"3 Core Ideas That Shape The Future Of Supply Chain"
ChainLink’s annual conference Parallax Views covers timely and relevant topics related to Global Supply Chains, and this year, we have “anchored” our research concepts around “3 Core Ideas that Shape the Future of Supply Chain.”
These 3 core ideas represent structural changes to Supply Chain Management. Often, structural changes aren’t easy to see until one steps back to look at the larger context. Thus, when we compare and contrast the differences in Supply Chain Management over the past decade, only then do we fully grasp the extent of this change and its impact on business today.
A few companies are already dealing with these changes; many will be affected in the near future. The market leaders know that contemplating what Supply Chains will look like in 5-10 years is not a frivolous exercise. Business transformation seldom happens overnight, and too many companies realize that things have to change only after the tipping point has occurred.
(Day One – Morning Topic) – Theme #1
The Supply Chain as the Organizing Principle – Not the Enterprise
As Peter Drucker put it, “Strategy, not ownership, defines the organization of tomorrow.” CEOs are starting to connect the dots between strategy and supply chain – which is increasingly outside the four walls of the enterprise as companies focus on core competencies and outsource what’s not.
What It Means:
- The structure, relationships, and processes that link together members of the supply chain have become more important than the activities within any one enterprise.
- Governance has moved from a centralized, hierarchical organizational model to a distributed, fluid and dynamic federation of firms.
- Risk Management takes on a new role and much higher profile, than in traditional approaches where everything is under your control.
- True synchronization – through alignment of business objectives – is only possible under a Federated business model.
- Traditional ERP is reduced to a lesser role because managing the flows of material, information, and finances requires the underlying data structures to be loosely coupled. (i.e., look for Interoperability – not Integration.)
(Day One – Afternoon Topic) – Theme #2
Selling Outcomes – Not Products
The brands that will continue to endure are those with an almost-magical aura. Smart brand-builders are figuring out how to organize and extend that magic by “wrapping” their products in services that focus on outcomes, as in experiences that customers care about. Furthermore, focusing on outcomes can serve as means to bridging the gap between two competing philosophies: “the business of business is business” vs. “corporate social responsibility”
What It Means:
- Customers (when given a choice) prefer to buy results or business outcomes – over products.
- A brand is the sum of your experiences with a product or service, and managing the supply chain is about your brand’s ability to deliver on its promise.
- The “Experience Economy” isn’t just for B2C because every buyer is an individual who wants an engaging and differentiated experience.
- Selling outcomes, rather than things results is an inherently more sustainable business model, both financially and environmentally. It results in much better alignment of buyer and seller goals. It also motivates manufacturers to radically reduce their consumption of materials and energies.
- Technology vendors are no different and need to think this way as well.
(Day Two – Morning Topic) – Theme #3
The Network as the Application
This idea is not new. However, we at ChainLink believe that SCM has not caught up to its reality. All of the larger SCM vendors still think enterprise-centric – not network. But as technology becomes more pervasive (RFID, broadband, etc.) and affordable, it creates opportunities for new business models as well as redefine existing business models (e.g. service providers like 3PLs).
What It Means
- As companies like Dell and HP lead the trend to keep IT budgets under 1% of revenue, hosted and on-demand delivery models will get serious consideration as a way to do more with less.
- Technology vendors starting with a clean sheet of paper have an advantage while incumbents have to deal with the cost of retrofitting. And just about every vendor could use a shot of creativity in their product strategy.
- Given their central role in connecting the physical chain of custody across the client’s trading partners, 3PLs have a unique opportunity to move up the value curve via RFID-enabled Network Services. Other intermediaries, such as financial service providers and telcos, are also entering the fray.
- New delivery architectures give greater choice to customers in how they want to get technology and other content-rich services.
- Network applications are a natural fit to address the data synchronization challenges of the extended enterprise