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trategists consider scenarios of static, dynamic, complex and disruptive environments – in which industries operate. Paramaters for determining those are – number of variables in the environment, and the rate of change of those variables. A disruptive environment is one when the rate of change is high, and the number of variables in the environment is large. The industry context for that period of industry life cycle is a ‘chaotic’ environment. The current industry is passing through a phase like that – with no surety if that is a permanent change in the way it will need to operate for years to come. Supply chains are structures, which support a random event called ‘sales.’ Each supply chain supports a systemic component of demand and a random component of demand. The state of supply chains in disruptive stage makes the component of ‘randomness’ increase. While enterprises may engage in the creation of their strategic plans, most of them are falling short of their desired outcomes. A pro-active approach to reaching the desired goals would mean that the enterprise perceives the need to change, identifies the theme, and wishes to pursue to change – so that it is relevant for its markets and its needs. This approach would help in creating a sustainable organisation for creating supply chain excellence in the disruptive age. The prominent pillars, which would create supply chain excellence for companies thriving on chaos, are Supply Chain Leadership, Revenue Growth through Supply Partner Collaboration, Supply Chain Risk Management and Reducing Supply Chain Complexity. Supply Chain Leadership: Supply chain leaders would need to get conversant with the financial lingos. The CEOs of companies would appreciate supply chain leaders, who would be able to talk and exhibit their positions using the balance sheet, P&L including the cash flow language. Supply chain typically contributes to 60 to 90 per cent of the COGS of the enterprise. The supply chain leader, hence, is a very important stakeholder for the CEO to offer his ears to. The future supply chain leaders will have to present the financial impact of the supply chain to CEOs, if they want to create the next level of supply chain excellence. Excellence lies in people. Today, supply chains lack ‘talents.’ An important dimension is the Talent Management in Supply Chains. The excellent supply chains of future would recruit, nurture and retain talent better than their competitors. Revenue growth through supply partner collaboration: Supply management organisations would need to develop supply strategies based on
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the proposed supplier relation. The clarity, hence, the visibility of the type of relationship would help supply management activities. Relationships that are based on mutually congruent goals would lead to partnerships. Partnerships with critically chosen long term suppliers would support the customer organisation to generate significant value. Risk management: The development of modern processes and practices has gone towards making enterprises more complex with many links. Just-in-time process requirements, longer and more complex supply chains, leaner supply chains, stringent service level agreements, single source supply and greater regulatory requirements have reduced organisational buffers in the form of inventory, lead time and capacity. Added to it is worldwide sourcing and marketing, which creates new risks for the
The search of low cost of supply base would tend to create longer supply chains with additional nodes of supply.
enterprise. Organisations able to create a structured process for risk management would manage the chaos better. Reducing supply chain complexity: The search of low cost of supply base would tend to create longer supply chains with additional nodes of supply. The need for customisation would add to the variety at the input and process stage of supply chain. Supply chains would become complex. Supply chain excellence would be achieved if supply chains are able to reduce the complexity through idealised design leading to sourcing strategies, reducing the layers of channel partners, and improving the visibility of the chain. The author is a Supply Chain focused Business Performance Improvement Coach and Trainer. He is the founder of SPARK, an organisation focused on releasing and igniting organisational potential for Sustainable Excellence. Contact: pinak.k@ think-spark.com.
industry 2.0
- technology management for decision-makers | july 2013
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