The US Military Supply System is Broken

The U.S. military's supply system has been broken for a decade and a half, and experts warn it may stay that way for years to come says an article in United Press International. This is interesting given that logistics as a science has its roots in the military. The first Iraq War triggered by the invasion of Kuwait in the last decade was one of the largest logistics excercise ever conducted by anyone on the face of this earth. Yet we find that the supply chain for the army in Iraq was so inadequate that it posed dangers to the men in the field.

Interesting read ........

There is real growth in the use of RFID in Supply Chain Management

Over the last couple of years, there was more hype about RFID rather than any real successful implementation in the real world, exception being the US Army. Even the mandate by Wal Mart was proving to be difficult as suppliers all over the world struggle to comply with their requirements.

Things are changing however, as this article about RFID printer and encoder sales shows. It would seem that the use of RFID in the CPG or FMCG vertical is really taking off. Healthcare seems to be ramping up as well. Another use of RFID that is mostly happening on the quiet is that of tracking books in libraries as this article on RFID for Libraries shows.

Accenture the best in SCM services

This is an interesting short article, Accenture beats its competitors in delivering SCM services. Almost 84% of its customers say that they will recommend Accenture to others in the market. Can you beat that ?

On-demand Solutions

On demand supply chain management solutions are more effective at reducing procurement costs than traditional licence solutions, according to research by the Aberdeen Group. Aberdeen conducts a lot of research into the global supply chain, much of these are published as free downloads on its website.

The analytical firm found that on demand solutions increase cost reduction capabilities by an average of 27.5 per cent, as opposed to 21.5 per cent for traditional supply chain management solutions. Aberdeen interviewed 135 industry executives in order to compile its On Demand Supply Management Benchmark Report.

IBM research indicates similar results with an interesting article that is tagged as "you snooze, you lose".

Bruce Richardson, the chief research officer of Boston-based AMR Research, who has grown along with the supply chain, commented on Forbes.com that "Even in the best-run companies, the demand side is not necessarily tied to the supply side".

In the coming months, lots of research and products will be released in the SCM market relating to the Demand Driven Supply Network. Watch this space.

Value Chain Management Excellence

The application of advanced technologies in all the three value chain management time horizons (Strategic Planning, Tactical Planning, and Operational Execution) will be the difference between adequate and great value chain performance.

Enterprises fail to master great value chain management because they often approach these projects in the same manner as they do enterprise resource planning (ERP) projects; they ignore the difference between an intra-enterprise transactional system and an inter-enterprise value chain execution/planning system.

Key Issues: How can supply chain planners identify the technologies and applications that will generate maximum benefit for their value chains?

Bottom line: To achieve greater Supply Chain Excellence, consider the 3 time horizons; Strategic Planning, Tactical Planning, Operational Execution.

Yet another acquisition in the SCM world - now its RedPrairie

RedPrairie has been quite active at both customer acquisition as well as business acquisition. RedPrairie will acquire BlueCube Software. The combined companies, operating under the name RedPrairie Corporation. Just earlier this year, it acquired Marc Global in an acquisition that integrates two companies which are quite alike in many ways. This move is seen to be more of a customer base expansion move rather than any technology acquisition initiative.

IBM believes that business growth is dependant on competitive supply chains

If you have been following this blog, you would have known by now that the enterprises around the world understand that their growth is very much dependant on their supply chains. With manufacturing centres relocating to lower cost countries, and sales extending globally, enterprises have no choice but to invest heavily into supply chain technologies as well as revolutionise their out-dated supply chain organisations.

IBM believes that the case for business growth lies very much in having supply chains that are competitive, click here for the article. I have long believed that the business battle today is not companies vs. companies but supply chains vs. supply chains. Just ask Dell.

Value Chain Definition

The successful competitors are those that can best manage, or even control, the entire virtual demand-supply or value chain to deliver the highest value to customers. They do this by closely evaluating costs, quality, and payback at every step along the way. They know the cost of shipping, marketing, and customer support at very detailed levels. They can enter risk analysis into the equation and optimise for time to market and profitability. In addition, they can manage their partners closely. Service and quality agreements are critical because if one piece of the virtual value chain does not deliver, the whole chain fails.

