You’re only as strong as your weakest link. And, as much as we love to hate a good cliché—this one’s not going away.
A supply chain is a network of businesses linked together and each supplier in that chain is an integral component. Regardless of which link you think is the most important, the entire chain is compromised if even one link is broken. Today, the supply chain has evolved from a linear chain to an interconnected web increasing in complexity. Let’s take retail, for example. According to Supply Chain Management Review, there is an ongoing shift away from traditional retail to direct-to-consumer shipping. Forty percent of brands now sell directly to the consumer and those sales are projected to reach a whopping $130 billion by 2025. At Nike, direct-to-consumer shipping accounted for 70% of growth in 2017 alone. A shift like this requires a supply chain with expanded capabilities.
So how does a supplier know if they are prepared to swiftly move in any direction and if they’re optimized for growth beyond 2020? First, let’s cover the basics.
Supply chain management is the planning, monitoring, and control of the flow of goods through the supply chain. A defined set of tools and systems are used to execute transactions, manage supplier relationships, and control processes. From raw materials and production to distribution and returns, supply chain management (SCM) is the engine of the supply chain and responsible for its performance in every phase. Effective SCM is critical to every industry from food and beverage to retail, automotive, timber, medical, plumbing, electrical, and beyond.
Before we get to the many reasons why SCM is a top focus for 2020 and beyond, let’s briefly review its key components:
Planning: Identifying resources and materials needed to produce a product or service.
Sourcing: Evaluating, identifying, and purchasing goods and services from suppliers.
Manufacturing: Receiving raw materials, making and testing the finished product.
Distribution: Buying and holding manufactured inventory and selling it to other businesses.
Shipping & Receiving: Shipping a good or service from the point of origin to consumption.
Reverse Logistics: Managing returns, exchanges, recycling, and disposal.
Support: Carrying out all supporting efforts involved with operations management.
Now that we’ve met the players, what does modern-day supply chain management need to achieve? Let’s review the basics.
To understand where we are, we need to know how far we’ve come. The future of supply chain management is bright when we build on the successes of the past.
Early theory in supply chain management dates back to 1911 with a focus on industrial engineering. Fredrick Taylor, known as the “father of industrial engineering” published his book The Principles of Scientific Management which discusses improvements to the manual loading processes.
Operations research began in 1940 when scientists studied the value of analytics relating to military logistics management problems resulting from the complex requirements of World War II.
The 1950’s brought focus to logistics management research, including improvements to labor-intensive processes of material handling, such as pallets and pallet lifts as well as spatial arrangements in warehouse layout. Improvements were also made to intermodal goods transportation between ships, trains, and trucks, which set the stage for SCM globalization for future years to come.
The 60’s saw a large shift from freight trains to over-the-road truck transportation, which was viewed as more flexible and time-effective when compared to rail. Formed in 1963, The National Council of Physical Distribution Management (currently known as the Council of Supply Chain Management Professionals [CSCMP]), brought attention and research to the role that computing could play in supply chain management. Prior to 1960, all transactions were done manually.
In the early 1970s, computerized data was still far from being an everyday thing in terms of supply chain management. Researchers were determined to develop computing technologies that would improve everything from logistics planning and management to warehousing, inventory optimization, and truck routes. Georgia Tech emerged to tackle computing technologies to support SCM by forming three departments: Production and Distribution Research Center, a Computational Optimization Center, and a Material Handling Research Center. All shared a common goal–to bring computer technology to supply chain management.
Well, hello personal computer! The PC emerged in the 1980s and as a result, computerized data introduced a game-changer that would transform the course of supply chain management. Collecting and storing data through spreadsheets and maps would open new doors to using data. Initially, computers were viewed as foreign, expensive, and complex. Yet, it was hard for companies to ignore as they could see the power they would bring.
Logistics wins the award for the most improved SCM element from computing power. As the component in supply chain management with the most moving parts—inbound, outbound and reverse flow of products and services—computers grew profit margins by streamlining processes and reducing waste. Companies now fully realized the power of computers. The explosion of computing logistics drove the need for enterprise resource management systems (ERP). There were bumps in the road for sure, but by the year 2000, most companies were utilizing an ERP and driving growth.
