Sometimes, when a problem is so broad and complex, it is also very hard to define. For example, what is an extended supply chain? The word “extended,” by most definitions, means to broaden further in meaning, scope, or influence, or to go beyond. The term “supply chain” is defined by business processes characterized by the creation and sale of a product, starting from the delivery of source materials from the supplier to the manufacturer, and extending up through its eventual delivery to the end user.
Translated literally, management of an “extended supply chain“ extends the management scope beyond the business processes covering the supply chain. However, in practical terms, what does it mean to manage an extended supply chain? And why should companies even care, and most importantly, how should they get started?
Let’s start with why is it so important to manage an extended supply chain. To put it simply, you have no choice. The world today is so much more connected and companies must think, operate, and execute as part of a greater business ecosystem.
You can’t develop products today without understanding customer sentiment and usage patterns. Product development teams must collaborate with a multitude of stakeholders inside and outside the company while sharing information, designs, and formulations in real time. Companies must innovate responsibly at speed. They must ensure the global compliance of their products, based on the raw materials they use in their bills of materials (BOMs) and recipes and where they plan on doing business. This material transparency must extend to their suppliers’ raw materials.
Customers expect personal products, and manufacturers must produce and deliver these individual products while operating at mass production cost efficiency. Asset Performance Management programs must extend the optimization and safety of company operations, beyond a company’s machines, and focus on managing performance and risk dependencies between management of its assets, workers, processes, and equipment suppliers. Organizations must plan and respond to shifting customer demand, requiring that businesses execute real-time material requirements planning (MRP) processes and demand and response planning.
For SAP, helping our clients manage an extended supply chain is running a digitized business that connects R&D, manufacturing, asset management, and sustainability with supply chain planning and execution. It’s about managing information and processes simultaneously across these interdependent processes to help our customers run as “live” connected businesses.