In a typical value chain, there may be links between different segments of a single, vertical manufacturing enterprise, or the links may be between independent, albeit inter-dependent, enterprises. All the enterprises in this chain work together in a closely-knit fashion to deliver value, in this case, products and services to end customers.

Each link represents a supplier and customer relationship. Each relationship involves the ordering and delivery of goods and services in response to supply and demand. Consequently, each link represents both the flow of physical goods (hard goods), soft goods (e.g. software), services, as well as information (e.g. orders, delivery notes, etc.).

The directional flow of information, goods and services through the various links and how fast they flow is what we term “product velocity”. Each flow may be subjected to “push” or “pull” forces that determine the functional characteristics of the link.

The challenge today is to maintain a visible and functional network of inter-dependent links so as to increase product velocity, thereby delivering value to the customer. This is the purpose and definition of a “Value Chain”.

Back from my June holidays and business trip to Osaka Japan

Hi everyone,

You might be wondering why I have not posted any thing since 17 June, well its because I was on holiday in Sarawak with my family, and then it was off to a business trip to Osaka Japan. Well, I am back once again. The photo you see above was taken at the Marriot in Miri, Sarawak, Borneo Island. The sunsets there were really beautiful.

Well, its onwards to more blog posts on the latest in supply chain technology !

Web Services and Value Chains in the Adaptive and Dynamic Supply Networks

The Internet has enhanced the ability of organizations within the adaptive and dynamic supply networks to integrate their processes through collaborative information sharing and planning, and to improve internal operations through flexible workflow management. Clusters of these organisations within each supply network begin to form to create what is traditionally known as Value Chains. An important element of managing the value chain is the ability to incorporate the requirements of a diverse group of players both within and outside the organization to create an integration plan that can be synchronized with the organization’s manufacturing, distribution, transportation and warehousing processes.

To manage and facilitate enhanced collaboration among the various participants in the value chain, organizations are increasingly deploying web-enabled value chain management software solutions to address their execution, transaction and planning requirements. Up till the advent of Web Services and the Internet, business process integration often involved the development of interfaces between proprietary databases. The usual solution was to transcribe entire databases or one enterprise to the format required by the other by developing proprietary conversion programs that are specific to each application, a very tightly coupled solution indeed. This is very costly, not very flexible, and if either enterprise needs to upgrade or replace systems, the whole process of data interface has to be re-started.

Web Services technology allows online services to be encapsulated as re-usable components or applications with well-defined programmable interfaces (APIs) that can be consumed by other services using common web protocols. This “Web Glue” loosely couples the producers and consumers of services and information within the value chains via the Internet. In essence, this glue consists of well-defined objects and methods that define the communications protocol between applications, publicising the availability and the way these services (i.e. applications and information) are invoked and consumed. The standards also seek to facilitate the management and coordination of groups of services to present a unified view to the consumer of these services.

Imagine now for a moment, entire value chains that consists of enterprises that synchronises harmoniously within the eco-system, all empowered by information services made possible by web services that are registered and published in online “yellow pages”. New participants entering the eco-system no longer have to spend millions of dollars on proprietary systems to generate product and service awareness, and to participate in the eco-system of the value chain.

The market for value chain management solutions is relatively new and is experiencing rapid growth. Industry sources estimate that the advanced planning and scheduling market was $350 million in 1996, and is projected to grow at a compound annual growth rate of 46% to more than $1.6 billion by 2000. The warehouse management systems software market was approximately $270 million in 1996, and is projected to grow to more than $1.4 billion by 2001 - a compound annual growth rate of 40%. These numbers certainly point towards an exponential growth for the new breed of SCE web services platform that seek to empower the relationship dynamics of the modern adaptive and dynamic supply networks.

