What’s happening in supply chain management: Part 1

By Maureen Aylward

Supply chain management is a critical component of many businesses. It is also a field that is changing, adopting new technology, and finding new ways to implement processes and ideas. We asked our Zintro experts to tell us their success stories and outline any tactical considerations, strategic approaches, and technology they are using or see as emerging trends in this area.

Dr. Rossano V. Gerald, an independent supply chain consultant and professor, says supply chain management can be defined as an effective and efficient flow of information, raw material/finished goods, financial reports, and services from the supplier’s vendors through numerous middlemen out to the consumer. “It can help an organization reduce total cost management and improve customer service by synchronizing the flow of the products/services through the supply chain pipeline to meet customer’s requirements and expectations,” Gerald says. “As a result, supply chain management is an imperative determinant of wealth expenditure. It impacts the consumer’s consumption behavior and demand for a particular product or service.”

Gerald provides us with the following overview and a success story.

Tactical considerations
“Supply chain activities are dependent on various transport modes to move the product to the end user, and as such the transportation function is a tactical aspect that must be taken into consideration,” explains Gerald. The transportation feature is a joint that connects transport modes to other supply chain activities to deliver the right product to the right place at the right time with the right quantity and at the right cost.

“Consumers’ demand for a service provider that is able to deliver a quality product within a short period of time poses logistical challenges to transporters moving freight through the global economy,” Gerald says. “Therefore, the transportation synchronization process plays a key role to what type of supply chain strategy will be used to lower inventory cost and improve demand fulfillment requirements for the customer.”

Strategic approaches
Several supply strategic approaches can be used to establish effective and efficient logistics flow of products and services and to resolve global supply challenges in any organization Gerald says. For example, financial supply strategies can be used to measure an organization’s financial performance by using transportation, inventory, and order cycle metrics to compare return on assets against return on investment to ensure that a company is able to achieve its financial objectives.

“The differentiation approach is another supply strategy to see how a company can use its supply chain process to differentiate itself from its competitor,” says Gerald.  “For instance, a pricing and service tactic could be used to reduce the length of demand fulfillment and/or product replenishment over time to deliver the right product at the right cost.”

Technology supply strategies help an organization plan, execute, control, process, and report supply chain transactions in real time, says Gerald. “Technology provides updated information that a company can use to communicate with internal and external customers so they can react to marketplace demand. For example, SAP is an enterprise resource planning system that is used to efficiently share and communicate information among key players to make the right decision when it comes to improving business and supply chain transactions.” Global supply strategy is also a logistics tactic to respond to global supply channel challenges that affect movement of products through international borders using local and foreign investor resources (intermodal and intramodal).

Professional supply chain challenges and success
Gerald served as an acting director of logistics for a multinational supply and service company. During that time, he was confronted with a transportation and inventory issue that required the movement of perishable and dry goods to customers in a hostile geopolitical and poorly infrastructured environment. “I decided to setup several logistics meetings with internal and external customers to develop a relationship-based strategy that forested collaboration, trust, commitment, communication, and sharing of information that allowed us to integrate our companies’ distribution and transportation management systems,” explains Gerald. “This strategy helped the company to deliver the right product to the right place at the right time for consumers in this developing economy. It also enhanced our supply chain processes, increased revenue, and reduced total operational costs. At same time, the process enhanced the quality of life for thousands of people who were living below the United States’ poverty level.”

Michael Arace, a business performance improvement consultant and supply chain specialist, says that supply chain management (SCM) impacts virtually every aspect of a business. “In my practice, I often replace ‘supply’ with ‘business’ because I find ‘business chain management’ to be a broader, more apt description of the work that has a hand in improving business results,” Arace says.

As historically practiced, Arace says that SCM is too focused on procurement/purchasing and, in particular, price as stand-alone foundations for business performance improvement. The price focus is rooted in accounting practices and compensation schemes that emphasize margin on sale at the unit level. The underlying theory is that lowest price in all goods and services purchased will equate to lowest cost and, in turn, the highest profit. “In my experience with retail, manufacturing, and wholesale, when taken to the extreme, the low price philosophy can be very damaging to a business and its relationships,” says Arace. “I encourage clients to take a step back from the day to day and look objectively and dispassionately at the current state of the business.”

Arace’s business supply chain process focuses on a three to five year history and trends: market share, differentiation, customer base, lines of business, volume, cost, profit dollars, cash to cash cycle times, and return on investment versus companies they view as leaders within their competitive sphere. “It is always enlightening. Through this process the client realizes that they either can’t or don’t measure or manage the business for the results they desire,” he says.

Arace believes in a sales and operations planning approach that includes SCM. “It’s a process through which key functional unit heads meet periodically to review sales, cost, cash flow, and profit results against the business plan. The process includes a reforecast of results through the end of the current fiscal year. It is then that the client can define what SCM excellence looks like,” he says.

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