How far are we from the smart supply chain

BangkokPost.com

Chris Catto-Smith

Many companies have developed very efficient supply chains, but are they smart? What makes a smart supply chain? Or is it a silly question to begin with?

Eight years ago, we made a presentation to the World Economic Congress in Hong Kong on the characteristics of "smart" supply chains. Let's see how far things have progressed against the original points in that presentation, as follows.

True visibility to actual demand. The opening point was "assessing true customer demand through a 'pull' approach was the first step to achieving smart supply-chain management.".

And today? Despite increased understanding and the opportunities to reduce its impact, organisations still haven't solved the bullwhip effect. The emphasis must still be on developing relationships with supply-chain partners who can respond appropriately to demand signals across functions. This enables the collection of significant transactional detail in a way that is extremely smart and can contribute to accurate forecasts of consumer demand.

Internet-enabled global visibility. "Near-real-time track and trace of inventory at the SKU-level by location (SKUL) is required for smarter international and domestic supply chain activities."

In 1998 near-real-time-visibility was a more of a buzzword than operational reality. However, now most organisations are able to exercise good visibility and control over their activities. "Visibility" is clearly part of a smart supply chain, with organisations understanding much more clearly the concepts and requirements of implementation throughout multiple levels.

Modular application architecture. The point we raised then: "Modularisation and smarter application design at each level of activity across the supply chain will enable tighter systems integration, deployment of specific capabilities as quickly as required in company-owned and logistics service-provider facilities, faster customisation of functionality without destroying future upgrade paths, with a focus on event-driven architecture."

And the point now? Service-oriented architecture (SOA) is now widely adopted now from a technology perspective. What SOA can do is enable true event-based processing, which can improve how information flows and enable smart communication (such as alerts) for exceptions or potential problems.

Real-time planning/execution linkage. Our view then: "Linkages between supply-chain planning and execution systems must occur both at the data and process levels."

Our view now: The internal barriers that existed then between planning and execution still need to come down. We need more "smarts" embedded in transaction-based execution systems between organisations - not just internally.

Reporting and analysis. Then: "Deployment of supply chain reporting solutions that compare planned results to actual performance are necessary for smarter control and analytics."

What is happening now: We have seen broad and growing use of Six Sigma methodologies within our supply-chain processes, but not fully embraced supply-chain statistical process control. There has been increased sophistication and standardisation of practical supply-chain metrics, particularly through SCOR (www.supply-chain.org). Metrics are critical to the smart supply chain, unfortunately competing implementations of project such as Balanced Scorecard without utilising cross-functional SCM measurements is hurting many organisations.

Common messaging-alert systems. Our point then: "Messaging and alert systems that cross multiple applications should be deployed to ensure smarter management of supply chains."

And now: This concept has morphed to mean "event management systems" that cover the entire supply chain. Unfortunately few companies, with the exception of some retail groups, have moved much beyond very basic event management systems. Event management is an important attribute but it is doubtful we will be able to implement global event management systems across all supply-chain processes.

On reflection, back in 1998 we had ignored the critical role of people in establishing and maintaining smart supply chains. If given a chance at the presentation again, we would start with the importance of having organisations aligned to key processes and their respective (customer-facing) demand chains. Senior management would share the same SCM measurements (such as those outlined in SCOR) and their team bonuses linked to (and dependent on) those of their counterparts in supplier and customer organisations. Even so, we have come a long way in eight years.