Thursday, August 28, 2008

Global supply chain complexity


Global supply chain complexity


The global supply chain is complex, but it doesn't have to be scary. The challenge is complex both on a domestic and global basis.

A look at real supply chains (as opposed to artistic Powerpoint versions usually shown by solution vendors) show non-linearity, multiple entities, non-aligned systems and ambiguous data standards, processes gaps, cultural differences across geographies, competing customer segments and congested channels, and a vast array of products that make up a typical global supply chain.

Great Expectations

This already complex environment has several key attributes that increase the challenge. These attributes are competition, industry dynamics, and the disruptive technologies and practices that impact the operating environment.

Compounding these business issues are: ideas on the latest approach to technology and process, trying to match "best-in-class" players and avoiding the pitfalls experienced by others.

Keeping to the Basics

Given the complexity of today's global supply chain, effective management relies on the perfection of the underlying basics, visibility, integration and risk management. As always, execution, cost, quality and service are all important.

Visibility and integration is essential to accurately control and maintain status information across the various systems in a global enterprise, and across the different systems in the extended enterprise (suppliers, partners, providers, channels, customers).

This involves integration among multiple systems and entities, using both mature and emerging technologies, whilst the expectation is to have the operational processes react quickly.

Real-time visibility into components, orders and supply is what enables other successful supply chain systems to work. It's what makes possible high-speed response to changing supply chain conditions and it enables real adaptive execution to maximise new product introductions on the front-end and customer availability and fulfilment on the back-end. It also drives minimised inventory risk, effective utilisation, and optimisation of fixed assets.

Risk can be managed by tightly matching demand with supply, while contracting for key material supply.

The risks being faced are those of supply price variance and demand changes under fixed delivery contracts, finite supply capacity and conservative inventory levels (excess and obsolete) to meet unknown demand variability.

To get on top of this complexity, it becomes essential to manage demand and supply variability to ensure customer product availability and lower total purchase price, while maintaining low inventory levels and capacity utilisation.


Processes count make them flexible, with multiple fulfilment models to deal with multiple geographies, product types (e.g., standardised/high volume, customised/ high volume, innovative/lower volume), and multiple channels (retail, OEM, direct).

Then consider the enabling systems. Adopt a complete systems or holistic view - hardware, network, financing, facilities, and don't underestimate people. All operations must be managed for simultaneous outcomes: maximum speed of operations, lower total cost, and maximum liquidity. Outsource all non-core competencies and processes to increase asset flexibility and break-even volumes.

Low Hanging Fruit

Successful execution consists of several short term, quick benefit initiatives within a longer-term strategic supply chain framework.

Global, multi-year, "big bang" implementation efforts simply don't work. This is by no means an easy task, given organisational inertia, the need for short-term cash results, the demand for scarce resources and investments, the changing business landscape and, often, the lack of knowledge in the company about leading, appropriate practices and their implementation.

However, leading companies execute successfully and always experiment to improve and change the game to maintain their competitive edge and flexibility. Others find the usual excuses as to why things won't work.


Fortunately, there are some tried and proven methods by which to tackle and execute successfully - while not necessarily sequential, they do follow a logical pattern.

Successful supply chain management execution demands a portfolio of skills and capabilities, both inside and outside the company. Define the anticipated results, targets (cost, liquidity, customer satisfaction, channels, segments), metrics, and parameters (including speed) of the supply chain(s).

Assign firm accountability at the individual (not organisational) level and set metrics. Design the overall process at a high level, then identify and prioritise the discrete initiatives and time frames necessary to execute over a series of short-term time frames; focus on the key points that provide maximum operations impact:

- Information and visibility first - how to get the information and how to integrate it across the extended supply chain;

- How to mitigate demand and supply risk, and manage for it;

- Manage inventory levels, deployment, and customer service to cut costs, capital investments, and retain customers.

To achieve this, work with the right skills (functional, consultative, industry, customer, supplier, integration, infrastructure, finance, technology evaluation, project management).

Build in innovative features - hosting, outsourcing, financing, shared services, and cost sharing.

Most importantly, plan, execute, evaluate, then execute again; the key is not to fall into a planning cycle that requires excruciating detail (I hate MS Project!).

Instead, plan to a high level, then execute (often through a pilot, or by integrating with one set of suppliers or customers), then evaluate, replan and re-execute. Such a speed-focused approach is critical in today's environment. Then, and only then, look at the appropriate, cost-effective supply chain system applications very carefully.

Weekly Link is co-ordinated by Barry Elliott and Chris Catto-Smith CMC of the Institute of Management Consultants Thailand. It is intended to be an interactive forum for industry professionals; we welcome all input, questions, feedback and news at:,

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