Supply Chain Execution (SCE) Solutions Driving Growth for SCM

Around 5 to 7 years ago, the buzz was all around how supply chain planning (SCP) will revolutionise supply chian efficiencies around the world. At that time we saw the rise of companies such as i2, Manugistics and AspenTech (can anyone remember this company?). Even SAP and Oracle got into the act.

Yet, all along without much buzz or fanfare, the growth of supply chain execution (SCE) applications continued unabated, albiet away from the limelight. Warehouse management, order management, freight management and transport management remain key areas for enterprises wanting to either lower costs or gain competitive edge. The study by ARC Advisory Group lends credibility to this thought.

Technology in SCM

Many SCM vendors are beginning to push the envelope of their solutions by injecting the latest technology into their applications. In the next few years, expect these technologies to become mainstream in SCM.

• Web Services. This software framework and standards is designed to be used by other software via Internet protocols and formats. It will strengthen the weakest links in manufacturers' supply networks and cost-effectively connect with a dynamic array of partners.
• Extended Internet. The extended Internet is an integral part of the extended enterprise -- Internet devices and applications that sense, analyze, and control the real world. Manufacturers will tap the extended Internet to raise their supply network processes' real-world awareness through the use of sensors and smart tags attached to physical assets. IBM, HP and Sun Microsystems have all released their vision of grid computing and pervasive network computing.
• Agent-based software. Intelligent agents will automate the resolution of supply network exceptions and improve learning. SCEM will be revolutionized by this concept.
• Pervasive Mobile Computing. Enterprises today are now more dispersed and collaborative in nature. This has led to the need of business on the move, or mobile computing. No longer are businesses confined to fixed premises, road warriors now take their work out of their offices and direct to their customers and suppliers.

Technology Trends in SCM

At the heart of today’s dynamic supply chains is a continuous, technology-enabled adoption cycle that will help manufacturing partners proactively detect emerging risks and opportunities, expedite exception resolution and capture opportunities, and continually improve their operational processes, all these across enterprise and international boundaries.

The transformation of today's linear manufacturing supply chains into dynamic supply networks will be supported by four emerging technologies; Web services, extended Internet (in short, the X Internet (or Extended Internet) is comprised of the myriad linkages between the physical world and the digital world. This burgeoning and utilitarian technology could prove to be the next big wave in the Information Age.) , agent-based software and pervasive mobile computing.

More about these technologies in the next few posts. Stay tuned.

Reverse Logistics

Reverse Logistics is also a new and growing section of logistics, as customers seek the option of returning goods for repair or exchange. Wikipedia gives a good definition of Reverse Logistics. The e-commerce ways of doing business online will only accelerate this trend. Since so much merchandise is sourced from Asia in the first place, reverse logistics activity is likely to be very substantial in the region in the next few years. There are a number of service providers who specialise in this kind of activities, for example Supply Chain Services Inc. There are even online publications which give the latest news on reverse logistics.

eCommerce logistics outsourcing

A derivative of logistics BPO, this is a specific service offering, where service providers leverage their existing expertise in the warehousing operations area to offer order e-fulfilment-related services including pick-and-pack, gift wrapping, kitting services and express delivery. An example of this is the recent collaboration between Toy’R’us and Amazon.com, for the former to utilize Amazon.com’s delivery channel.

Today, we are witnessing a significant consolidation and integration of many e-procurement hubs and trading exchanges that had mushroomed in large quantities over the past two years. Already, industry leaders are leading this consolidation by placing their huge procurement activities onto exchanges founded by them. Many of these trading hubs and exchanges currently lack a logistics platform that is necessary once the order flow is processed. This logistics back-end platform is integral to any exchange, linking suppliers and buyers, as well as their respective logistics providers to retrieve information about the order picture, forecasts, delivery dates, shipment tracking, and other data necessary for planning their logistics delivery. A logistics hub would allow buyers, sellers, distributors, and transportation providers to tap into one central source, pull data from ERP systems, and receive order-tracking alerts and notification of potential problems.

