Today having a modern and agile supply chain can mean the difference between staying afloat and sinking. Over 80% of businesses report experiencing at least one supply chain disruption in 2014. With constant and rapidly changing market conditions, organizations need to be lean and flexible in order to respond to disruptions quickly and effectively.
Organizations who adopt modern supply chain practices that are flexible, account for disruptions, and leverage new technology fair better in the long run. Let’s take a deeper look into how Technology, Continuous Improvement, and Resilience help supply chains remain relevant and sustainable.
Innovation is key to business improvement and supply chain management is no exception. To meet ever-changing consumer demands, organizations must continually optimize the productivity of their supply network due to global competition. Leveraging modern technologies can help simplify processes, reduce costs, improve customer satisfaction, and provide greater control over your supply chain.
IoT technologies present some very promising opportunities that help track products to increase visibility and reduce the impact of disruptions due to material shortages or natural disasters. For example, consider Coca-Cola as they recently reinvented their vending machines and introduced Coca-Cola freestyle®. Coca-Cola freestyle® offers consumers fountain soda from a vending machine that can dispense up to 126 different flavor combinations. Using Radio Frequency Identification (RFID) technology, Freestyle machines are not only able to monitor the level of each syrup, but also track which combinations are most popular amongst consumers.
When syrup levels get too low, the machine sends information to Coca-Cola’s head office and to the machine’s owner so that necessary supplies can be automatically replenished. Coca-Cola freestyle® also passes along valuable sales intelligence data that has been collected. This information can then be analyzed by data scientists and marketing professionals to identify trends, understand consumer behaviors, and improve sales forecasts to ultimately find new ways of increasing revenues.
Implementing Supplier Management software is another way to gain real-time visibility into your supply chain while increasing collaboration with suppliers. A solution that records supplier nonconformances, assigns and tracks corrective actions, and generates real-time supplier performance ratings can help enhance efficiency across your supply chain. Additionally, the ability to have suppliers work collaboratively with your organization directly via a comprehensive supplier management solution will further streamline supplier workflow and help forge strong relationships.
Supply Chain organizations that are able to create and embed a culture of Continuous Improvement are also able to identify ways to differentiate themselves from their competitors. This begins with the organization’s culture and their employees. Companies that can build strong teams made up of motivated and innovative Supply Chain professionals are ones that will challenge status quo and always question “how can we do better”. Once this paradigm is engrained in the way that team members think and act, the opportunities for improvement begin to reveal themselves. There are various tools that companies can use to drive improvement. Organizations could decide to use Six Sigma as their Continuous Improvement methodology or other tools (Agile, Toyota Production System, Baldrige Criteria, etc.). Lean methods can be applied to help eliminate non-value added activities from operations and solve the tough business problems that were historically sources of frustration for end customers.
For example, Proctor and Gamble (P&G) was struggling to find ways to improve its North American supply network to better serve retail customers (B2B) and end consumers (B2C). With their new investment in a $500M facility that will be built in West Virginia, P&G will be able to manufacture and supply multiple brands. Also, the new location will help P&G take advantage of its distribution center network so that 80% of customers in the eastern half of the United States can receive P&G products within one day.
Supply Chain organizations require continuous improvement to help them remain flexible and adapt to changing market conditions. The pace at which change happens continues to increase and organizations that have the systems in place to help them acclimate will thrive today and in the future.
One of the most common challenges in building a resilient supply chain is effective communication and collaboration within the network. A disconnected supply chain creates longer procurement cycles, diminishes quality, increases costs, and ultimately impacts customer satisfaction.
According to a recent Accenture survey, collaborating with suppliers to master procurement can result in up to 50% less time managing supply chain activities, with a potential cost savings of 30% or more. By developing strategic partnerships with suppliers, both big and small, organizations can position themselves to strongly influence their suppliers to improve quality.
So what does this look like in practice? Consider Levi Strauss Company’s approach – they source a large portion of their garments from suppliers in Bangladesh and regularly audit these suppliers to assess factors such as workplace safety, worker productivity, and machine utilization rates. In the event that improvements must be made to a supplier’s factory, Levi works with the World Bank’s private sector arm, the International Finance Corporation (IFC), to secure loans at interest rates and terms that reflect Levis’ credit (not the supplier’s more strenuous ones) to help their suppliers achieve operational improvements as quickly as possible. By supporting their suppliers with necessary cash infusions to support operational improvements at favorable terms, Levi is able to directly influence both the conditions under which their products are produced and overall product quality.
These types of supplier partnerships are key to establishing resilient and sustainable supply chains. The more effectively and efficiently a network collaborates to achieve operational excellence, the more formidable and profitable all parties can become. Organizations need to constantly work together to identify how they can increase the size of the pie to maximize the value created and captured for all parties involved.
How you approach modernizing your supply chain will vary based on complexity. Understanding how Technology, Continuous Improvement, and Resilience play into your business model will enable you to influence suppliers, drive quality, and ensure your supply chain remains sustainable well into the future.