased profitability, improved customer service and loyalty, and enhanced shareholder value. Such value-creation aspects of the supply chain have become a new competitive ground to which most companies can aspire.
According to the Supply Chain Officer Report 2011, high-performing supply chains can enable companies to create value in multiple ways. Some of these are:
- Enabling higher customer service leading to customer loyalty: The two customer service-oriented supply chain levers are information visibility and lead time reliability. Information visibility is the foundation that allows companies to coordinate supply chain operations to increase efficiency, reduce waste and improve response time reliability. Lead time reliability directly influences customer loyalty, leading to repeat business and new opportunities. However, lead time improvements depend on a multitude of other factors such as having the right distribution and logistics partners, having the right level of safety stock, and having reliable manufacturing processes.
- New product introduction: In this case, speed and reliability are what matter most, where speed refers to efficient product introduction and capacity expansion when a product takes off. Also, transition management (the simultaneous management of ramping down current products and ramping up new ones) is highly important for effective execution.
- Expansion to new market segments in existing regions or expansion to new geographical markets: With the Asean Economic Community (AEC) in 2016, the globalisation of the supply chain will gain even more momentum. As local businesses spread their wings beyond borders, the ability to customise products for local needs or regulatory requirements _ plus efficient distribution of those products to customers _ will grow in relevance. Designing the right services to go with products in new markets and delivering them efficiently is what will differentiate the supply chain winners from losers.
- Stronger supplier relationships: Strong retailer relationships bring higher revenue opportunities. Indeed, strengthening the retailer relationship, being able to serve retailers better and collaborating with retailers are all proven ways to improve sales.
The above examples show how the role of the supply chain is being redefined, from an operational tool to a bona fide competitive strategic weapon. This will require new skills. Strong business acumen, strategic decision-making and collaboration capabilities (both internal and external) symbolise the traits of next-generation supply chain leaders.
In fact, AMR Research has developed an 11-station supply chain talent model to reflect the new trend. It includes seven functional skills ranging from the obvious (plan, source, make, deliver) to the emerging (new product development and launch, customer management, post-sales support) as well as four enabling skill sets (governance, change management, performance management and technology enablement).
Among the "essential" four core skills (plan, source, make, deliver), the research identifies planning as the nucleus around which the modern supply chain profession is built. However, as the supply chain graduates from its heritage as pure cost centre, the role of customer management gains in prominence, based on understanding customer demand as the driver of the entire supply chain.
Of the enabling skill sets, the high value placed on performance management and change management indicate that most supply chain organisations see their role as drivers of strategy, not merely support for the business.
There are many ways for companies to execute supply chain strategy and create sustainable performance improvement. The Integrative Improvement System (iiS) is an popular new approach to align the supply chain's "demand-driven value network" role with an agile supply side (refined people skills, process and technology capabilities) to develop market-driven innovations and win in new markets.
In summary, the role of the supply chain has evolved with new skill sets honed and is now at the forefront of business, serving customers and delivering top-line growth. So, businesses that fail to adapt to these new dynamics will surely fall short in the competitive game.(Parts of this article are drawn from the following sources with thanks: www.logiseconomy.tistory.com (CLO Report), www.scmworld.com (Chief SCM Officer), www.capgemini.com ('Toward Achieving & Maintaining Excellence in SCM Planning' and 'Lean in Supply Chain Planning').
Kanishka Ghosh is a supply chain professional and independent writer. The Link is coordinated by Barry Elliott and Chris Catto-Smith CMC of the Institute of Management Consultants Thailand. It is intended to be an interactive forum for industry professionals; we welcome all input, questions, feedback and news at: Barry.Elliott@inslo.com
About the author
- Writer: Kanishka Ghosh