Emergence of eLogistics

The Internet is changing the traditional channel through which buyers and sellers communicate. It has substantially changed manufacturing flow and distribution patterns, profoundly impacting the logistics service marketplace. Increasingly systems and services will be positioned as Internet-centric in order to optimise the availability and “distribution” of the highly complex “information” that drives the growth and development of the logistics BPO world.

Companies that fully embrace such “eLogistics” opportunities are expected to achieve substantial competitive advantages over non-IT-savvy players. eLogistics will bring traditional logistics providers opportunities as well as challenges. We have recently seen new players such as Electron Economy (now acquired by SynQuest, which subsequently merged with Viewlocity) gained an early advantage in their ability to leverage their IT capabilities to compete in the eLogistics marketplace.

Traditional logistics service providers need to catch up to retool their legacy systems quickly to meet the requirements that e-commerce firms require. 3PLs have traditionally moved products in bulk, from the factory to the warehouse to the retail outlet. In the B2B / B2C e-commerce space, this is not the case. There is a need for “back-end operations” such as order fulfilment, reverse logistics, etc. To stay in the race in the complex ecommerce logistics marketplace, 3PLs will need to focus their efforts on providing the back-end operations, demonstrate that they can provide “e-fulfilment” and the ability of react in “internet speed” — otherwise, they will not be viable as future Internet players.

Motorola builds a supply chain control "tower"

In order to reduce its supply chain costs and achieve full supply chain visibility, thereby giving it an edge over its competitors, Motorola is pioneering the concept akin to the airport control tower, it is called a supply chain control tower. Just like an airport control tower, Motorola's control tower will enable it to marshall its resources to enable efficient order landings and delivery take-offs. If Motorola manages to execute this well, its command and control ability over its entire value chain is going to power its rise once again as an electronic giant.

Logistics Trends - Outsourcing of Logistics / Supply Chain Functions.

Today, it is an accepted fact that the majority of Original Equipment Manufacturers (OEMs) are enlisting the help of outside companies, usually to a third-party logistics provider (3PL) to manage their supply chain, returns, repairs, and other logistics functions. These companies want to focus on their core competencies and many lack, or choose not to put up, the resources or capital necessary to invest in comprehensive logistics expertise. Hence, we see over the last decade, the rise of 3PLs. Revenue from 3PL companies totalled $45.4 billion in 1999 and is expected to grow 15 percent to 20 percent in 2000. With outsourcing comes the next wave in logistics practice, Logistics Business Process Outsourcing or Logistics BPO.

Logistics business process outsourcing (BPO), although an outcome of the traditional outsourcing of logistics, is a relatively new development. Logistics BPO is an IT-enhanced and integrated outsourcing function that stretches from the vendor to the end customer. This set of activities comprises much more than delivery- and warehousing-related functional activities. Logistics BPO goes beyond merely the physical flow of the products to encompass the process and information necessary to optimise a customer’s logistics activities. What drives the growth of the logistics BPO industry will be the effective integrating and bundling of traditional third-party logistics services with today’s internet-based information technology-based solutions

Lawson and Intentia have merged

In April 2006, Lawson Software and Intentia merged to form the new Lawson. This merged entity now delivers enterprise applications in 20 languages to more than 4,000 customers in more than 40 countries. Lawson applications support global processes, from order to cash, demand to distribution, or forecasting to financials.

With this merger, the new Lawson now specialize sin service industries, healthcare, manufacturing, and distribution. Their cross-industry applications provide business intelligence, manage human resources, and maintain assets. All their products are designed to help streamline processes and operations. The new Lawson intends to be an international player in the ERP space, however, their supply chain capabilities have also be enhanced with the integration of Intentia's applications.

Bridging the Chinese Supply Gap

This article is interesting as it highlights the fact that many indegenious Chinese companies are today trying their very best to improve their supply chain capabilities in order to extend their marketing into the value chain of the international manufacturers.

