Systems; Supply chains: Garbage in, Garbage out

GENERATION 21X SPEAK :SUPPLY CHAIN
Garbage in, Garbage out

By S.Jain, Sathish S. & S. Menon

You never step into the same river twice,'' said a Greek philosopher, underscoring the truism of change. The ubiquity of change thus impresses upon us that it is change that demands management. Where there is no change, what you need is not management but administration. The metaphor of the river holds the manufacturing imagination in the commonality of various terms such as flow, stock, and velocity. And just like intrepid explorers, manufacturing professionals are attempting to discover the analogous secrets of source and destination in the creation of value. The supply chain for the new millennium will be the offspring of these efforts.

THE FARTHER LINKS. The trajectory of development of supply-chain concepts for the new millennium contests several established ways of thinking. Much of this momentum will be impelled by enablement through infotech. At the highest level, it will require an evaluation of the nature of new business models that shift from brick and mortar to brick and click across a range of industries characterised by differential transactional efficiencies and buyer sophistication. At the next level, it will comprise transactions described by some researchers as Dynamic Trading Networks (DTN), which defines a trading mechanism between firms at 3 different levels: communication, deal making and scheduling, and logistics.

Communication management, which involves the flow of information between trading partners, will involve issues of security, data translation and transformation, and broadcasting status. Deal making is the ability to analyse orders on-line and evaluate their attractiveness before making a commitment. Scheduling and logistics encompass newer ideas that have been described as make/move logistics by some researchers. Make/ move logistics permeate all logistical and manufacturing activities and are intertwined. The difference lies in dispersing make activities further upstream or downstream and tying them up with move activities, and, more importantly, with information. Technology will enable different make/ move components to be assembled to create customised processes around very specific orders.

Thus from an infotech perspective we are talking of an architecture that will use Enterprise Resource Planning (ERP) as the basic transaction engine. Surrounding this will be the application platform that incorporates de facto inter-operability standards and standard application program interfaces (API) of either SAP or Oracle. At the next level will be the plug-in components that these deliver to industry-specific advantage. These include, most vitally, supply-chain applications, e-commerce solutions, customer relationship management (CRM), and other industry specific initiatives. A new breed of systems integrators will provide this architecture assembly.

the closer links. At an altogether different level, manufacturing professionals and academics are waking up to the fact that most planning processes used in the previous century were piecemeal, problem-solving approaches to discrete problems in demand management, master planning and execution. This approach was a significant cause of the supply-chain problems many firms faced. Planning across trading partners is, therefore, an even higher hurdle.

However, companies should pause to remember that their technological capabilities will probably far outstrip their abilities to use them. This is a major handicap because no packaged solution available off the shelf will be a source of competitive advantage. A generic strategic solution is an oxymoron. Competitive advantage is the creative sculpting of processes and not the mere imposition of an infotech platform.

To manage the supply-chain, distribution, manufacturing, retailing and marketing professionals have to acquire an understanding of the new concepts of EDI, pos- Capture, CSO, and Cross-docking. What is important to remember is that one size doesn't fit all. Much of the innovation in supply-chain management the previous century witnessed were in distribution-intensive industries that deploy intensive or extensive retail channels.

Thus, the studies by consulting firm Kurt-Salmon Associates on managing the supply-chain were actually restricted to the apparel and the grocery industries, which, while representing the extremes of retail intensive channels as efficient supply-chains, were limited to just those kind of industries whose product offerings are categorised as either innovative (fashion-driven) or functional (function-driven). But this century will see sourcing-intensive and manufacturing-intensive industries focusing more on supplier rationalisation, relationship building, and the deployment of strategies for mass customisation. And logistics providers will shift towards more value added services.

These concepts will drive the supply chain of the future. Even at the beginning of the millennium we are witness to the initiatives launched by firms whose distribution intensity has prompted a quest for differential efficiencies over a period of time. The nature of supply-chain integration sought by Levers, the channel restructuring and efficient customer response initiatives being pursued by P&G, and the postponed differentiation through dealer tinting systems and packaged applications from i2 Technologies that Asian Paints is using, are illustrative examples of the future of SCM. Companies will approach this millennium with excitement as well as diffidence. That the future will not be like the past is something that all companies understand; however, the better companies do seem to realise that it is in their hands to make the future perfect.

S. Jain, Sathish S., & S. Menon are second-year MBA students
at the S.P.Jain Institute of Management

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