The Flat Supply Chain

Is visibility a challenge?


With growing complexity and variety in IT systems that are deployed across the supply chain, companies are adopting service-oriented architecture (SOA) to achieve flexible collaboration at a lower cost. According to the survey of almost 300 line-of-business executives done by Aberdeen Group in September 2005, more than 60 percent of companies with annual revenues of more than $1 billion either have or are in the process of standardization on common platforms for supply chain management. It also shows that 63 percent of all the responding companies have SOA projects underway, while almost 80 percent of large companies (revenues more than $1 billion) do (6).

Moving on to the soft, intangible side of managing visibility in a flat supply chain is about organizational structure, change and resistance.

An AMR research study of over 300 North American companies conducted in Q4 2005 showed that approximately 37 percent of companies have experience with a distinct supply chain organization structures for two or more years. Also, 44 percent of companies heads of supply chain report to a C-level officer who is a chief operating officer (COO) in most of the cases, and they seldom have a direct reporting responsibility to the CEO (7).

As an organizational restructuring exercise, we propose that companies have a separate Global Supply Chain function that reports to the business head, acting as an interface between the supply and demand organization. This function should own the responsibility of S&OP processes and aligning operational plans with the business objectives. Any such organizational restructuring would result in some sort of change and resistance within, but with proper top management support and communication, the results should outweigh the chaos that exists during the transitioning period.

It will impart suitable process training to all the business users whenever a new process or technology is deployed or upgraded. It will also result in an effective and impartial flow of information within and outside the four walls of the organization, thereby building trust and transparency in the system.

Change management is a very essential component because new processes and technology need a buy-in from the various business users and demands skill upgrading.

With the above framework in place, organizations can overcome the challenges of managing visibility and create an opportunity to differentiate and excel.

Conclusion

While the challenges in a flat supply chain are obvious and many in number, companies can adopt the suggested framework to manage their visibility in a flat supply chain to a great extent and observe obvious improvements in business processes. It is basically a combination of process and organizational initiatives enabled by correct technology application.

Yet, the improvements will be neither automatic nor immediate. Managing the supply chain in this new world requires perseverance. Companies need to continuously work on it as an ongoing effort to achieve excellence in a flat supply chain.

References

1. Pricewaterhousecoopers (2006) ‘9th Annual Global CEO Survey-Globalisation and Complexity-Inevitable Forces in a Changing Economy', www.pwc.com.
2. Hillman, M. and Hochman, S. (2007) ‘Supply chain technology landscape has radically changed for everyone', Global Logistics & Supply Chain Strategies ‘07, January.
3. Muthukrishnan, R. and Shulman, J.A. (2006) ‘Understanding supply chain risk: A McKinsey Global Survey', The McKinsey Quarterly ‘06.
4. Enslow, B. (2007) ‘Global supply chain excellence: New best practices to master', Global Logistics & Supply Chain Strategies ‘07, January.
5. Hofman, D. ‘Achieving supply chain excellence', Ascet — Vision.
6. Manhattan Associates (2006) ‘The Service Oriented Architecture in the Supply Chain — Benchmark report', www.manh.com.
7. Cecere, L., O'Brien, D. and Martin R. (2006) ‘Three factors to improve success in supply chain organisations', AMR Research report ‘06, February.
8. Friedman, T. ‘The World is Flat'.

About the Authors: Aatish Goel has over seven years of industry experience in the Supply Chain function and is currently working as Manufacturing and Supply Chain Consultant in Domain Competency Group in Infosys Technologies Limited. He holds a Bachelor's Degree in Mechanical Engineering and MBA from NITIE majoring in Supply Chain management. He is a CPIM and has been trained on the Motorola University Six Sigma Green Belt Certification.

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