And by all accounts, I think their initiatives are paying off. Many of these Chinese enterprises are serious about improving their overall quality and capabilities. As these improvements take place, there will be many opportunities for supply chain management (SCM) vendors to be part of these sweeping changes.

Adaptive Supply Networks

Over the last decade, increased outsourcing and alliance building have made it harder for manufacturers to spot brewing supply chain glitches.

The result? When unexpected supply chain events arise, manufacturers and their logistics service providers (LSPs) switch to firefighting -- a defensive mindset that carries a hefty price, which often leads to more damaging outcomes. Technologies are emerging which will soon enable manufacturers to sense and respond proactively to unanticipated variations in supply and demand -- and transform their static supply chains into what Forrester and some in the industry calls "adaptive supply networks."

Adaptive supply networks are business networks of supply chain partners that use technology to sense and respond in a coordinated fashion to changes in their environment. Supply Chain Event Management (SCEM) refers to the effective management of these changes or events in the supply chains. These supply networks will boast self-regulating capabilities akin to today's energy and telecom transmission networks. Within this context of adaptive supply networks, it becomes vital to understand fully the following logistics trends.

Oracle to Acquire Demantra

Oracle did it again. Lately it has gone into an acquisition frenzy and its latest score is Demantra (remember, not dementia). Demantra provides Demand-Driven Planning solutions that enable marketing, sales, and supply chain departments to create and execute to a one–number plan. The Demantra Spectrum Suite includes solutions for Trade Promotion Management & Optimization, Real-Time Sales & Operations Planning, Demand Management, and Retail Planning & Store Replenishment. These solutions manage the rapid creation, planning, and fulfillment of demand from promotion management to inventory replenishment, resulting in improved demand visibility, more profitable promotions, optimized service levels, increased customer responsiveness, lower operational costs, and increased sales and profits.

The acquisition is expected to not only help Oracle expand its supply-chain applications business, but also to help it focus more intently on particular industries, in this case the retail and grocery industry. Demantra recently landed customer C&S Wholesale Grocers, the second largest wholesale grocer in the U.S. It also counts as customers McCain Foods, Korbel and Welch's.

This acquisition dovetails nicely with its purchase of Retek last year in Mar 2005, which Oracle fought hard with SAP for. Together, Retek and Oracle will accelerate and deliver innovative solutions that streamline and integrate all aspects of retail businesses. The combined offering will provide a comprehensive, complete solution that includes back-office functionality for finance and human resources and extends throughout planning, merchandising, the supply chain, and multiple retail channels.

Bridging SCP and SCE

Companies have made enormous investments in supply chain systems, yet the ultimate goal remains elusive. Most businesses today do not operate high velocity supply chains and are not able to respond to supply chain changes as quickly and efficiently as should be possible. And speed is only part of the challenge. Many businesses outsource some production and fulfilment activities, adding complexity and reducing day-to-day control and visibility.

Most problematic, today’s SCM suites have strong tools for strategy, planning and execution, but inadequate tools for real-time management of supply chain operations. A gap between traditional supply chain planning (SCP) solutions and supply chain execution (SCE) applications is preventing businesses from attaining a high level of production visibility and supply chain responsiveness. This gap is slowly narrowing as a new software segment emerges. Supply Chain Operations (SCO), as we call this nascent market, bridges the gap between planning and execution, proactively managing the operational phase of the supply chain. This software automates responses and recommendations based on daily changes that impact the supply chain. Supply Chain Operations applications keep the business rolling while guiding activities to avoid inefficiencies and problems. In achieving this aim, three main areas in SCO become important focus; they are Supply Chain Collaboration, Supply Chain Visibility, and Supply Chain Event Management.

There are currently no public companies that cater primarily to SCO, as this is a nascent, but rapidly growing market. For this reason, potential customers will need to broaden their horizons in terms of evaluating currently available offerings.

