Supply Chains: The Next Generation

It's crystal ball time. Here's a look at what the analysts, practitioners and solution providers are predicting for the supply chain in the years ahead, as well as their advice for building your own next-generation supply chain.



The later As are talking to her about visibility applications and business process modeling, which allow a company to look at real-time events in the supply chain and make better business decisions in response to those events. These companies are also looking at software to enable collaboration and at the various B2B standards that are emerging, such as RosettaNet and CPFR. Meanwhile, less advanced companies, Cecere's Bs, are working on more enterprise-related supply chain management topics, such as back- and front-office integration, and are trying to reap the benefits of customer relationship management (CRM) applications. Or they're talking to her about more sophisticated features of supply chain planning, such as capable-to-promise or profitable-to-promise. The later Bs and Cs are looking at supply chain planning and supply chain execution.


Beyond Utopia: The Federated Group


Of course, all these predictions could be completely wrong. That, in fact, is essentially the contention of a group of consultants at Booz Allen & Hamilton who say that the above-described orthodox view of the supply chain's future is utopian. Writing in an article entitled Beyond Utopia: The Realists Guide to Internet-Enabled Supply Chain Management, in the consultancy's house magazine, Strategy+Business, this group of iconoclasts asserts that all this talk of planning across the extended enterprise is akin to the dreams of totally planned economies harbored by Communist economic tsars. Instead, they offer an alternative vision they have dubbed federated planning.


Don't laugh. After all, Booz Allen came up with the very term supply chain management nearly 20 years ago. In their article, the authors Keith Oliver, Anne Chung and Nick Samanich, all of whom focus on supply chain management, among other disciplines - argue that supply chains will never be able to function as harmonious, unified entities due to the tensions and complexities inherent in the supply network. Companies may give lip service to the idea of shared goals and shared profit, but ultimately they will behave independently, in their own perceived best interests and in pursuit of their own goals. The anti-utopians suggest, for example, that companies will be unlikely to share information that they view as potentially giving them some competitive advantage.


The Booz Allen group further points to the incredible complexity of today's supply chains, which can involve thousands of companies generating billions of transactions every year. These different nodes in the supply chain form complex webs that are difficult to define and are constantly shifting. Companies within the same chain compete with one another for resources not to mention revenue and profit - and may also belong to multiple supply chains pursuing differing strategies. The consultants finally argue that by stressing real-time information, utopian supply chain management systems could divert a company's attention away from strategic goals and prompt managers to plan based on the latest data rather than on trends.


The Federated Approach


In place of the orthodox vision for the supply chain of the future, the Booz Allen group offers federated planning, a system in which each member of a supply chain continues to act independently in pursuit of its own goals and on behalf of its own shareholders, much like members of a political federation pursue their own policies on behalf of their citizens. In federated planning, companies in a supply chain would hold discussions and negotiations to align their business objectives as a precursor to collaboration. Through ongoing dialog, supply chain partners can understand critical constraints and cost drivers in the supply network and achieve agreement on performance levels, incentives, rules and boundaries, the consultants write. These boundaries define supply policies and targets and govern the flow of information across organizations. Because the dialog is ongoing, the supply chain can renegotiate the rules and boundaries to adapt to new market conditions.

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