Business is about change. Change is constant, pervasive and permanent. Nowhere is this more evident than in the Supply Chain of a business. We’ve talked before about the 64 Transactions of a Supply Chain, the need for Rebels & Innovators and Enterprise 2.0. Today we will talk about Change and its effects on your Supply Chain.
So, where does Change come from?
Change can be driven by internal forces or external forces.
Internal forces include company initiatives, strategies, mergers, divestitures, new products, & new markets. The business is attempting to change its position in the market. We’ve identified previously the use of Blue Ocean Strategy and how we think this book is literally the step by step guide to “create uncontested market space and make the competition irrelevant”. While your company may not be taking this approach they intention is the same. They want to improve their revenue and margin while beating their competition.
External forces are often less inspiring. These include regulations, customer compliance, competition, global economic factors and herd mentality. Regulations and compliance are thrust upon your business by a Government or your Customer; both of which are well intentioned but have little concern for the actual effects on your business. Competition is out to eat your lunch so there is no mercy there and global economic factors cause turbulence for everyone. Herd mentality is a rather dangerous aspect of business as it is easy for a company to follow the herd even if they are charging head long toward a cliff. Two examples of this are the 20+ year move towards International Outsourcing and the almost cult like belief that ERP is the answer to a company’s woes.
How does change affect the Supply Chain?
Like a brand new babies butt: change spanks it.
The 64 Transactions of the Supply Chain, and more specifically your combination of those in your Supply Chain, are immediately impacted. If a regulation/compliance arises you will need to capture more data and ‘report’ this out to the appropriate authority that initiated the requirement. If Competition sneaks up on you or has been banging against your flank for years they can begin to offer some greater customer value that your sales team and top management are going to start demanding; which often is accompanied by a change in process/transactions. Global economic uncertainty places a strain on profit so greater efficiency and accuracy will be demanded. Herd mentality, which is a strategy chosen by the market and adopted by top management as gospel, will result in tremendous shifts in the Supply Chain. The agility of the Supply Chain will become non-existent (ERP) or the length and responsiveness of the Supply Chain will stretch around the globe (international outsourcing).
All of the internal sources of change also demand more from the Supply Chain. New markets often
include a longer supply chain, varied distribution channels and its own set of regulations and compliance to achieve. New products can impact the amount of data, add to the complexity of SKU
proliferation and strain facilities, labor & lead times. Any time a company merges with another or
divests itself of a division the Supply Chain is impacted as dependencies, legacy system incongruity and a new culture are developed. Internal strategies and initiatives are best achieved through the use of the Supply Chain and so the next great idea will invariably push change into the Supply Chain.
Change is everywhere and all the time. Its impact on the Supply Chain calls for a new view of the role and responsibility of this vital aspect of business. A Supply Chain must be agile, innovative and responsive to internal opportunity and external demands.