Acceleration in SCE Market

Another segment of the SCM market, supply chain execution (SCE), has shown remarkable stability in an overall weak software market. Supply chain execution is a broad term referring to the framework for managing the flow of materials. Most commonly, it brings to mind the management of outbound distribution of finished goods – so-called outbound logistics. It is important to note, however, that logistics also involve management of receiving functions (in-bound logistics) and optimisation of warehouse activities (warehouse management). Ibelieve that SCE will be one of the fastest growing segments in supply chain management over the next several years, with Atlanta-based vendor Manhattan Associates and India-based vendor Four Soft Ltd being the key beneficiaries.

Downsizing in the Supply Chain Planning (SCP) Market

Vendors in the supply chain-planning (SCP) segment are looking at a dreary sales environment through 2006. And even as this market starts to rebound, vendors are facing a drastically different sales environment, one with fewer overall prospects, considerably smaller deal sizes, and very conservative technology buyers. The SCP vendors, namely i2 Technologies and Manugistics, have been forced to downsize (in i2's case), or be acquired (in Manugistics' case), in order to survive. This market is not expected to rebound to the levels of the late 1990s; in fact, the sales landscape has permanently changed. Technology buyers are being very selective and have ruled out the multi-million dollar suite-sized implementations of the past.

Sterling Acquires Nistevo

Why Sterling? Think Nistevo AND Yantra.

Here is another acquisition that indicates that consolidation in the SCM market is gathering pace. Sterling intends to blend Nistevo with Yantra, a provider of software for distributed order management and warehouse management. Some of you will remember that Sterling acquired Yantra last year for $170M. Yantra’s core strength was in the retail space, linking retailers with suppliers and third-party logistics providers (3PLs).

With the Nistevo deal, Sterling now has an attractive offering for retailers, suppliers, and 3PLs. Better yet, in the future all of the software will be supported as software-as-a-service (SaaS), an attractive option for companies looking for lower cost implementation options. (note: the software is also available for deployment behind a firewall).

Conceptually, the Nistevo/Yantra pairing fits nicely with Sterling’s value-added network (VAN) business, which has long provided services on a pay-as-you-go model. Sterling intends to use its VAN to extend the reach of Nistevo and Yantra, especially to midsize business. Today, Sterling’s network has 30,000 customers, with most under $250M in annual revenue.

Click the link in the title of this post for a run-down on this deal.

Worldwide Supply Chain Planning Market to Grow

Over the last few years, the Supply Chain Planning (SCP) market was moderately shrinking. Companies such as SAP, Oracle, Manugistics and i2 did not see much growth in SCP in the last two years. However, the SCP market is still around USD$1.8B in 2005, and that is no small sum. What is interesting is that the SCP market is once again beginning to grow, albeit at a slower pace. Click the link to the title of this post to read about how the research firm ARC sees the SCP market in the next few years. Interesting times are here again for SCP.

Defining Supply Chain Management (SCM)

The supply chain management (SCM) market is a catchall term for an array of software solutions aimed at extending information and cooperation among different supply chain constituents. The market includes many sub-segments, each with different outlook and growth prospects. There are three core segments in the SCM market: 1) the traditional supply planning (SCP) segment, which is most commonly associated with supply chain software; 2) the supply chain execution (SCE) market, which is responsible for what happens after the order leaves the manufacturer; and 3) the supply chain operations (SCO) market, a new market that manages the extended supply chain in real-time, filling the gap between planning and execution

Is there such a thing as a "smart supply chain"?

Supply Chain Management (SCM) is one subject that has given rise to so many buzz phrases. One of these is called the "Smart Supply Chain". First, what does the word "smart" refer to here? Does have complete visibility into a supply chain makes it "smart"? Does have the ability to see events that happen throughout the chain make it "smart"? Follow the link in the title of this posting to see what others are saying about the "smart" supply chain.

