Increasing global competition and economic uncertainties are putting more pressure on supply chains than ever before. Supply chains need to be accountable for delivering cost and value advantage to organisations over their competition in order to drive business growth in this tough economic climate.
The changing needs of the supply chain
Many supply chains were designed in different economic times to manage high-volume production in stable market conditions, but fluctuating demand, rapid growth of developing economies and changes in labour and materials costs across different worldwide locations mean many organisations are facing challenges that they are ill prepared to meet.
A recent McKinsey survey highlighted that 68% of global executives believe that supply chain risk will increase over the next five years. Many cite increasing wealth in developing countries and the emergence of new suppliers from those markets as a major threat to profitability. Environmental concerns also weigh heavily, as companies try to predict the levels and direction of future environmental legislation.
So what steps can we take to meet the future head on and leave ourselves in the best position to meet the changing needs of the market in which we operate?
The challenge now faced by supply chain designers and managers is to make decisions that are future-proof and which do not suddenly become uneconomic due to changes and developments in the economies in which they operate.
Recipes for supply chain success
The keys to effective supply chain management remain responsiveness, reliability, resilience and relationships, but it is important to consider new strategies for managing supply chains to take account of the changing economic climate.
The trend in supply chain management has been to pull together the many different strands of the business supply process into a single, cohesive set of processes. However, there is an argument now for splintering your supply chains into smaller ones to help to deal with the more complex issues and processes posed by current economic conditions. This enables organisations to focus certain areas of the supply chain in different geographic locations according to specific product and business needs, offering greater flexibility in responding to fluctuating market conditions.
Choose the right tools
However cohesive or fragmented the supply chain, using the right tools for predicting demand levels is also key. It is vital that organisations are able to gain a complete view in order to protect themselves from macro-environmental risks. Natural disasters, political unrest and failures of suppliers’ businesses can have disastrous effects on any organisation but these can be minimised by demand-driven supply chain processes, which allow companies to adjust their strategies for production, promotion and pricing flexibly and at short notice.
Adaptability within the supply chain is vital. You need to be able to respond quickly and effectively to any fluctuations in supply or demand and this means having the systems in place to plan quickly and to execute those plans in a timely manner. Choosing the right technology and implementing it effectively makes this possible for every organisation. Well-structured information systems provide real-time information that can flag up market changes quickly, while dynamic planning systems provide an effective framework for making necessary adjustments and delivering a rapid response. This enhanced integration has the added benefit of improving customer and supplier relationships as well as streamlining processes and minimising costs.
Making the right product decisions at the right stage in the process is another key to long-term competitiveness in a challenging global market. All too often innovative products are designed and put into production without a full analysis of the various aspects in the process that will affect the health of the business. Ensure that you cost fully, consider any impediments to manufacture and address all aspects of supply while your product is in the very earliest stages of conception.
Full integration of your supply chain with the other areas of your business will leave you best placed to face the future. Align your supply processes and systems with those of the finance, planning and operations functions as well as with manufacturing, distribution and sales for maximum stability and returns.
No-one knows what the future may hold. However, with the right planning, tools and implementation processes you can leave yourself as well prepared as possible to meet the diverse challenges of a changing global economy.
Brad Parker is a freelance writer and avid blogger. He supplied this article for 2touch, a world leader in providing order fulfillment services on a global scale.