Driving Supply Chain Efficiency for Leadership

The dynamics of the business world has changed drastically over the last few decades. The rules of competition and the game of brand leadership in the market have changed too along with a change in the buying habits of the customers. Every theory and practice of marketing is being rewritten in the wake of the coming of internet age bringing with it online shopping, social media marketing and virtual transactions.

Organizations have realized the need to change in order to be able to survive and grow their markets. By change we are not referring to just tweaking some of their product features and so on, but re-engineering their focus, vision, strategy, including their Organizational culture, operations as well as business processes in line with their focus on customer, market, their product and value offering.

Globalization and technology have been two major factors of everything in our lives and similarly it has affected the businesses as well as the Organizations too.

More than five decades ago, we began to see computers being used in all functions to automate repeat tasks. Slowly the concept of MRP came about bringing with it the concept of integration and planning. Further technological advancement led to ERP systems.

Today it is the ERP systems that drive the entire operations as well as business processes in Organizations, across all the functions and across multiple locations including several business units.

Today Organizations are focusing on driving their operational excellence and efficiencies on integrated supply chains and using systems and technology as the backbone to drive the supply chains. Systems, Technology and connectivity have enabled seamless and virtual integration thereby leading to shrinking of the supply chain processes and resources. Organizations no longer hold inventories and block their money on stocks. Their systems are integrated with their supplier’s system and are able to call for materials and pay for materials just when they consume the items for production or for sale. The entire logistics of warehousing and stocking in many cases have been done away with.

The innovation in technology and the resultant process refinement has led to further specialization in supply chain models. Concepts like cross docking and Vendor managed inventory, integrated logistics etc have come into practice. Using cross docking where in the incoming truck and the outbound truck at the warehouse being scheduled to dock at the same time, the entire cycle of warehousing and shipping is eliminated at the distribution center by moving the materials from the inbound truck directly on to the outbound truck for delivery to the shelf or to the end customer. The entire process of receiving, inventorying and shipping is carried out in an instant and recorded by the system eliminating physical tasks.

Similarly, 3rd party logistics providers have begun to offer integrated logistics concept where in they take over the entire outbound shipment at the customer’s plant, manage the outbound transportation including multi-modal transportation, documentation as well as other logistics requirements and manage the entire outbound supply chain till the products reach its end customer. In many cases, the third party logistics providers operate their own regional and national warehouses which are used as multi-client facilities for en route distribution management. In such cases, they charge for the warehouse usage on per pallet or per cbm basis thereby eliminating huge supply chain costs to their customers.

On the part of suppliers too, things have changed. Suppliers now work with customers as their partners. They sit down and engage with their customers in long term planning, quality control and forecasting and commit to bring down the costs by improving their operational efficiencies. Using third party logistics providers, the suppliers are able to get the LSP to set up VMI hubs next to the product centers of their clients and affect Just in Time deliveries. Using third party owned VMI Hub gives huge cost advantages to the suppliers as they pay on the basis of ‘Pay per skid or transaction’ and not marry fixed costs. The system integration between the customer, the third party LSP’s warehouse hub as well as the supplier’s system enables real time transactions wherein the customer’s production program triggers automatic call off to the warehouse which supplies the materials within stipulated number of hours. On delivery to the production floor of the customer, the hub system reduces its inventories and sends out sales data to the Supplier’s system that generates the invoice on the customer and process the sales data to monitor the inventories at the hub and plan for replenishments. The amount of time, effort, space and operational as well as logistical tasks save are huge.

Organizations that focus on improving their business operations as well as supply chain in order to increase their value proposition to their customers and thus improve their leadership and business never rest on their laurels. They keep pushing the bar and exploring new ways for achieving excellence all the time.


❮   Previous  Article Next  Article   ❯


Authorship/Referencing - About the Author(s)

MSG team comprises experienced faculty and professionals who develop the content for the portal. We collectively refer to our team as - “MSG Experts”. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.