We live in a changing world, where in the future, supply chains will no longer be managed in a linear fashion, as suggested by the SCOR model of Source-Make-Deliver chains. In this article, we present our vision for the future of supply chains and the topics that will determine their competitiveness. The future of supply chains will be characterized by growing business networks and cloud-enabled ecosystems. Companies will be members in multiple ecosystems and may play multiple roles. For instance, an OEM could act as a supplier, an engineering contractor, and a participant in a marketplace he has created with competitors.
All supply chains are lagging behind their optimal performance. This is what we call the supply chain performance gap. With the first nine articles of this series, we analyzed the issues of Supply Chains lagging behind their potential. Today we will close the journey and ask ourselves what the characteristics of a high-performing Supply Chain are and how we can make a difference. In 2016 the magazine Inbound Logistics asked several CEOs and Supply Chain executives: "What are the characteristics of a great supply chain?". These are the success factors, as well as possible reasons for failure.
Today’s internal complexity article concludes the insight into the eight root causes of the supply chain performance gap. Internal complexity means complexity resulting from inside the company such as organizational structure, type of organization, number and types of processes, internal and external interfaces, corporate culture, business activities (e.g., product and service development), and mergers and acquisitions. The good news is that internal complexity can be directly influenced and reduced through different actions, from executive decisions on business and corporate structure to processes, personnel, and products.
Our planet and its people face one of the greatest challenges in history – to become more sustainable. Supply chains do not escape this challenge and reforming the supply chain to become more environmentally friendly is one of the major tasks of the future. Sustainability is defined as meeting our own needs without compromising the ability of future generations to meet their own. Therefore, it is vital to maintain an ecological balance and avoid the depletion of natural resources to a point beyond recovery.
In today's globalized world, regulatory complexity is one of the root causes to lacking supply chain performance. This article presents the sixth of eight root causes we defined for supply chains lagging behind their potential. You will find an overview of all root causes in the first post of our ten-part series. For more details, jump to the related article.
Today, we give you an insight into our 5th root cause: the complexity of supplier network. In the previous articles, we already addressed the root causes of product portfolio complexity, speed of innovation, new types of competition, and multi-channel sales complexity.
The complexity of supply networks is determined by the diversity of supplier relationships and their changes over time. The main drivers for the diversity of the network are the number of suppliers involved and the topology of the network, which is expressed in the number of levels, the degree of networking, and the types of relationships. Examples of supplier relationships are direct material suppliers, logistics services providers, contract manufacturers, engineering contractors, equipment vendors, and professional services providers. In addition to the structural complexity, the geographical location and thus political and social structures have an additional influence on the complexity of the supplier network.
Today we can observe new types of competition emerging in established market environments closely related to business model innovation and the use of new technologies. Thus, the existing players need to deal with new types of competition to sustain or even strengthen their position. Consequently, "new types of competition" are considered as the emergence of innovative approaches to gain competitive advantages or market share. This is achieved either by generating new customer needs or by better serving existing ones.
The speed of innovation has increased significantly over the last 15 years and has become a key factor for competitive advantage. The success of technology and innovation leaders like Alphabet, Apple, Amazon, and Microsoft illustrate this development. Their products and services, such as the iPhone or video streaming services like Amazon Prime Video, have changed the way we live, work and interact with each other tremendously. However, current technological developments not only have an impact on end-customer markets. More and more use cases are also emerging for companies which can be subsumed under the keywords digital business models, Industry 4.0, IoT, cloud technologies, robotics, and AI.
The core of innovation is to enable people to do tasks better than they previously could or make them do things that they couldn’t do before.
Supply chain performance is a measurable indicator based on turnover, costs, and capital employed. We have identified 8 root causes for supply chains lagging behind their performance that we are happy to share with you in a series of articles. Today we will dive deeper into the one cause with the biggest impact on your supply chain performance: product portfolio complexity.
The 8 root causes we have identified are:
The purpose of a supply chain is to provide customers with physical goods in the right quantity and quality at the right time and place. Multiple partners collaborate on the operational processes of a supply chain – material suppliers, manufacturers, logistics providers, distributors, retailers – to fulfill customer demand. Thus, a supply chain can be seen as a virtual entity, distributed over many locations and organizations, connected via material, information, and financial flows. Being virtual, distributed, and connected, supply chains are inherently difficult to manage. As a result, many supply chains operate in a mode that is far from optimal. We call this the supply chain performance gap.