ERPs opened new doors by allowing companies to capture large amounts of data. This significantly improved supply chain management and thrust companies into a new era of SCM. 2010 to 2020 brought technological improvements to computer speed and storage. Concepts like real-time data and analytics enter the picture, and these technologies are now not only available to the IT department, but also to the users of the technology on the shop floor.
Prior to 2010, there was no such thing as a smartwatch or an iPad! Technological advancements make leaps and bounds and the landscape of SCM in 2020 is barely recognizable compared to just 10 years earlier. Legacy systems are retired and the Internet of Things (IoT) of SCM is realized. Smart tech, sophisticated software, mobile networks, and cloud computing are integrating data points, eliminating blind spots, and predicting the future.
Marketing globalization, a rise in consumer demand for real-time shipping, eCommerce, and fierce competition have shaped the industry. We are now entering Industry 4.0, a new phase in the Industrial Revolution that focuses heavily on interconnectivity, automation, machine learning, and real-time data. Industry 4.0 uses IoT and smart manufacturing to marry physical production and operations with smart digital technology and big data to improve SCM.
According to Entrepreneur magazine, the global supply chain management industry is expected to reach $1.3 trillion by 2022. And, smart cloud-based SCM software is at the core driving that growth. The good news is that new tech is now more affordable and much easier-to-use. Every organization is different, but beyond 2020 they will share a common challenge—the need for interconnectivity and access to real-time insights across processes, partners, and consumers.
Artificial Intelligence (AI) is also rapidly being adopted into future-forward SCM software with intelligent tools such as predictive analytics and algorithms designed to further identify patterns and potential disruptions. Automated geocoding and demand-prediction will drive growth and mitigate risk. We now have the capability to fully optimize the entire supply chain extending to third-party logistics companies (3PL) to 4PL, 5PL, and beyond. Industry-specific software and purpose-built programs tailored to company’s needs are within reach and they are changing the scope of SCM.
Data is king. According to IBM, in 2017 a typical supply chain accessed 50 times more data than just five years prior, but analyzed less than a quarter of that data. Thriving companies are using smart SCM software that is robust and able to analyze massive amounts of data. And, it’s delivered in a way that makes sense to the user via easy-to-use mobile devices.
While today’s supply chain is more complex than ever, implementing SCM software doesn’t have to be. ERP software developers have removed the guesswork and the barriers to integration. Most systems can be used on-premises or in the cloud. And, ideally, systems have the ability to move from the premise to the cloud. Modern-day software tools easily integrate multi-site functionality and streamline transactions across organizations. And, they should not require maintenance by middleware or interfaces. A great SCM will optimize data to provide:
When companies decide to stop playing catch-up and move to a more advanced supply chain solution, they gain a competitive advantage and position their business to more easily adapt to future demand.
Let’s take Advantage Industrial Automation. Advantage provides industrial control and automation solutions to several industries including food and beverage, water and waste management, consumer products, materials handling, and more. After they became a subsidiary of Graybar, a leading distributor of electrical, communications, and data networking products they faced barriers in merging as they looked to expand into new markets and territories. The acquisition presented complexities and they needed a solution that would streamline internal processes, allow them to capture and get a better vision on critical data as well as expand and grow.
Through smart and scalable supply chain management software, the company was able to automate and speed processes, streamline eCommerce transactions, simplify controls, and streamline multi-vendor automation. They were also able to analyze more data at a much faster pace.
"We quickly process orders, purchase products, and get those products out the door to customers…. [Epicor software] has helped us drastically reduce errors.". David Tatro.
CIO/Finance Director | Advantage Industrial Automation
Effective supply chain management orchestration requires smart systems developed by experienced SCM and ERP software providers. Epicor helped Advantage integrate solutions that allowed them to optimize their supply chain for ongoing growth.
Technology clearly plays a critical role in managing the modern-day supply chain. We’re seeing a continued growth of physical and informational flows and this is driving the need for integrated, scalable, and adaptable systems. Navigating through the intense complexities of a globalized market may seem daunting, however, the experts working in this field have honed in on the technologies and developed affordable, easy-to-use, and integrated supply chain management solutions.
Explore leading supply chain management software solutions from a company with decades of experience in enterprise resource planning.