The rise of new players means new rules for supply chain leaders.
by Harshad Khatri, November 2013
Supply chain management continues to be challenged by globalized markets, ever-increasing customer expectations, and new pressures on price and delivery. Technological innovation and the proliferation of e-commerce are allowing nontraditional players such as Amazon, Alibaba.com, and eBay easier access to markets traditionally owned by supply chain participants.
Smart managers are constantly looking around the corner to identify and respond to such disrupters. “Nontraditional competitors have become more of a factor,” said William J. DeLaney, president and CEO of the world’s largest broadline food distributor, Sysco, during a recent earnings call. Among the threats that are taking share from broadliners such as Sysco are “Amazon or Amazon-like businesses,” DeLaney said. “We see it. We recognize it. And we’re watching it very closely.”
For traditional supply chain players, ongoing success in the disruptive world will mean much more than executing operationally with the support of enterprise resource planning and supply chain management systems. It will require identifying, thwarting, and one-upping the disrupters. The future state will be a digital battleground of nontraditional players that will further blur roles, resulting in multiple intersecting supply chains that will evolve into the dynamic supply web.
Success in this new world requires orchestrating the supply web adroitly from an IT perspective, leveraging data-driven insights coupled with disciplined execution. Business leaders should institute a vigilant, analytical mindset and culture, using technology to anticipate, analyze, and respond to potential threats.
Anticipate. Configure operational and analytic systems to track supply chain movements and events against existing financial and operational benchmarks and thresholds. This typically entails tracking product and revenue flows and identifying changes in sales and channel strategies, buyer behavior, and costs and margins. Closely monitor activities against these benchmarks and identify abnormal, missing, or out-of-sequence events.
Analyze. Develop customized processes and systems to interrogate and analyze incoming sources of data and associated external events. Analytics on this financial and operational data will identify trends and trigger follow-up actions, such as changes in product pricing and production strategy. Large changes represent potentially significant shifts in the market, which will enable leaders to act quickly and strategize appropriately. Analytics also allow managers to identify areas in the supply web where they can add value and promote innovation.
Business leaders should institute a vigilant, analytical mindset and culture, using technology to anticipate, analyze, and respond to potential threats.
Respond. Leading-edge supply chain management tools can automatically initiate operational actions in response to triggers for predefined thresholds. For large changes observed, the analysis and response can be escalated to executive management. One industrial supplier observed a steep increase in a competitor’s delivery levels followed by an equally steep drop. Upon further analysis, this was attributed to the competitor retooling for a new product and technology introduction. Armed with this information, the supplier preempted the competitor by hastening its product introductions and changing pricing.
The robust supply chain management systems and processes that anticipate, analyze, and respond to disrupters should be dynamic and able to evolve with the environment. Coupled with execution discipline, these frameworks allow for rapid response, both defensively and proactively—possibly becoming disrupters themselves.
Harshad Khatri is a senior director for Industry Strategy and Insight at Oracle.