Supply chain efficiency has become the new tool for companies to compete in the market and increase their market share. Probably a decade ago, customers would happily wait for a week or more for a package. However, this doesn’t seem to be the case today, especially with top companies even offering facilities such as same day delivery. Retailers and suppliers are now expected to formulate creative and innovative ways to meet these changing consumer demands. This is one of the main factors fueling the importance of supply chain management process for companies. Furthermore, forward-thinking companies are undergoing technology and process upgrades which clearly show that supply chain excellence is more widely accepted as an element of overall business strategy. Now, increasing value to customers is not just management’s, but everyone’s, business.
Trends changing supply chain management
Here are some of the key trends causing significant impact and change to supply chain design and performance:
Rise in globalization
Globalization is one of the key factors that has greatly increased the importance of supply chain management for modern companies. Globalization has a dramatic impact on the way business is managed and transacted, even on the most local levels. Processes such as sourcing, manufacturing, distribution, invoicing, and returns are significantly impacted by the increased integration of a global customer and supplier base. To manage the changes brought about by rapid globalization, an efficient supply chain management is critical. A supply chain network design that is well-designed can optimize the supply chain network and the flow of materials through the network.
Shorter product life cycles
Shorter product lifecycle is one of the key reasons behind the rising importance of supply chain management. The rising need to develop innovative products and bring them to market more rapidly, while minimizing cannibalization of existing products which are still in high demand is putting companies under extreme pressure. Companies are now looking at designing products that share common operations, components or materials with other products. This minimizes the risk of obsolescence, write-offs, ensures that infrastructure investments are optimally utilized, and increases cost leverage on the purchasing of key materials. Additionally, getting this right helps companies to improve their time to market. This will further help companies to buffer itself against the risk of an unplanned cost increase, obsolescence or write off, and poor new product launch. This will eventually enhance the overall customer perception of the company as an effective innovator.
Demand-driven production
Most companies are now shifting focus from plant-level production planning to adopting more of a demand-driven focus. Rationalizing what your company is best at selling, making and delivering, and aligning the sales force with that mindset, is critical to adopting a demand-driven model. This makes the supply chain management of companies easier as the problems of overstocking or understocking can be avoided.
Competition and price pressures
Previously, factors including the price, product features, and recognition of the brand were enough to differentiate various products in the marketplace. With continued commoditization, companies are now on realizing the importance of supply chain management. Product innovation and brand equity no longer allow them to command a higher price in the market. To continue to compete with that commoditized product the firm will have to make significant cost improvements with the redesign and technology upgrade of supply chain management. Effective supply chain management can help companies offset this trend in two ways. Firstly, companies can identify ways to reduce cost and are creating a more efficient value chain to remain cost competitive. Secondly, companies can provide value-added services to meet the demands of more sophisticated customers.
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