Resilience in the Supply Chain Supply Chain Collaboration

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This another blog in a continuing series discussing what makes for a resilient manufacturing organization. If you missed the opening discussion please read part 1.a summary of the topic, part 2 the introduction, part 3 Flexible Manufacturing Capacity & Scheduling,  part 4 Enterprise Asset Management ,  part 5 Enterprise Asset Management II , part 6 Enterprise Asset Management III , part 7 Enterprise Asset Management IV , part 8 Facilities Management , part 9 Human Capital Management , part 10 Suppliers

Being able to manufacture your product is only one part of the manufacturing organization.  To deliver products in the right quantity, and a the right place and on time in a volatile market and increasing costs companies have built or are building complex global supply chains.  These supply chains are called on to do more than ever. They must serve different markets across the globe, deliver custom-configured products, support changes of plan at a moment’s notice, react to unforeseen events, and offer optimized solutions that support the business goals.

Such supply chains need to be monitored and controlled, which are a complicated set of activities in a high-velocity business environment. With multiple partners, the need to monitor countless interdependent activities and moving components, needing act quickly to eliminate bottlenecks and delays, it is a daunting task.

Today’s supply chains are truly multi-enterprise supply chains and span the globe. They are getting longer and more fragile. Costs are increasing, customers are increasing escalating the demand for services, and companies lack the visibility into the supply chain. 

Figure: Chief Supply Chain Officer Survey - Aberdeen Group - Research Brief Collaborative Execution: Closing the Loop on Supply Chain Planning and Execution Aberdeen Group October 2011

These complex supply chains require sophisticated abilities to monitor, report, adjust to, and analyze the flow of events that occur.  Being able to manage these events, in collaboration with your partners and the suppliers of products and services is crucial to transforming from a “plan and execute” to a “sense and respond” way of operating.   In other words the supply chain too has to become resilient.

Increasing the visibility into the supply chain is becoming a critical strategy for today’s corporations. According to a survey by the Aberdeen Group 57% or respondents said that supply chain visibility was a high priority and a further 28% indicated that it was a medium priority.[1] Visibility into the events concerning the supply gives you and your partners time to respond and adjust; the very characteristics that make up a resilient
organization.

Long term collaborative partnerships are being considered to counteract this fragility. Companies of all sizes are focused on improving collaboration, the speed of interactions, and process integration with their partners. Each partners’ business processes are become deeper entwined with each other. Information needs to flow smoothly and quickly between each of the concerned partners. The key is communication.  Plans, changes, orders, information about quality, production, inventory, transportation, etc. all make an impact on the supply chain and need to be communicated between partners.

Companies are doing this by connecting to each other electronically, either by using some form of electronic document processing (e.g. EDI, XML, etc.) or by using a web based collaborative environment (portals), or in some cases both. In each case these methods allow for information to be passed between companies and partners quickly, and accurately. This allows for changes, and the responses to changes, to be passed seamlessly between partners, allowing everyone involved to be part of the solution. ARM found out that electronic connections to customers translated into real savings: 13% shorter days sales outstanding (DSO), _ 37% shorter cash-to-cash cycle times, _ 19% lower total supply chain costs (including manufacturing), which translates to a whopping 5% of, revenue![2]

Common across all processes is the drive to reduce costs. This is true for the supply chain as well.  Companies are trying to drive costs out of the system by optimizing the routs, selection of carriers, and using modern tools toper from spend analysis.  Care must be taken to balance the cost reduction drive to those of the flexible resilient organization, since it is generally possible to get lower costs with restrictions, organizations will end up paying more for the desired flexibility. 

Figure: Top Strategic Actions Transportation Procure to Pay - Transportation Procure to Pay – Aberdeen Group 2012

As the supply chains grow larger and cross international boundaries, the requirement on the organization to comply to multiple countries
regulations increases.  It can be seen in the below diagram that the best in class companies have already address global operation when compared to the rest of their peers, and are aware off the growing complexity of regulation,  and the associated risk of non-compliance.

Figure: Pressures Driving Global Trade Management and Global Trade Compliance -  Global Trade and Supply Management – Aberdeen Group 2011

Have you faced issues with creating a resilient organization? Is it possible to build a resilient organization in the chemical industry? Are your suppliers resilient as well? Is your supply chain included when ensuring that you are a resilient organization? Feel free to discuss/share stories about these questions along with manufacturing in the chemicals industry in general in the comment space below. 

Or join the conversation at @SAP4Chemicals

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[1] Supply Chain Visibility Excellence – December 2009 – Aberdeen Group

[2] Benchmarking B2B E-Business: The Value Is in There -Bill Swanton, Debra Hofman 2007