Part 1 of the series “The Network And Your Supply Chain“
We have all heard about globalization, tariff wars, ever-changing geopolitical events, market volatility, rising fuel costs: all are among the many challenges and trends facing supply chains today. Manufacturers and supply chain planners have to deal with challenges that include reducing costs, improving profit, optimizing inventory levels, and reducing complexity and risk within their supply chains.
Complexity within supply chains includes product variability/variety and higher customer expectations for serving e-commerce channels from large retailers to mom-and-pop stores. In the connected world of the supply chain, companies are constantly striving to identify strategies to mitigate these challenges. How can supply chains and networks alleviate these challenges and complexities and continue contributing to the organization?
Let’s discuss some facts
At its core, a supply chain is the network of manufacturers, suppliers, and logistics providers needed to get a specific product to your business and, subsequently, to your customers. At each phase of this network, value should be added, and each owner of each phase should be considered a conversion node: covert an input (raw material, for example) to an output (partial or finished/sellable product). Conversion can include storage and transportation as crucial elements of the supply chain. Supply chain management is the act of overseeing and managing such a network to ensure it is operating as efficiently as possible and meeting customer expectations.
This may cause you to wonder where procurement fits in.
Procurement is the process of getting the goods and/or services your company needs to fulfill its business model. Some of the tasks involved in the procurement process include developing standards of quality, financing purchases, creating purchase orders, negotiating prices, buying goods, and managing inventory.
These definitions highlight two important factors:
- Suppliers or trading partners are the key stakeholders involved in both processes
- More importantly, procurement is a key component of the supply chain
Transforming your enterprise into an intelligent supply chain includes many factors. An intelligent supply chain’s business goal is to deliver the right product at the right place at the right time to the right customer at the right profitability. Also while doing this responsively and reliably, increasing efficiency, and cutting costs through intelligence and automation. It is a lofty and challenging goal that can be achieved only if your supply chain is fully integrated, seamlessly connecting suppliers, contract manufacturers, third- and fourth-party logistics providers, warehousing, and end customers. This seamless, intelligent supply chain enables agility, flexibility, and one version of the truth.
A supply chain network offers the unique opportunity to connect your manufacturing, procurement, warehouse, payables, and other lines of business within your company with your trading partners. The network must also provide visibility into risks emanating from informational silos and help give your enterprise a big picture of the current state by predicting and mitigating disruptions, instead of following traditional methods that include creating artificial buffers in your inventory and squeezing supplier margins.
The signals that trigger events in your supply chain can emanate from anywhere within or even outside your network, such as social networks, geopolitical events, labor interruptions, and weather patterns. These signals impact all issues affecting supply and demand, such as shortages of raw materials, components, finished goods, or spare parts. In a world where we have seen the acceptance of e-commerce models and hyper-tailoring (manufacturing smaller lot sizes), the fully responsive supply chain is a huge competitive advantage.
Gone are the days where the network is considered within the four walls of your enterprise. A cornerstone for a true multi-enterprise network requires the ability to intelligently connect:
- Procurement for your direct, indirect, and services spend
- Integrated planning
- Logistics collaboration
- Data integration, insights, and advanced analytics
- Financial solutions
- Risk management
Successful enterprises that have adopted and participated in collaborative business networks have been able to streamline their collaborations and automate their B2B transactions. Networks provide a proven model to integrate across the entire supply chain in real-time and while rapidly exchanging information with partners.
Now that we have established the need for a supply chain network, in part 2 of this series we will discuss what it means to be on one.
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