The mission of the modern supply chain

By Narendra Mulani -- Logistics Management, 2/1/2008

It’s been a long time since the supply chain was solely about supply. Today the supply chain could just as appropriately be called a “customer chain,” a “demand chain,” or even a “value chain.” What’s more, most supply chains are hardly even chains. They’re more like collaborative, interactive networks, with events and participants at every point affecting decisions and activities made at every other point.

While the term “supply chain” might be a bit archaic, the scope, role, and complexity of the supply chain has never been more relevant. One reason, ironically, is that the best supply chains might be more-accurately termed “information chains” as they do an excellent job of replacing hard assets with just that: information. Following are three of the modern supply chain’s most important missions, along with a look at how information management distinguishes the high performers.

1. Aligning supply and demand

   High performers excel at getting closer to customers. They begin by carefully analyzing what customers want. With exceptional speed, they then translate that knowledge into dynamic, relevant actions. Information and information technology often make the difference by helping them to do the following:

   • Sense demand. Supply chain leaders extract maximum, intelligible information from multiple data sources, including shipment and order history, distribution center withdrawals, customer feedback, and point-of-sale and marketing data. By maintaining data at the lowest level, they develop accurate demand pictures and thus generate the most forward-looking forecasts.
   • Shape demand. High performance means using demand insights to influence, as well as meet, demand. Good examples include timing changes to a company’s product mix, proactively managing promotions and sales incentives, and using local differences and seasonality profiles to make manufacturing and promotional decisions.
   • Maximize visibility. Dynamic supply chains are transparent. They help the extended enterprise know where inventory is, what events are (or are not) happening, and the total landed cost of every relevant thing. Because they “see more,” supply chain information leaders develop better flow-optimization strategies, postponement approaches and decisions about where to make, move, source, and sell.
   • Measure performance. Many companies try to calculate total landed cost on an SKU or item basis, even though their metrics rarely include all of the influencers that affect total landed cost. Others track performance on a more micro basis but lack the ability to understand what those measurements mean in relation to each other. But only the savviest have pan-organization performance measures that fully reflect the complete scope of supply chain service and influence.

2. Maximize resilience

   Risk is ubiquitous. Yet few companies develop their global operations strategies with specific attention to managing supply chain risk.

   Supply chain masters, on the other hand, do more to anticipate, avoid, and neutralize risk—not just craft a response to it. For example, their ability to rapidly gather, analyze, and leverage information lets them make fast and insightful operating changes like rebalancing near-shore and far-shore manufacturing, sourcing contingent suppliers and logistics providers, or quickly shifting inventories and safety stock.

   Oftentimes, the core capability is a multi-tiered, lifecycle-focused “resilience framework” that uses IT to manage risk methodically.

   With this advantage, companies know more about what to watch for at a local level, at a regional level, and at a global level. In turn, the right information helps them make rapid and comprehensive risk-mitigation decisions. High levels of visibility also make it possible to recognize disruptions further in advance. And comprehensive supply chain education—including IT enabled events such as distance learning, virtual seminars, dynamic news-feeds, and virtual libraries—helps ensure enterprise continuity and responsiveness.

3. Tap the power of lean, global operations

Global operations have moved far beyond the establishment of new international bases from which to source or sell. The mission now is integrated operational excellence on a global scale—lean manufacturing, strategic sourcing, creative leveraging of third parties, savvy segmentation of suppliers, customers, and market—the whole nine trillion yards.



It’s hardly surprising that high performance in global operations is dependent on global information management. Knowledge drawn from strategic network optimization tools helps companies develop sophisticated worldwide distribution networks, synchronize supply and demand, define global product mixes, and support mergers and acquisitions.

Advanced transportation management applications function concurrently as central logistics hubs, local transportation management systems, and global operating systems. Advanced supply chain planning tools promote global information availability, maximize visibility of material positions, automate allocations across regional and central distribution centers, consolidate individual shipments into optimal truckloads, highlight exceptions, and release planning recommendations for execution.

Given the scope and sophistication of today’s supply chains, it’s not surprising that no one term wholly or accurately describes them. But it’s very clear that, in today’s demand-driven, high-risk, and unprecedentedly global world, goods and information travel together.

Narendra Mulani leads Accenture’s Supply Chain Management service line. He has worked across a diverse set of retail, technology, and products clients, and continues to have responsibility for Accenture’s global relationship with Procter & Gamble. He has been with Accenture since 1997.