Trends to Watch

The years of 2001 and 2002, and the first half of 2003 has seen one of the worse economic recessions that the world has ever seen for over 50 years. With the US and EU economic slow down, coupled with the more than decade long recession in Japan, the war in Iraq, and SARS, it would seem that the only bright light today comes from China. China is fast becoming the shop floor of the world, with much of the world’s manufacturing relocating to its cheap land and labour. With China and India powering the growth in Asia, 2004, 2005 and 2006 are becoming a bit brighter. Nevertheless, what the economic situation brings about is an intense downward pressure on business costs and as a direct consequence, supply chain costs.

This signals that the battle of the future facing most businesses is in the area of Supply Chain Management (SCM), and in particular, Supply Chain Execution (SCE). Enterprises are now actively pursuing outsourcing as a means of survival, focusing instead on their core competencies. Collaboration among enterprises in a supply chain eco-system over international boundaries has now become the order of the day. Over the next few blog posts, I shall describe the fundamentals of supply chain management.

JDA Software to Acquire Manugistics

More interesting news for the supply chain management software industry. The once high-flying supply chain management software provider Manugistics has succumbed to consolidation. JDA software has bought the company for a song. With SSA going to Infor, I wonder who is next.

Infor to acquire SSA Global for $1.35bn

This is another interesting piece of news for the SCM software industry. SSA Global, which went on an acquisition spree over the last few years (acquiring companies such as EXE Technologies) has themselves been acquired by Infor. It sure looks like the SCM Software Industry is consolidating at a rapid rate given that JDA recently acquired Manugistics. Who's next I wonder ...... Manhattan Associates? i2?

Supply Chain Council

The Supply-Chain Council was organized in 1996 by Pittiglio Rabin Todd & McGrath (PRTM) and AMR Research, and initially included 69 voluntary member companies.

The Supply-Chain Council now has closer to 1,000 corporate members world-wide and has established international chapters in North America, Europe, Greater China, Japan, Australia/New Zealand, South East Asia, Brazil and Southern Africa. Development of additional chapters in India and South America are underway. The Supply-Chain Council's membership consists primarily practitioners representing a broad cross section of industries, including manufacturers, services, distributors, and retailers.

Impact of Supply Chain Costs on the Bottom Line

How much does it costs to move goods through your supply chain ? Has there been research on what percentage of sales goes into the supply chain? Well, this table shows that companies that manage their supply chains carefully tend to keep logistics costs to around 9.5% of their sales. Without any substantiated data, I would put forth a guess that many companies which do their manufacturing in China, India or Indo-china would tend to have logistics costs at about 15% of their sales due to the lack of sophistication in their SCM. Anyone want to dispute this ?

Constant Change

With the Internet, competitive information is easily accessible globally. As a result, companies are finding it increasingly difficult to differentiate their offerings solely on product, location or price. Companies must therefore distinguish their product and service offerings by ensuring that their value chain provides effective and reliable delivery and fulfilment according to the consumers' individual preferences. High-tech companies are especially concerned daily with on-time delivery, time-to-market, system integration, internal and external supply-chain collaboration, and forecast accuracy. The pre-occupation of the management of these enterprises has been how best to achieve value add for their organisations, and to do this fast. For some, the logistics associated with e-business is an extension of strategies already in place.

As such, market trends are beginning to drive organizations to expand collaboration with trading partners along the value chain. In the highly competitive environment created by the Internet, market power has forced manufacturers and distributors to become more responsive to retailers and consumers, which has created a need for improved value chain planning capabilities. Manufacturers are being forced to reduce costs, decrease order cycle times and improve operating efficiencies. They are also increasingly under pressure to better manage the value chain, as they seek to improve manufacturing efficiency and logistics operations while maintaining flexibility and responsiveness to changing market conditions and customer demands. These pressures are compounded by the increasing complexity and globalisation of the interactions among suppliers, manufacturers, distributors, retailers and consumers.

