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Is Your Supply Chain Changing With The Times?

Proper planning will generate more shipments of export cargo and import cargo in international trade.

Is Your Supply Chain Changing With The Times?

When it comes to business processes, we want them to be as efficient as possible. To do so, we tend to build them into the system. Just like we have a Standard Operating Procedure for a task, we are tempted to have a SOP for how a supply chain should function.

While this approach is not wrong in itself, in an ever-changing world, it is only natural that the process must be resilient enough to allow for sometimes small, sometimes significant changes. While the skeletal framework forms part of a company’s core value proposition, leaving a wide enough buffer for changes to come is a prerequisite.

Here, we discuss how the very nature of supply chains has evolved. As you read through, I think you will agree that the business conditions that existed even a decade ago do not hold relevance now. Only the most resilient leadership with the vision to build a supply chain of the future can hope to survive the demanding test of these hyper-accelerated times.

Planning Demand Backwards

Traditionally, fulfilling market demand has one powerful constraint: production capacity. Automotive retailers and phone makers alike have seen up-close the vagaries of the need for a product that suddenly catches on and goes viral. However, the ability of every business ability to fulfill demand depends on their capacity. Naturally, whatever is unfulfilled goes to a competitor.

However, as part of a dynamic restructuring of this viewpoint, we see examples of businesses that get a very accurate picture of demand first and move into production later. Apple does it all the time—most new iPhones are only ever available on time if you preorder. Several cars have also moved into this model.

While preordering can be an extra step in an already long conversion funnel, it is sometimes necessary to introduce efficiency into the system. You always know your demand accurately, thus saving time on a product that sells phenomenally well, and money on a product that doesn’t. In the era of lean businesses, that is not such a bad thing.

Going Global

Globalization itself has been around for a while. Planning for it, unfortunately, has not. Warehouse selection still depends majorly on the cost of leasing and proximity to a seaport. While both these considerations are needed, we also must evaluate the physical placement of the warehouse.

On a global scale, studying demand and supply patterns helps us determine the most commonly searched, and ordered, items in a particular location. By storing more relevant products in warehouses closer to these pools of demand we can save immensely on time taken to deliver a product. As a result, we can expect better consumer trust in our brand.

Sophisticated, Yet Cheap

Quick deliveries, unique products, and dead-cheap prices: these three attributes could describe today’s online commerce very effectively. All of these attributes are very hard to compete on or to adjust independently of one another. So how are some companies winning the price wars, while others just fail?

The ones who finish the race have two key elements in common. One, they reduce costs, not at the expense of profits but innately. In other words, they use new technology, buyer knowledge, and data analytics to reduce their cost of being in business. This allows them to pass on the value to their consumers as well.

Two, companies are investing some of the money thus saved into building a better user experience. They are beginning to move back to human interaction instead of the IVR, and are using every opportunity they get to register as a trusted brand in the consumer’s mind.

Fragmented, Yet One

How do some of America’s largest retailers handle returns? Through outsourcing, of course! Manufacturers are not new to the idea of outsourcing the production of parts, or the actual shipping and delivery. That’s one reason why so many automobile franchises exist in a single city.

In particular areas such as the actual production, sales, and service, we may have reservations about outsourcing. After all, the more you outsource, the more you have to manage. A supply chain that makes allowances for disruptions in these processes, either internal or external, has a better chance of surviving the competition. In other words, it is desirable to build a supply chain out of outsourced components, thus reducing the operational burden on any single entity.

An Expanded View Of The Supply Chain

In recent times, building a supply chain has not been the focus of businesses as much as developing a value chain. A value chain offers transparency of information, so that each stakeholder in the process may make a decision based on the best information available to them.

As a result, a carrier understands the need to handle a product with utmost care as it is to be delivered for a special occasion. A manufacturer sees the need for using quality as a benchmark, as that is one of a brand’s core values. A consumer also gains decision-making power from a value chain. They understand the process by which a product reaches them, and are in a better position to decide if a product is indeed worth its monetary value. A value chain has the potential to build very long-term business value.

Irfan Khan is the president and CEO of Bristlecone (a subsidiary of the $19-billion Mahindra Group).

Blockchain secures data associated with shipments of export cargo and import cargo in international trade.

‘Disruptive Innovation’ Not Mutually Exclusive

Can disruption and innovation go hand-in-hand? I often wonder about this, as I hear the word ‘disruption’ quite often.

Over time, I have come to understand that disruptive innovation is characterized by two attributes. One, the new innovation is a new way of doing business within an established industry. Two, this new way of doing business is in direct conflict with traditional methods. The advent of internet banking and cab aggregators are a few common examples of disruptive innovation. Cab aggregation is not just a novel way of doing the business of taking people places but is a new business model that is in direct conflict with existing modes of road transport across the world.

Extending the example to procurement, the emergence of blockchain creates a situation where every single supply transaction can be protected by the influence of the many. In other words, for any changes to be made to the data stored via this medium, consensus must be obtained. Examples of transactions include the issuance of a purchase order as a legal contract and the transfer of asset ownership.

This can be compared to the way nuclear codes work – a launch can happen only when everyone with the secret code enters it accurately.

It is perhaps safe to say that disruption in all traditional industries in general, and in procurement, in particular, is not just inevitable and something to be dealt with, but even desirable. Disruptive innovation using technology has the ability to transform the Supply Chain as we know it, be it through increased transaction security or by increased accountability at each step of the way.

“Thus, businesses will find that using innovation, they can reduce the cost of doing business, do it more efficiently and build a more sustainable solution that doesn’t bleed money and also provides long-term results.”

Are you ready? This is what disruption in procurement looks like, and we’re only skimming the surface here. Do note that most of these advancements already exist in the market.

Spend Analytics: Can you use AI to classify spend data? Products like Spend360 allows you to pinpoint every single spend on suppliers, understand why one method costs more than another and allocate spending so as to make most business sense.

Risk Management: By analyzing data from a company’s own portfolio of suppliers, as well as historical data from the industry, some products can predict the type and level of risk in procurement at each stage of product development. Such a solution can enable you to attach a premium to the risk, or to find ways to remove the risk from the system entirely.

Supply Intelligence: Churning data from millions of market sources enables products to accurately predict the price of most common supply commodities, including metals.

If this is already happening, you’d want to know what can be expected. Outrageous as the ideas themselves may be, no one ever thought blockchain could find such widespread acceptance. We can expect data to help us attach value to each sourcing operation, down to the molecular level. This can save businesses huge amounts of capital. IoT will also have a role to play in offering granular visibility across the procurement and manufacturing process by accounting for every single component digitally.

Research shows that in as less time as the next three years, traditional industry practices need to find a way to become complementary to disruptive innovation. Innovation would become the new norm around which traditional models work. Is your business disruption-ready? Here’s how to find out.

Do you accept that the face of the industry is about to change and that change is already underway? Every leader must look as far as ten years ahead into the future and be able to anticipate the realities of that time. Only then will the business have enough time to accept or challenge the disruption in their domain.

Irfan Khan is president and CEO of Bristlecone (a subsidiary of the $19-billion Mahindra Group).