So you want to improve the cost effectiveness of your supply chain. Is that good enough anymore? Not if you want to be a leader. In its 2013 Supply Chain Top 25 list, Gartner’s noted that the top companies on the list were moving beyond simple cost containment in the supply chain toward making supply chain an integrated pillar of growth.
That’s a big leap – from streamlining cost centers to making the same processes into a growth engine. That’s moving from a process that takes money out to making it one that brings money in. It takes a minute to grasp. Can it be done? What would that take?
It will take visibility and collaboration… and perhaps the fortitude to retool your processes. But that fortitude can pay off in historical ways. Let’s start with visibility. Consider this little historical nugget:
Do you know who Anton van Leeuwenhoek was? He was a 17th century Dutch draper – a cloth salesman. Fortunately, he was also a tinkerer. He had become fascinated with lenses after using a magnifying glass to examine the fibers in fabric.
Through his tinkering with fire and tiny glass balls, Leeuwenhoek developed lenses that could magnify an object 275 times. This was a whopping innovation, considering that the standard 20x lenses in microscopes of the day allowed scientists to see fascinating things such as the vein structure in a leaf.
With his lenses, Leeuwenhoek – an uneducated man, mind you – became the first person in history to see and document bacteria and circulating blood cells – all previously unknown – and unimagined by scientists at the time. He changed the world of science and medicine forever, simply because he sought to understand how things work.
Why should you care? If you’re going to make the leap from simple cost containment to endowing your supply chain with pillar-of-growth status, you’ll need good data and deep-level visibility – and you’ll need more than a magnifying glass to get there.
The kind of transformation we’re talking about requires end-to-end examination and full data visibility. You have to know every detail of what’s happening before you can have all processes in synch, coordinated and moving in the same direction.
This kind of transformation pulls supply chain out of its silo and connects it to all aspects of company growth objectives. The changes made possible through full visibility shift the supply paradigm: It morphs from simply a product-movement system to being a powerful, integrated partnership engine indelibly coupled with marketing, product sales and demand planning, R&D and engineering. It demands a powerful collaboration among manufacturers, shippers, DCs, vendors and retailers to join forces on solutions that improve sales and product movement.
In order to pull off the transformation from cost containment to growth engine, a thorough, end-to-end evaluation has to happen. If you only have a magnifying glass, you may not have the right data to facilitate the right changes to lead you toward the right results.
By now you’re thinking, “Ok, Steve, so what’s my microscope?”
It starts with collaboration. A 2013 supply chain study by The Aberdeen Group (Supply Chain Visibility – A Critical Strategy to Optimize Cost and Service) points to collaboration as the top strategy to alleviate pressures associated with supply chain complexity.
Collaboration has to take on a larger scope, beyond just having all your departments or divisions speaking the same language, especially as globalization through overseas sourcing continues to play a larger role. The study reveals that companies in the top 20 percent of supply-chain performance are demanding higher levels of control and coordination with the external parties they rely on.
Having everyone at the table means everyone in your chain, internal and external. Are you doing that? Or are you doing your best to change your own processes, but only achieving it to the level allowed by your external trading partners’ processes? What would be possible if they were partners in your transformation? Retailers stand to benefit from manufacturers’ supply chain changes that increase sales, and vice versa.
Let’s look back quickly to another historical innovator, Louis Pasteur. Did you know that the pasteurization process he pioneered was not originally developed for milk, where we’re most familiar with it today? Au contraire – he was asked by leading French winemakers to unlock the mystery of wine spoilage. Wine went bad very quickly in those days, making it hard to sell it very far from the vineyard. They were creating a lot of wasted, unsaleable product. They wanted Pasteur to figure out why that happened and how they could extend distribution.
So… Pasteur was an early example of supply chain collaborating with R&D to solve a sales growth need. By the way, pasteurization saved the wine industry in France. Using a microscope developed by Leeuwenhoek nearly 200 years earlier.
Leeuwenhoek himself had his own collaboration, as do most innovators: The scientific establishment of the 1600’s didn’t believe him. He couldn’t prove he was seeing these “tiny animals” in blood and water because he didn’t have the artistic skills to draw what he saw. So he got artists in Amsterdam to have a look and do his sketches for him.
Leeuwenhoek didn’t invent bacteria – but no one knew it existed until he gave us a way to see it. So it’s important to know the difference: Will you be the company seeing blood cells and bacteria coursing through the veins of your supply chain, or will you be the one looking at vein structures in leaves, denying the existence of blood cells and bacteria?
What do you think? Agree? Disagree? Please share your thoughts in the comments section below.