The future of supply chain management

By Jonny Williamson

What do you sense are the growing challenges logistics managers around the world are facing?

Every company is critically dependent on a unique network of business partners to operate their supply chain. Today, many companies never really take inventory or touch the products that bear their names and that’s introducing a new set of challenges in the supply chain.

You need only look at the recent horsemeat scandal or use of African conflict minerals or the reports coming out of Foxconn to see examples.

Historically, companies have been able to deflect responsibility and pass the buck, but the public aren’t willing to accept that any more, they expect those at the top of the supply chain to take responsibility for its entirety.

To run a business more effectively you really need to have a tighter control over that network of business partners in order to exchange information more frequently, be that sale forecasts, inventory locations, component orders or any number of different data. That’s where fully integrated supply chains, and GXS comes in.

What are the key characteristics of a fully integrated supply chain?

No-one has a map of global supply chains, where you can track who’s trading with whom for a particular product, where all the components are being sourced from and how they are being connected to create the final product.

GXS helps companies to manage supply chain information connecting them to their suppliers, contract manufacturers, distributors and their customers. We operate a network of 550,000 businesses around the world who are connected for that exact purpose; a network which exchanges 14 billion transactions a year.

As there are so many companies connected to our network, we have been working on developing a supply chain map, which we call a business partner graph, to show who’s trading with whom across five or six levels in any one particular area; something we’re hoping to officially launch in the next 24 months.

What are the economic benefits of a fully integrated supply chain?

A better brand name in both the industry’s and public’s eye, contributing to a lift in sales; lower inventory, carrying costs and working capital by operating distribution centres and plant stores more efficiently; optimised labour and ultimately greater visibility, leading to better  decision-making and less wasted material or products.

Why is the concept of a fully integrated supply chain so hard to realise?

Mostly it’s not a case of the desire, but the difficulty and time it would take to achieve. Many companies are working from severely fragmented ERP and SCM systems that have been designed for an individual company, and that’s not how the world works anymore.

There is a constant struggle to get  the system behind your firewall to synch with all this information coming from outside, and so many people have been questioning whether manufacturing will go the way of the airlines.

About 25 years ago several of the major European airlines came together to address the challenge of constantly having to keep up-to-date, synchronised records of flight reservations, ever-changing flight schedules and seat availability. Their discussions resulted in a centralised computer reservation system called Amadeus which each had remote, real-time access to, saving them all precious time and money.

Might we see manufacturing companies take a similar approach?

How do fully integrated supply chains feed into the current wave of cloud computing?

Companies are beginning to look at a shared SCM system which multiple others can access via the cloud. For example, a large OEM and 20 of its key suppliers could use a cloud-based SCM application which contains master data for all 21 companies. This would eliminate the challenges of constantly trying to keep pricing, forecasting, inventory and logistics data synchronised across buyer and supplier systems. It would certainly seem to be one viable method to achieve a fully integrated supply chain in a timelier fashion.

Companies are still wary about placing sensitive data which could hold a competitive advantage onto the cloud, but as privacy regulations become more detailed and specific I think we are going to see the movement grow. Once an innovative company, say Wal-Mart or Amazon, creates this sort of eco-system with its supply partners, you’ll see other companies chasing it more seriously.

The increase of BYOD and mobility is also going to make it so much easier to keep up-to-date with your supply chain in terms of approving purchase orders, checking inventory or sales levels, and really begin to move information faster.

What do you think is next in terms of supply chain innovation?

It will be interesting to see how far we move into this cloud model and I think the Internet of Things is going to provide a wealth of big data that’s going to allow companies to make much faster and smarter decisions.

Though at the moment studies show that fewer than 10 percent of invoice in Europe are sent electronically, I thinke-invoicing is going to become ever more prevalent as it can save a company upwards of 30 percent compared to traditional paper systems.

I also think collaborative logistics, where companies put rivalries aside to share space in distribution centres, or on trucks/ships/planes, is going to become more common as companies aim to perform not only smarter, but more sustainable too.

GXS is the world’s largest B2B integration services provider and operator of the world’s largest integration cloud, the 
GXS Trading Grid®