Where are the next innovations, and what do they look like? Sam Tulip investigates
It’s hard to believe, but ‘Supply Chain Management’ as a concept is less than a working lifetime old. There was a time when ‘logistics’ was a purely military term, transport managers kicked tyres, store keepers in brown coats refused to issue stock without handwritten chits in triplicate, and a buying clerk’s sole function was to beat suppliers up on price. How things have changed – at least, in most companies.
Changes have been fundamental – supply ‘chains’ were very short and the concept of ‘tiers’ of supplier didn’t really exist. Limitations of transport and communication favoured local supply (globalisation wasn’t created by the opening up of China, but by the invention of fax and the shipping container). The pace was leisurely, lead times long and product life cycles extended. Inventory was ‘good’.
Innovations have both enabled and driven change. Mechanisation and automation of materials handling and warehousing has been transformative. IT has of course been crucial: demand forecasting systems, MRP and ERP, transport and warehouse management systems, identification through barcodes, RFID and now the Internet of Things allowing tracking and tracing and a view of where goods and materials actually are, as opposed to where they are supposed to be. Communication up and down the supply chain has evolved from private and expensive EDI to cheap and accessible internet and SaaS solutions. The barriers between even small companies and lean agile supply chain practices are getting ever lower.
But could we be about to see step changes, paradigm shifts, in supply chain management; real innovations beyond merely incremental improvement?
Supply arrangements that are economically, environmentally, and socially sustainable all the way from ‘customer’s customer to supplier’s supplier’ requires not so much supply chains as supply networks, or indeed a supply hive or colony.
‘Chain’ thinking inevitably creates silos and boundaries within or between companies, each ‘link’ striving for local optimisation without regard to the best overall outcome. It may be that we are getting to the limits of what is possible in this approach – future supply innovation will be about capturing network benefits, not point improvements. This is true whether the future is of individual firms dependent on a co-ordinating mega-platform (the Amazon model, if you like) or an equally plausible, looser, more transitory association of players – call it the Farmers’ Market.
We will probably see both but, either way, individual firms – suppliers, carriers, manufacturers, retailers, end-users – will have to share not just assets but plans and strategies not only with their own supply partners but, more controversially, in horizontal collaboration with other businesses and supply chains, some of which may even be direct competitors.
Professor Alan Waller is Chairman of ELUPEG, the European Logistics Users, Providers and Enablers Group, which has been banging the drum for supply chain collaboration for over 15 years. Major barriers to horizontal collaboration, he says, have included ‘it’s not my job’, ‘where are the real benefits?’ and ‘isn’t it illegal under anti-trust legislation?’
Attitudes, however, are changing and benefits from collaboration have been frequently demonstrated. Waller cites two directly competing CPG manufacturers in Benelux, both serving the same distribution centres of major retail customers. By consolidating shipments, they lower costs through better utilisation, provide better customer service and help the environment through lower carbon emissions.
Legislators such as the EU now actively promote collaboration, short of actually sharing market information. NexTrust is an EU-funded project which brings together 31 partners to drive collaboration in the logistics industry. It will create interconnected, trusted networks that collaborate together along the entire supply chain.
In physical logistics there are many examples of collaborations that have succeeded well beyond pilot stage (for example some nice urban delivery schemes which could transfer well to equally congested port environments). But similar thinking approaches could equally be deployed to bring parties together on commercial and organisational aspects of supply. For example, it is quite possible to create systems that can analyse and forecast demand for a particular supply across multiple users, essentially creating a single consolidated order, allowing suppliers to plan, manufacture and deliver more efficiently, without the customers seeing each other’s commercial data. Similarly, performance data (supplier delivery performance, equipment performance in service) could be pooled through a trusted intermediary to drive supplier or product improvement which will benefit all users.
More controversially, one could imagine collaborative systems which, in a case of supply shortage, could objectively find the allocation that does the least damage to the overall business ‘ecosystem’.
Collaboration itself may be the key supply chain innovation that empowers all the other developments we need for sustainable operation in a changing and networking world.
This article was originally published in the Marine Trader, IMPA’s official journal for maritime procurement and supply chain management, in issue 04 of 2018. Head over to www.impa.net to find out more or simply read new issues on the go with the MT Journal app.
