Supply Chain Management: Corporate Vision: Part IV – The 6 Key Elements of an Integrated Supply Chain
In Part IV of our series, Supply Chain Management: Corporate Vision, highlight the key elements, key hurdles to overcome to create an integrated Supply Chain.
Six elements to track for better supply chain costing monitoring:
Certainly, the number of elements for measure and track supply chain costs is higher than six, but the authors believe that these six elements are the most influential on the structure of the supply chain and its cost:
- Integration: A high vertical or horizontal integration rate requires various logistics activities.
- Complexity: The complexity of the company’s activity (various products with different production lines) or the complexity of its environment (competitive sector, high demand volatility, fluctuation in raw materials price) implies more resources and efforts to manage assets, information, time, and the relationship with suppliers, clients and partners
- Experience: Continuous learning improves product and service quality, reduces defects and time, and push the innovation in products and processes.
- Size: The number of collaborators and partners in a big enterprise is generally large. So, the supply chain requires more allocated resources to ensure its efficiency and effectiveness.
- Technology: The technology level has a direct impact on supply chain. This means product technology and process technology. Advanced technology is expensive and high skilled IT staff typically require high salaries.
- Assets: The assets exploitation is one of the major worries of companies. A non-operated asset is an additional cost because it generates an amortization without generating an economic advantage (benefit). The rationalization of using assets is one of the key missions of the supply chain manager.
- Insight: What can a company do? What do managers want to do? What it is the relevant information that managers need for decision making and strategy deployment (e.g., selecting suppliers, accepting an order, subcontracting an activity, improving the design of a product or a process, reducing staff, training them, restructuring the organization, re-segmenting the market etc.)? How and for what reason the company collects and stores data? Having an insight helps the company to eliminate or mitigate useless actions that reduce the value.
What can prevent a company to have an integrated supply chain?
Referring to our experience in the field, the response can be one or more of the following causes.
- About owners:
When they don’t focus too much on evaluating the CEO’s performance, and almost nothing jeopardizes his career, and nothing drives him to extra effort except his conscience.
When they do not have a clear strategic vision.
When they do not see the utility of investing in data analytics.
Some they are satisfied with the positive results without seeking to know the shortfall.
- About managers:
Some managers don’t know the importance of the information derived from the integration of the supply chain.
Others are not ready to learn. Manipulating new computer systems and interpreting reports is an effort that exceeds their mental and physical capacity, but despite this they occupy positions of responsibility and prevent skilled collaborator to add value)
Others are afraid of change (for several reasons).
When the manager is not motivated.
When the manager fails to ask the right questions.
- About environment:
When competition is not intense.
When the customer is not demanding.
When and technology and its management are costly comparing to the provisional value added. If the company fails to integrate the supply chain’s subsystems, a lot of data collected and stored will not be exploited or managed despite the cost of investing in data analytics. In this case, data analytics will not increase the assets of the company, on the contrary, as Prashanth Southekal said “If the data collected by the business is not monetizable, data can become a liability”.(i)
The supply chain is an effective answer to the cost/customer satisfaction dilemma. Customers are satisfied when the value they obtain is superior to the value they sacrifice to acquire the product. The supply chain must be managed in harmony with internal processes and in the context of the company’s strategy. The deployment of the goal in comprehensive operational objectives, the adequacy of these objectives with the know-how of the executive teams, the availability of the relevant tools and the pertinent data, the follow-up of the technological evolution, and the innovation are essential keys to succeed the supply chain within an enterprise.
In today’s environment supply chain integration is a necessity for it to be flexible, effective and efficient. It cannot achieve the purposes for which it was designed if the other systems within enterprise are unreliable. Its success is linked to the combined efforts of individuals and structures. For this reason, the authors believe that there is no typical or irrevocable supply chain. However, each supply chain should look like a matrix or a network that takes into account everything it can improve sustainable performance.
(i) PRASHANTH.H Southekal, Analytics best practice, Published by Technics publications, USA, 2020, p183.
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