IBM study: New trend—managing risk—joins "faster, better, cheaper" for majority of top SC execs
By Manufacturing Business Technology Staff -- Manufacturing Business Technology, 2/25/2009 9:42:00 AM
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Face-to-face interviews with supply chain executives—in fact, 400 of them in 29 industries and 25 countries—revealed that managing risk is just as important as the familiar "faster, better, cheaper" motto heard from companies around the world when referring to effective supply chain strategy.
According to the brand new IBM study, The Smarter Supply Chain of the Future, companies in every industry—large or small—are at risk of worsening financial performance, ruining business partner and customer relationships, and worse, impacting the health of consumers.
Respondents say their primary reason for focusing on risk is due to myriad recall headlines concerning dangerous food—e.g., the salmonella outbreaks from peanut products, and contaminated infant formula out of China (See the many related stories in the Feb. 26 edition of Mid-Day Report).
The IBM study was developed by IBM Global Business Services’ Supply Chain Management Practice in conjunction with the IBM Institute for Business Value, which develops fact-based strategic insight for senior business executives. The report calls for a "smart" supply chain that will bring together technologies such as RFID tags and advanced GPS systems to connect the entire supply chain—not just among customers, suppliers and IT systems in general, but also parts, products, and other smart objects used to monitor events within the supply chain. The result is a supply chain strategy from supplier to manufacturer to wholesaler to retailer to consumer that gives executives the intelligence to anticipate collapses in the supply chain.
Of the survey respondents, 70 percent say their No. 1 challenge is fragmented data, and their inability to make sense out of the information. But fixing this “visibility” problem is low on action plans because it’s just too costly and difficult. Apparently silos are worse than ever and respondents say they are just too busy.
Supply chain leaders understand the threat of information blind spots, but they are only cautiously optimistic that they are taking steps to use their valuable information for real competitive advantage. Just 16 percent said they are effective at integration and visibility of information across the supply chain with external partners.
The study shows the greatest opportunity for these executives are smart devices and integrated ERP systems that capture real time visibility: forecasts/orders, schedules/commitments, pipeline inventory, and shipment life-cycle status. Automating real-time detection with smart devices increases flexibility, speed, and accuracy to promote better decision-making.
Rude awakenings
According to the study, the No. 2 issue for these executives is the having the visibility and flexibility to manage risk, with 60 percent of respondents saying risk is escalating as a concern. The last decade has been peppered with wake-up calls: tainted food and toys, random acts of terrorism and, most recently, the dramatic downturn in global economics, which will destabilize supply chains as trading partners retrench or fail.
Of respondents, 38 percent manage risk and supply chain performance in some manner, but with separate tools and processes. Executives cite the lack of standardized processes, insufficient data, and inadequate technologies as the chief stumbling blocks preventing effective risk management.
The most successful supply chain executives are incorporating risk management as part of their plans, and using analytical predictive tools to mitigate risk, and identify new opportunities.
“As important as cheaper, faster, better is, this year, we’re beginning to hear a new verse: a clear message about the overwhelming need for greater visibility and flexibility to manage risk,” says Sanjeev Nagrath, a global leader for IBM Global Business Services. “A crisis in one country or region can now ripple very quickly across the world economy, creating tremendous turbulence. As supply chains become more complex, global, and stressed, the executives we spoke with believe they must drive far more intelligence throughout their supply chains if they are going to anticipate, rather than react."
The next wave
IBM’s report calls for a future supply chain that is thoroughly instrumented, interconnected, and intelligent. It brings together the ability of human know-how and technological excellence to make optimal use of machine-generated data flowing out of sensors, RFID tags, meters, actuators, and GPS. The entire supply chain will be connected—not just among customers, suppliers, and IT systems in general, but also parts, products, and other smart objects used to monitor events within the supply chain.
IBM says the evolving role of the chief supply chain executive will also become “chief collaborator,” bringing together stakeholders—even those outside the extended supply chain, like regulators, financial organizations and governments—and facilitating joint planning and risk mitigation. Negotiation and stakeholder management skills will be components of the future supply chain expertise.
Hot potato: Food supply scares heighten demand for product recall technology
Legislative loop: Debates continues over how to handle product recalls
Fielding quality: Argenti Lemon S.A. tracks product port-to-port using RFID-enabled devices
