Traditionally, when a CEO paid attention to their supply chain, it meant something had gone wrong. Strategically, compared to other areas of the business, the supply chain was a relative backwater. The conventional wisdom held that so long as you kept pace with your industry’s averages, you were doing fine. Although companies were only too eager to participate in arms races with competitors that saw sky-high R&D, marketing, and legal spends, for some reason when it came to the supply chain, CEOs were content to march lock-stop with even their most bitter rivals.
This is no longer the case. If the supply chain was once about the status quo, now it’s about disruption. The continued march of globalization, as well as diverse technology trends such as automation, Big Data, and cloud computing have all brought the supply chain to the CEO’s attention.
See & Respond to the End-Consumer
This seems obvious if you’re a retailer, but even manufacturers and logistics providers are realizing that to succeed in the coming years they’ll need to be able to see and respond more quickly to actual end-consumer demand. This means the whole chain, from the retailer to the raw material suppliers, are all working together to give the end-consumer what they want. Companies taking this approach are experiencing dramatic increases in consumer sell-through revenue.
Just look at what Amazon, a company famous for focusing on its customers, is doing. Most observers agree that its massive building spree of fulfillment centers (adding 50 new facilities since 2010 alone) set the stage for same day delivery throughout the U.S., with Dallas/Fort Worth one of the first. And if that doesn’t get your attention, how about Amazon’s plan to use pilotless flying drones to deliver packages – called Amazon Prime Air – to customers within a half hour of placing an order? CEOs should be preparing their companies for this increasingly consumer-driven world.
A Simpler Technology Landscape
How long does it take to for you and your trading partners to see a change in demand? How much are you spending to address that response?
Most CEOs are surprised to learn just how many IT systems their company uses. Today’s global company typically uses well over 20 separate applications to manage their supply chain alone. Oftentimes these multiple systems are in conflict with each other, making it very hard (and expensive) to keep up with demand and supply changes. No wonder they rarely seem to react to problems until it’s too late! CEOs (and for that matter, CIOs) want to unify their disconnected systems in a way that provides them with a unified, accurate view of their supply chain. Only then will they be able to incorporate it into their long-term strategic thinking.
Measure and Mitigate Risk Outside of the Enterprise
As companies continue to outsource more areas of their business, CEOs realize much of what determines their success or failure lies outside of their enterprise. In fact, they are more concerned about this extended value chain risk than risks to company-owned operations. A recent Deloitte survey of 600 executives at manufacturing and retail companies found that 63 percent were highly concerned about risks within the extended supply chain comprising vendors and customers, ranking it among their top-two concerns.
This really isn’t surprising when you think about it. Today’s ERP systems (and the applications that run off of them) were built for the vertically integrated supply chains of a few decades ago, where a single company would often source, build, and deliver the product to the end customer. However with the advent of outsourcing, companies now have many sales channels as well as hundreds or even thousands of trading partners, each owning a narrow slice of the demand fulfillment process. Just imagine a tangled internal landscape multiplied by the numerous outside suppliers, distributors, and customers, and the amount of hidden risk becomes very scary.
Everything described here is readily attainable. With cloud technologies, multi-party processes, and all trading partners working together to satisfy actual end-consumer demand, it can be done.
The best CEOs are adept at making difficult decisions to set up their companies for success in the long run. They seek out the hidden opportunities nobody else can see. Increasingly, these opportunities will be found in the supply chains.
Make no mistake, more disruption is coming.
Greg Brady is the CEO and Founder of Dallas-based One Network Enterprises. Before that, Brady led i2 Technologies both as CEO and head of worldwide operations. Previously, Brady was vice president of worldwide applications marketing for Oracle and held positions at J.D. Edwards and at McCormack and Dodge.
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