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A decade ago people used to believe that people, process and technology are the three Business enablers.  John F Kennedy once said, “the Chinese use two brush strokes to write the word ‘crisis.’ one brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity”. In today’s world globalization propels the business growth and at the same time, presents massive challenges in the form of supply chain.  This phenomenon called globalization impacts the economy, product life cycle, society, environment and personal life too.

I am not sure if anyone measured the increase in competition due to globalization, but surely the globalization has immensely improved sustainable competitiveness in many organisations.  In order to be competitive in this world of uncertainties and volatile market conditions, we need a successful formula that could deliver and address challenges such as global reach, price competitiveness, agility and rapidity to reach the market, improved production and supply lead time, make vs. buy decisions, identifying non-core activities and outsourcing, improved operating profit after capital charge, on top of all this, EVA, total customer satisfaction and happy investors.  The role of the supply chain has never been as important as it is in today’s globalized economy. Supply Chain speed and agility have become two key levers for competitive differentiation and increased profitability. Today’s supply Chain successfully handles all the challenges identified above and converts those challenges into opportunities in order to deliver competitive advantage to the organisation. And it is proved time and again  that Supply Chain is the core business enabler apart from people, process and technology.

Today there is no dearth for technology, we have variety of technological tools that offer variety of automation, the need of the hour is the people who can understand the business dynamics and customer expectations and develop effective supply chain processes that adds value and delivers competitive advantage and sustainability to the business.

Supply Chain delivers broadly four competitive advantages to the business and that includes, cost benefits, flexibility benefits, quality benefits and last but not least is the lead time benefits.  These benefits are driven through Planning, Continuous Improvement, Quality (standard work to achieve consistency) and the ability to reach global customers faster and efficiently.

The below figure shows the supply chain functional pyramid:

Pic1Whereas the business is not a charity, in order to be successful, it has to generate profits keep the shareholders happy and encourage them to invest more money into the business.  George W Bush rightly pointed out that, “you can’t do today’s job with yesterday’s methods and be in business tomorrow”.  And that is where we need effective, advanced and cutting-edge supply chain processes and efficiencies.  A good business leader should create a vision, articulate it passionately and drive towards completion.  Any good vision will have four “P”s in it, people, process, product and profitability.  If you look into the business objectives pyramid, you will find all these elements in one form or the other.

The below figure shows the Business Growth and Prosperity Pyramid:

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The Alignment:

In the month of December 2013, Hitachi Consulting group report (published in Europe) indicated that 80% of supply chain managers do not see their supply chain as an enabler of business strategies within their organisation.  Greg Kinsey, VP of Hitachi Consulting, said: “The results from our survey make one thing very clear – disconnect between a company’s business transformation strategy and the day-to-day management of the supply chain remains a serious, yet hidden, problem for many organisations.  Hence, it is absolutely necessary to align the supply chain transformation strategy with the business strategy in order to excel in today’s dynamic, challenging, volatile, confusing, compelling, and exasperating world of business.  The below figure explains the alignment between supply chain transformation and business growth and prosperity with right people, processes and with the help of technology.

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It is very critical that the supply chain transformation is well aligned with business growth and prosperity strategies.  The below figure illustrates the path for the alignment.

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Organizations may have to recognize that the supply chain transformation and alignment with the organisational goals and objectives delivers a competitive market differentiation.  The uniqueness sells; let us not forget that uniqueness’s core objective is to create that magic of alignment between supply chain and organisational goals.  In order to achieve the short and long term goals the transformed and aligned supply chain will have critical influence on business and organisational outcomes and to large extent on the shareholders and customers.

It is worth concluding this article with 7 simple supply chain lessons taught by Steve Jobs of Apple Computers (Source: Supplychain247.com)

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The Story of Three Arrows

three arrows

As we all know that the Global Economy is not heading in the right direction.  One of the best indicators of global growth is oil prices.  Oil prices (Brent) are assumed to average about $105 per barrel (pb) in 2013-2014, compared to $110 pb in 2012.  Unemployment remains elevated in many developed economies, with the situation in Europe being the most challenging. A double-dip recession in several European economies has taken a heavy toll on labor markets. The unemployment rate continued to climb to a record high in the euro area during 2012, up by more than one percentage point from one year ago. Conditions are worse in Spain and Greece, where more than a quarter of the working population is without a job and more than half of the youth is unemployed.

Christine Lagarde, Managing Director, International Monetary Fund (IMF), described the global economy recovery in 2013 as “fragile and timid” because the Eurozone is prone to political crisis and slow decision-making processes.

