In recent years, Supply Chain management has received high attention in academic, consulting and business circles. There are companies that are addressing the processes related to the entire Chain with great attention and the number of articles and events related to the subject has exploded.
The fact that the subject receives a high importance reflects a need that is presented in reality. What are these needs? And what are the main challenges they face?
A Supply Chain extends from the suppliers of our suppliers to the clients of our clients. The administration is understood then by the coordination throughout the Chain in such a way that an Efficient Response to the Final Consumer is achieved.
Some of the main characteristics of a Chain that have given rise to needs are:
Interdependence
Movements that have occurred in the past such as the opening of borders, strategic alliances and the reduction of suppliers have generated a high interdependence between the links in the Chain. In fact, this has led to competition shifting from business versus business to chain to chain. In other words, from being fights between individuals to being fights between gangs.
Diversity of Interests
Since there are a variety of entities in a Chain, each has its own interests that do not necessarily coincide with each other. This diversity of interests leads to the generation of conflicts that inhibit collaboration throughout the Chain from the exchange of information to the creation of joint actions between the participating organizations. This lack of collaboration and the failures that are generated cause excess costs and waste.
Lack of Visibility
Any company located in some part of the Chain does not have complete information about what is happening far and wide. For example, aspects of final demand, or of the inventory position in our clients, are unknown. This causes decisions to be made based on partial information with consequent results.
Communication and Competition
Communication technology has made suddenly that the client can be found anywhere in the world and that any competitor in the world can compete. So not only have the Chains become more interdependent, but they have also become much more dynamic and require much more agile responses.
The Battle for the Customer
Within Supply Chains, a good part of the battles for customers have been fought in manufacturing. Even though there are still things to do in manufacturing, it is not enough. The costs and service associated with providing an efficient response to the client are not only found in manufacturing but also in all the logistics of the product and in the interdependencies found throughout the Chain. Thus, the improvement efforts initiated in manufacturing have been extended to other fronts.
With all the above, there are five great challenges to achieve an efficient administration of the Supply Chain
Master the Basic Processes
The first great challenge that companies face is to master the basic processes that predominate in the Chain. Processes such as interaction with customers (quote, take orders, deliver), plan demand, distribute products, supply materials. Mastering basic processes implies having superlative execution through rules and procedures, use of information technology, organizational capabilities, performance indicators.
Still along the Chain there are a whole series of basic activities that are not mastered. In the interaction with customers, for example, even though most companies express that service is a strategic aspect, how many really have faithful indicators of their service to customers and consumers? It is the minority.
Or, a critical process such as demand planning, where the demand to be satisfied is determined, the way in which it will be satisfied and a plan is generated that governs the conduct of the business (in sales, production, materials, distribution, finance) short term, is for many companies a state in which they aspire to be one day.
Serve the End Customer
The Chains still function as sequential links, without seeing beyond their client, without having visibility of what happens upstream, with the final client. By not having information about what is happening in the market, actions are taken that do not obey the market requirements and that have a cost consequence, or timely actions that have a consequence in service are stopped.
It is not easy to have final customer information, but there are practices that can bring us closer to that information. Meetings with the sellers of our clients, with the buyers of our clients' clients. Verifications at the point of sale.
Along with this information, the other great challenge is to translate market information into competitive actions. This demands the creation of organizational capacities related to cross-functional work.
Collaborate Between Business Partners
A great arena of activity for efficient administration is collaboration between business partners. Coordination failures between partners cause costs in the Chain that are finally reflected in the market. On the contrary, the coordination has a huge area of opportunity in both costs and service. However, achieving this coordination is not easy, simply because within the spectrum of common interests between the partners, there are conflicting interests.
Coordination must take place at three levels: strategic, informational and interactional. The strategic level where positions and objectives of the partners are aligned; the level of information where information is shared; the level of interaction where practices of exchange of goods and services are modified. A good relationship hardly starts with the third element.
Incorporate and Take Advantage of Communication and Information Technology
A Chain is composed of material, monetary and information flow. Information technology is an important element in having strong chains and it is advancing at an impressive rate. It is a great effort to keep up with the incorporation of these technologies, ERP's, APS, CRM's, Internet, Datawarehouses, wireless communication, and only God knows what is to come. But an even bigger challenge is taking advantage of technology.
The speed at which technological development is progressing is much greater than the speed at which companies are taking advantage of it. If we take a simple case, such as Excel, Word, PowerPoint, most of us use it at a percentage less than 50% of its functional capacity - on the one hand because we have not had the necessary development and training and on the other because there are functionalities that we do not need.
It must be very clear that a company must invest in information technology, otherwise it runs the risk of becoming technologically obsolete in a very short time, and must invest even more in the use of that same technology, otherwise it runs the great risk of that technology is useless.
Create Chain Strategies
A Chain strategy involves two major elements. The first is that it must be comprehensive, in the sense that it must cover the different elements involved in a solution. In this case we are talking about practices in processes, supported with information technology enablers and with the development of organizational capacities that allow the execution and development of practices and information technology. On the other hand, it must be relevant, which implies that the solutions are aimed at providing strategic and economic value to the business, or in other words, that they are aligned with the business strategy.
Achieving this requires two important efforts. The first is that those responsible for business strategy get involved in the development of Supply Chain strategies. The second is that those who participate in the supply processes, take their approaches and solutions to the business level.
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