Supply Chains

Organisations, both large and small, are adapting to the challenges that the digital economy presents. Small businesses and individuals can now participate directly in international supply chains. For comparatively little cost, even individual entrepreneurs can trade well beyond national borders.

Supply chains are systems. In other words, their various parts are highly interdependent. A change in one leads to changes elsewhere. Crucially for supply chain management, failure in one part of the chain has a knock-on effect producing poor quality outputs, or gaps in availability.

On the other hand, when parts of a supply chain work well, the system as a whole benefits, enabling better results for end users. One of the advantages of digital technology has been to reveal more opportunities for supply chains to work well together by making the contribution of each member more measurable and visible. Online retailer is innovating its supply chain to give its customers even quicker and easier access to the goods and services it has on offer.

Social media has been more than just a personal platform; it has significant opportunities for organisations of all sizes, connecting them both to each other as members of a supply chain, and with their potential and actual end-users and customers. This is a good example of how the digital economy is re-balancing some aspects of the power relationships between customers, intermediaries and suppliers that, in the old economy, were dictated by size and one-way communication.

Future supply chains are likely to become more intelligent and self-managed. Supply chains will be able to react to changes in demand, opportunity and risk at a very detailed level. The degree of integration and transparency between partners increases in step with this.

Older supply chains, built to deliver high-volume production, taking advantage of labour costs in the developing world, will struggle to cope with the new demands. Modern supply chains will demand flexibility: the ability to cope with rapid changes in demand, volumes and tastes!

Those who excel in the supply chain function will be in the best position to minimise uncertainty. Furthermore, organisational key decisions will start to become more and more focused on the supply chain structure and capabilities as central to corporate strategy and a source of competitive advantage.

Despite this emphasis on the key role played by technology, however, it is worth reflecting once more that effective supply chain management will continue to depend on the use that managers make of the tools at their disposal rather than on the sophistication of the tools themselves.

by Ale Madia