[From iSource Business, October 2001] Ask Christopher Flum, C.P.M., to describe what his company's supply chain will look like in the future and he'll tick off a list of adjectives that are worthy of a PowerPoint slide: Virtual. Smarter. Faster. More efficient. Smaller.
The supply chain in question is that of The Budd Co., a $2.5 billion tier-one automotive supplier that manufactures parts found on more than 100 current vehicle models sold in North America. Flum, a 15-year purchasing and supply chain veteran with such companies as General Motors and Allied Signal (now a part of Honeywell), is corporate manager of strategic sourcing and e-business team leader for procurement and supply chain at the Troy, Mich.-based Budd, which is a division of German industrial group ThyssenKrupp Automotive Co.
Flum's PowerPoint list is a sign of the times. Economic trends are compelling companies to pursue strategies for delivering ever-greater value out of their supply chains on a year-to-year basis. It's all about speed, cost, change and the tools we're going to use to get us there, Flum says.
Analysts, consultants and software providers have responded to these trends by putting forth various visions for the supply chain of the future, which is often dictated by their particular product or service offering. The blizzard of press releases over the past two years frequently has obscured those trends that are real and those that are merely hype. Nevertheless, some general characteristics of a common vision have begun to appear recently with all signs pointing to a supply chain built around compressed cycle times and increased information flows. Not everyone is ready to jump on the enabled supply chain bandwagon, however, and a few opposing voices are offering a competing vision for a federated supply chain that these dissidents say holds the key to keeping a supply chain competitive in the years ahead.
While it's too early to tell which vision will prove the more prescient, both camps are already suggesting the next steps companies need to consider taking, and they are pointing to likely success factors for enterprises moving toward their next-generation supply chains.
Catalysts for Change
Supply chains don't exist in a vacuum, and companies obviously don't re-engineer their supply chains on a whim. Hugh Baker, a sourcing practitioner at the London office of consultancy Booz Allen & Hamilton, points to several macro trends that are driving changes in the chain, beginning with deflation and ending with the emergence of e-business.
Expectations that the U.S. savings rate will increase in the near-term are combining with increased competition domestically and globally to put downward pressure on prices, Baker argues. To maintain margins, companies will be forced to focus on productivity gains within their own enterprises and also to shift deflationary pressure upstream in their supply chain. Eventually suppliers will run out of margin to give up, and buying organizations will have no choice but to work more closely with their supply base on innovation, product specifications and joint efforts to eliminate cost drivers and to change the mix of goods or services the suppliers provide to the enterprise.
Baker further asserts that increasing requirements for mass customization and increased service levels to consumers and customers up the value chain are leading companies to adopt increasingly sophisticated supply chain functions. At the same time, Robert Ferrari, an analyst with Boston-based technology consultancy AMR Research, points out that companies are outsourcing increasing numbers of processes, creating an extended enterprise for which the supply chain systems of the past are not necessarily adequate. Fortuitously, e-business solution providers have come forward with new tools that supply chain practitioners need so that their enterprises can work more closely with suppliers and customers.