Some believe that China is the engine that propels global economy growth in the right direction.  There is a belief that China is recovering and that signals global recovery.  However, the statistics reveal a mixed result according transport intelligence.com.  The February figures from Container Trade Statistics (CTS) show that, if anything, container trades are heading downwards. Overall, Asian exports – including on intra-Asian trades – fell by 26.4% as compared to January and by 8% as compared to February last year. In addition, import activity for Asia fell by 10% compared to January 2012, whilst on a year-on-year it was down by 12%. The export traffic indicates a twelve month low.  This is confusing and one thing is certain and that is economic downturn is here to stay some more time.  When we look at the major air cargo carrier performance during the first quarter, the results are no different.  Lufthansa Cargo has reported a 1% increase in its aircraft utilisation in the first quarter of 2013. In a difficult market environment, the cargo carrier scaled back capacity by 7.4%. Due to a smaller decline in sales, by 5.9%, the company was able to increase its load factor to 71.4%.  Overall, Lufthansa Cargo carried approximately 400,000 tonnes of freight and mail in the first quarter of the year – a decline of 7.2% compared with the same period in 2012.

Keeping in view of the global financial trend, business houses have to develop strategies that will take them through the tough financial conditions.  Any organisation will target three different improvements and they are, top line revenue growth, bottom-line improvement and increase satisfied customer base.  In order to meet the above, organisations will develop number of objectives, each describing a desired future condition toward which efforts are directed. An objective is a statement that clearly explains actions to be taken or tasks to be achieved by an organisation. If the objectives are accomplished, then the business should be a success.

Research reveals that most of the business organisation will have two types of business objectives and they are Economic and Socio-human objectives.  However, the organisation can focus on socio-human objective only when they are financially successful.  Hence, the focus is on economic objectives and they are mainly three objectives targeted by most of the entrepreneurs.  They are (1) Business prosperity through improved margins and increased sales volume (the upward arrow); (2) Speed to the market place to maximise product availability (the side way arrow) and (3) Cost reduction/optimization to make the product competitive to sustain in the market place (the downward arrow).  In fact all three objectives are inter-related and driven by cost trade-off decisions within supply chain.

The purposes of objective setting are, to establish a standard for evaluating the success of the business and set priorities for its management and staff. Objectives help keep management and staff focused on achieving set targets and keep them away from distractive activities that drain business resources.  The appropriate organisational goals will also to address the challenges of global economy.

The risks of doing business and competing in a global economy seemingly change by the day. At the same time, risk management and cost seem to go hand in hand, leaving many executives to wonder: Is it possible to reduce risks and still grow the top line? The answer is yes, and there are stories to prove it. A key ingredient is a “conscious” approach to managing risks in your organization’s supply chain. Every business that depends on goods and services in a global supply chain is at risk for various supply chain disruptions, or worse: contamination or product failure.

It is evident that the key to the success of any organisation lies in Supply Chain efficiency.  The industry has realised that if one manages the supply chain efficiently aligns it to the business dynamics; the success of the organisation is assured.  The optimisation of Supply Chain was handled by different section of experts in different ways.  Some think that technology is the solution to the supply chain efficiency some believe that the strategy is the key to the success. And some believe that people (the right team) are responsible for supply chain innovation through thought leadership.

Supply chain performance has never been as critical as it is today. In today’s dynamic world what is good today can turn into ugly tomorrow in market place.  At some stage buffer inventory was recommended to meet the demand fluctuations (JIC) and now carrying inventory more than required levels is undesirable and JIT is the favoured option. Under these ever changing circumstances, supply chain efficiency plays a very vital role in keeping the organisations alive. In order to achieve maximum benefit from a supply chain and creating competitive advantage in the supply chain wars, a supply chain must be performing at its best and continue to perform that way.  We have seen organisations flourishing through the product innovation and we are today witnessing organisational superiority in the market place through innovative supply chains.

If we take a hard look at the IT hardware industry, most of the big brands and your local assembler provide more or less same product.  However, there is huge price variation which is possible due to supply chain innovations.  When we look at the retailers, the product range is the same, origin of supply is the same and the quality of the product is almost the same.  However, there is huge price variation.  The reason is supply chain efficiency.  The procurement strategy, the distribution strategy and the organisational objectives make the difference.

Supply Chain efficiencies cannot be ignored by any industry in today’s economic downturn.  However, the truth is that some of the organisations do not recognise what is appropriate for their supply chain and pursue inappropriate policies and concepts.  Fortunately, we have only two supply chain processes and they are known as Pull and Push. The failure and success of the business model mainly depends upon selecting the appropriate process.  If a retailer who predominantly follows push process decides to use pull process, the end result would be a catastrophe.  At the same time if an IT hardware manufacturer decides to use push process, will end up with high inventories and obsolete stock in the warehouse.  If one can align the supply chain with the business dynamics, it is truly possible to register revenue growth and improve velocity and also reduce costs.

In today’s world what is critical to the business success is the right supply chain strategy that could meet customer expectations and the last but not least is the right team with the ability to think outside the box and innovate with thought leadership.

save costs

Image credit: San Francisco Sentinel

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