In this context, the term Express brings out two equally important concepts, that of speed, and that of “squeezing out the essence”. Express Value Add therefore signifies the speed at which value is squeezed out of value chains in order to derive maximum benefits from the chain for all its stake holders, namely manufacturers, distributors, service providers, customers, and so on. Technology makes it possible to unleash and express this value so that “time to benefit” is significantly reduced for the eco-system of the value chain. This is a top priority for business executives as it promises to rid companies of excess inventory and minimize the occurrence of shortage, which have direct impact to the bottom line. Effective supply chain management can reduce carrying costs by 20 to 30% over the long term.

The Rules are Changing

The age-old goal of business has always been:

“To provide superior products and services with outstanding customer service whilst achieving profitability”.

While this goal has remained relatively unchanged, what have changed dramatically are the benchmarks by which quality, service, speed, and delivery performance are measured. With the advent of the Internet and advanced supply chain management technology, these benchmarks have now been raised even higher.

Companies are just beginning to realize the potential in adding stronger, yet more flexible links to their supply chains in the form of collaborative capabilities. Firms are re-engineering supply chain processes, trading partnerships, and collaborative relationships, as well as the transactions that support them. The addition of collaborative functions to applications, such as collaborative planning, forecasting, and replenishment (CPFR), new product introduction, and transportation and logistics represents the next stage in supply chain evolution.

"The issues are twofold,'' said Barry Wilderman, senior vice president in META Group's Application Delivery Strategies service.”To succeed in today's economy, companies must develop an outward-facing collaborative culture and make appropriate technology investments. They must also learn to maximize their relative 'positional power,' because channel masters often get to dictate the terms of transactions.''

While supply chain collaboration grows in popularity, most businesses have only a vague understanding of its complexity. Lack of careful planning in collaborative supply chain management can lead to security leaks, risks of exposure to competition, increased complexity in technology integration, and a lack of understanding regarding benefits/ROI in some areas.

Many organizations limit the benefits that can be derived from supply chain collaboration, due to their imprecise understanding and limited application of collaborative activities. As such, these firms have focused collaborative activities primarily on internal supply chain integration. Internal supply chain excellence and an outwardly focused culture are important precursors to true collaboration.

What does supply chain management address?

Supply chain management must address the following problems:

* Distribution Network Configuration: number and location of suppliers, production facilities, distribution centers, warehouses, and customers

* Distribution Strategy: centralized versus descentralized, direct shipment, cross docking, pull or push strategies, third party logistics

* Information: integrate systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, and transportation

* Inventory Management: quantity and location of inventory including raw materials, work-in-process, and finished goods

SCOR is an operations reference model for supply chain promoted by the Supply-Chain Council.

Wikipedia: Supply Chain Definition

Wikipedia (follow the link in the title) definies a supply chain, logistics network, or supply network as a coordinated system of entities, activities, information and resources involved in moving a product or service from supplier to customer.

A definition that I have been personally using for several years now is: a supply chain is a series of links that connect sources of supply of an item to its final end buyers.

Wikipedia also defines supply chain management as the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible.

What is Supply Chain Management?

Supply chain management (SCM) is the process of planning, implementating, and controling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption.

Some experts distinguish supply chain management and logistics management, while others consider the terms to be interchangeable.

From the point of view of an enterprise, the scope of supply chain management is usually bounded on the supply side by your supplier’s suppliers and on the customer side by your customer’s customers.

Supply chain management is also a category of software products.

Welcome to Supply Chain Digest

Everything that you buy from the shops get to you after the items have been manufactured and transported to your favourite shop. Did you ever wonder how things that you buy at your favourite shops get there? How did they arrive at the shops from the various factories? How does one know how much to make and transport in order to ensure that retailers do not run low on your favourite items? Supply Chain Management (SCM) is what makes this happen. Supply Chain Digest is my blog which introduces SCM to the ordinary person in the street.

The materials that I will be putting up in this blog has been gathered over a period of 17 years of my career in the supply chain domain. Supply Chain Management (SCM) is actually quite an interesting topic. Students, supply chain directors, and logisticians will find the documents and materials that I will be presenting very useful.

Hope you enjoy this blog ! Thanks and have a nice day.