The Next Revolution Is In Supply Chain Management

I’ve been researching and writing about supply chain management for 20 years. I’ve seen a goodly number of “revolutions” in SCM.

In the first revolution, the concept of supply chain, as opposed to logistics, was put forth. Constraint based optimization tools for the extended supply chain were developed to support the new philosophy. As this was going on, Lean and Six Sigma approaches to improving capabilities, not just at the factory level, but in other internal departments, as well as across the supplier and 3PL base, were gaining in strength.

It took a while, but it was recognized technology was not enough. The key process in SCM is the sales and operations planning (S&OP) process that balances supply with demand intelligently. S&OP itself is going through a second rev and we now talk about integrated business planning (IBP), a form of S&OP that is more closely aligned with finance. A related “revolution” that improves the demand half of S&OP is based on the concept of demand driven supply chains; this is the idea that it is important to not just create a forecast based on historical shipments, but having real visibility to demand at the point of sale to improve demand management.

In recent years, the topic of supply chain risk management has emerged and new processes and ideas have begun to be codified and turned into a distinct discipline. An emerging topic is supply chain sustainability; and indeed in many corporate social responsibility reports the topics of both supply chain risk management and sustainability are addressed.

Even as work remains to be done in the previous revolutions, I think I’m beginning to see the emergence of a new revolution based on a new generation of supply chain control towers. Here is what I think will be included in this new approach.

  1. Enhanced risk management capabilities in the control tower. Minutes after a major catastrophe or impactful but less severe event occurs, a company should be able to draw a perimeter around an event epicenter and answer the following questions: What suppliers are included inside the perimeter? What components do I source from them? What products do they go in? Which customers will be impacted? What is my revenue at risk?
  2. Quick corrective actions designed to rebalance supply and demand as profitably and quickly as is possible. These corrective actions will be based on prebuilt playbooks, supply and demand simulation, and the use of social network collaboration.

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