The Future Supply Chain

Introduction
With the rapid transition of companies towards globalization (Guarnieri, et al., 2006), the need for better and more robust supply chains is also increasing. As companies grow in size and complexity, also their supply chains become every time more and more complicated, this opens a way to several problems to arise, makes companies much more vulnerable and leaves them exposed to many unnecessary risks (Borade & Bansod, 2007). The importance of the supply chain in a company is not to be underestimated, and the need to make supply chains more visible, cheaper and less risky makes this topic a very interesting one. Companies can no longer rely on their expertise in R&D, production or marketing alone as they might have done before. Now its no longer enough to make the best product or have the best ideas. To be competitive, financially stable and become a long lasting player in the market, companies have to innovate also in their supply chains. Particularly after the last economic crisis, companies are paying special attention to the cost reduction, risk reduction and improvement of processes (Bentley, 2011) .

Looking to the future

Big multinational companies are becoming more and more aware of the importance and the critical factor that a robust supply chain can play in deciding the fate of a company. Important multinationals like IBM are working on improving what they have defined as key aspects in a supply chain (Butner, 2010), these are: Cost containment, Visibility, Risk, Customer intimacy and Globalization. They have recognized that being global and interconnected can bring many benefits that help them enter new markets and benefit from economies of scale and scope to overcome local competitors, but this also comes with a price of increased vulnerability and complexity. In this interview made by IBM to 400 senior executives from North America, Western Europe, and the Asia Pacific region in charge of their organizations supply-chain strategies and operations, the managers have said that the rapid change with which the market moves is making supply chain operations more and more expensive. The amount of information that now a day is available from the company makes it easy to lose the track of which measures are the really important ones. Risk management is always a top priority in their agenda. The relation with suppliers should be at least as important as the one with the customers. And that Globalization, despite the idea of economies of scale, has not really reduced costs but rather just increased revenues. After identifying the true drivers of supply chains, companies need to start thinking on the supply chains of the future, or at least ones suited to todays reality. Many of the supply chains existing date from the time when the costs of transportation and the amount of competitors were lower and the economic situation was one of prosperity (Bentley, 2011). For this reason new concepts 1

like smart supply chains are arising. The problem is not that companies dont care or dont worry about this issue; its also not that they dont do anything about it because in fact the amount of supply-chain-improvement projects its always increasing. The real issue is that supply chains which are efficient, demand-driven and transparent are still not good enough (Butner, 2010). The development of Information technology and Information management is surely one of the biggest drivers of the continuous improvement of supply chains. Programs like Enterprise Resource Planning (ERP) and Electronic Data Interchange (EDI) provide better tools to design the future supply chains (Borade & Bansod, 2007), but as Butner (2010) have discovered with her research, this flooding of information hinders managers to act on the right pieces. This should give us a very clear hint that before starting to incorporate fuzzy logic algorithms and ever more complicated ways to assess possibilities, which is currently being done (Borade & Bansod, 2007), the identification of the right information for the specific external and internal situation of the company has to be a priority for new supply chains. One very important part of the supply chain of any company are the suppliers, and some companies have been much more successful than other in coordinating each other, forming alliances, conglomerates and strategic partnerships. We can learn a lot from the automotive industry where many important relationships have been formed which help secure the future of their businesses. The modular strategy (MS) is a form of organizing the production of the supply chain, by means of better communication and more transparent processes this industry has achieved to find suppliers that will deliver pre-assembled parts, bring them at the exact time needed and in the exact quantities (Guarnieri, et al., 2006). Bringing suppliers closer and closer can help companies reduce the lead times, inventories, bull-whip effect and many of the associated risks. Perhaps one of the most important drivers of the decisions made in the companies is its customers, being customer satisfaction the ultimate goal of a supply chain. In this aspect companies have to focus on three key aspects which are product availability, response time and customer importance (Min & Zhou, 2002). Its very common that companies tend to overdo improving availability and response time trying to satisfy all customers, without even assessing whether some clients are actually making the company lose money. Companies should spend more time identifying which are the most profitable customers and which ones can become very profitable in order to reduce the amount of work and variation in the supply chain. Wasting time in the wrong clients lead to losing money by not satisfying the right ones. An emerging technology is starting to infiltrate and influence many of the big changes that supply chains are facing. RFID technology is now being enforced by some major retailers mainly in the U.S., Europe and Asia (Soon & Gutirrez, 2008). These companies are making it a mandate for their suppliers to adapt the RFID. This drastic measure is done by companies who are seeing the full potential of this technology. Airbus for example has developed smart containers to transport parts from the docks to their factories and identify when theyre going off course. If a shipment arrives to the wrong place or is incomplete they know it right away and the error can be fixed well in 2

