“By the year 2020, 80% of the goods (compared to 20% today) will be manufactured in a country different from where they are consumed.”
Th insight above from McKinsey & Company's supply chain study illustrates the changing nature of supply chain in today's landscape. Supply chains are becoming more global and international not only with the parties involved in fulfilling and delivering an order but also in the flattening of the potential market for our goods and services. Companies that are pursuing growth will need to think about how to deal with this global environment and all the supply chain complexity that comes with it including quicker lead times, increased options and expanded product portfolios.
A Focus on the Customer vs. Just Reducing Cost
Supply Chain Management is becoming more and more a new frontier for demand generation. Companies, who are able to manage these tremendous shifts in movement effectively, will have a big competitive advantage in contemporary business environments and in turn, business results.
In the sixties the term “business logistics” became a key term in supply chain. At that time much of the focus was put on production and marketing but an integrated approach through Supply Chain Management was sadly neglected.
On an individual firm level logistics costs sometimes account for more than 32% of sales revenues. It was obvious that business logistics would be the next area for managerial attention, focusing on cost reduction in delivering a heightened experience for the customer.
Now, more than fifty years later, the focus and performance of supply chain leaders is on their contribution to revenues and profit enhancement. This view replaces the traditional objective of minimizing supply chain costs, to “meeting customer service requirements”.
The Need for Supply Chain Agility and Flexibility
The mark of a successful supply chain today is being about to achieve two goals: 1) consistent on-time, in-full customer orders, 2) in the most efficient way possible.
Too long have our supply chain strategies focused just on cost reduction. This has led to cost efficient but static and immobile order flows that hamper supply chain growth and flexibility.
As markets evolve toward increased globalization, free trade and outsourcing, how we build and leverage all of our supply chain parties, network and processes will determine supply chain and business success. This is critical since customer choice is quickly being influenced more greatly by overall experience vs. price or product.
This is where supply chain orchestration comes into play, helping to build agility and flexibility into your supply chain strategy, processes and technology.
What is Supply Chain Orchestration?
Collaboration and coordination will be the keys to achieving the benefits of Modern Business Logistics. When parties in a supply chain relationship win equally, due to their cooperative actions in the supply channel, the benefits are likely to be realized and the relationship remains intact.
In too many cases, this does not occur and this limits success in the supply chain. True supply chain orchestration includes the following features:
Multi-Enterprise Suppy Chain Networks: The future of the supply chain is not building and manage all the necessary functions in the supply chain yourself but by strategically leveraging and investing in the right relationships to ensure cost certainty and flexibility in delivering a quality customer experience. This doesn't happen without complete transparency and supplier collaboration with your 3rd party providers.
End-to-end Supply Chain Visibility: Supply chain orchestration is focused on the full life of the customer order from beginning to end across the various functions needed to constistently and effectively deliver on-time and in-full orders to customers. This requires visibility not just into transportation but other supply chain steps in manufacturing, warehousing, customs, cross docking, etc. to be able to conduct planing in real-time. This requires not only visibility into your own operations but also visibility into your multi-enterprise supply chain network of suppliers and partners.
Operational Supply Chain Control Tower: Complete end-to-end visibility comes first but a critical second is the ability to take action on this visibility. A supply chain control tower helps you to proactively manage order exceptions in real-time, reducing missed orders and overall expedition costs due to being alerted to potential missteps in your supply chain process and operations. This acts as the source of truth for each customer order so your planners can be most effective.
Sophisticated Order Management: While the control tower helps you manage real-time exceptions, the core of any supply chain orchestration platform is sophisticated order management that can give you flexibility to automate key and complex order flows in your supply chain. Taking into account your multi-enterprise supply chain network and key constraints in your supply chain such as inventory, costs, time horizons and capacity, it intelligently plans every customer order that comes in, ensuring your parties and systems work in concert to deliver every order on-time and in-full in the most efficient way possible.
Supply chain orchestration helps you to extend your current supply chain systems while connecting your suppliers and partners with your exisiting investments. All while adding important agility and flexibility that you can tap into as you grow and evolve in the current business climate.
Why Supply Chain Orchestration Today
Supply Chain Orchestration is the foundation of innovative supply chains today. It's about ensuring that your supply chain is a consistent competitive advantage in delivering the quality experiences needed to grow and retain your customer base all while removing the inefficiences in your process that can help you reduce overall cost to serve. As supply chain continue to get more complex and the pace of change exponentially rises, organizations that succeed will have a supply chain as agile and flexible as their product development. That means thinking seriously about supply chain orchestration.
Related sources: The Evolution and future of logistics and supply chain management, Ronald H. Ballou