advance before the parts are needed for production. This has also cut time spend physically handling the parts by 75% (Butner, 2010). As more companies start adapting this technology, efficiency will increase tremendously. Future supply chains cannot be influenced and created around single cost elements like cost of labor anymore. When designing a new supply chain the whole picture has to be considered, political, economic, social, technological, environmental and legal factors have to be taken into account. Some companies are even estimating the likelihood of the occurrence of natural disasters using historic data (Butner, 2010). The more the world shifts into globalization, the more companies have to worry about the world around them. The definition of globalization implies interconnectedness and interdependence of companies and countries with the rest of the world, and that makes the idea of basing decision on just economic factors obsolete. As it was mentioned before, even though future supply chains are coming with more and more innovations, this will not be enough without the most important ingredient of the mix, Flexibility (Butner, 2010). New supply chains have to start using the technology and information now available to model as many different scenarios as possible in order to identify which aspects of the supply chain are susceptible to which risks, and which actions have to be taken in case something goes wrong. Being able to design supply chain which are suitable for more than one scenario and that can be changed at will may be the only way to overcome the problems of the fast changing times were facing.

Conclusion
We have learned that companies are constantly paying more attention to improvements and innovation on supply chains, and also that is not that they werent doing it before, but now its really impacting the profits and even the future of every company. Technological improvements are opening new possibilities, but one cannot expect that a new software or technology will solve all problems that arise in the company. This ease of getting measurements is flooding managers with information and its their job to identify the important parts. Alliances are playing a very important role now, as customers become more demanding and the differentiation and variety of products increases, its very important for companies to be as close as possible to their suppliers to be able to act according to these changes. Every company needs to assess their role in the industry theyre involved in, and they have to also consider what external factors may affect the continuous flow of their operations. The measure of risks associated to every single aspect of their supply chain has to be done in order to create counter measures and be able to respond on time to contingencies. Flexibility is a word that every manager needs to have in mind to design the future supply chains, as the increase in risks and complexity is advancing at a fast pace, managers have to always be one step ahead.

Bibliography
Bentley, Y., 2011. Managers perspectives of logistics and supply chain changes during the recent economic downturn. International Journal of Logistics Research and Applications: A Leading Journal of Supply Chain Management, 14(6), pp. 427-441. Borade, A. B. & Bansod, S. V., 2007. DOMAIN OF SUPPLY CHAIN MANAGEMENT A STATE OF ART. Journal of Technology Management & Innovation, 2(4), pp. 109-121. Butner, K., 2010. The smarter supply chain of the future. STRATEGY & LEADERSHIP, 38(1), pp. 2231. Guarnieri, P., Negri Pagani, R., Resende, L. M. & Hatakeyama, K., 2006. PRODUCTIVE AGGLOMERATIONS OF SUPPLIERS IN THE AUTOMOTIVE INDUSTRY: A WAY TO MAXIMIZE COMPETITIVENESS IN SUPPLY CHAIN MANAGEMENT. Journal of Technology Management & Innovation, 1(3), pp. 38-46. Min, H. & Zhou, G., 2002. Supply chain modeling: past, present and future. Computers & Industrial Engineering, Volumen 43, pp. 231-249. Soon, C. B. & Gutirrez, J. A., 2008. Effects of the RFID Mandate on Supply Chain Management. Journal of Theoretical and Applied Electronic Commerce Research, 3(1), pp. 81-91.