The key deliverables of a good SCM system are to ensure availability to the customers:
Of RIGHT Product
At RIGHT Time
In RIGHT Quantity
At RIGHT Place
At RIGHT Price and
Of RIGHT Quality
However, in this article, I shall not dwell on these well known and basic parameters. Instead I shall deliberate on three other very important aspects of the supply chain management for your consideration:
1. What will a great SCM system mean?
2. What is the emerging role of SCM system in launching a new product
3. Innovation and measuring SCM effectiveness
1. What will a great SCM system mean?
In my opinion this will cover three important points:
- The SCM system should have an excellent feel of demand fluctuations and its robust measurement system.
- The cost of running an efficient SCM system should be kept at its minimum.
- The SCM structure should always be without any organizational flab.
I repeat, to be effective, a good SCM System must always be demand driven. Customer demand must be ascertained and quantified first and only then company specific supply chain requirements to be worked out and not the other way.
Various research studies confirm that there are certain common qualities for the demand-driven companies, namely:
- Reaction time to gauge and respond to the customer needs and demand is very quick
- A robust IT infrastructure is in place to facilitate delivery of the key Supply Chain
SCM helps in value creation, value delivery and the value realization process:
As we know that value creation is the first step for a demand driven organization, followed by value delivery and value realization.
Pfizer Inc ranked high towards these efforts with Lipitor. If by any chance Lipitor gets out of stock, doctors usually do not switch over to other statins; the patient may possibly come back to the Pharmacy next day and hope he/she will get Lipitor. Such type of value creation for the product had made Lipitor over US$14 billion brand today despite the presence of other newer statins in the market and a very efficient SCM system of Pfizer Inc.
In an ideal scenario there should be an overlap between product management, demand management and the SCM systems.
Need for interaction between SCM and Product Development/Management Teams:
In my view, some sort of close interaction between the Supply Chain with Product Development and Management teams is very important for any innovative company to succeed in the market place. This I reckon will be unavoidable in not so distant future. Currently there could be some such link, as mentioned above, existing in some organization, but certainly not what it ought to be.
A robust IT system is a major requirement:
A robust IT system is a major requirement for such interaction process between Product Management, Demand Management and the SCM. Those companies, which will be unwilling to invest in a robust and rapidly scalable IT infrastructure that provides process integrity, transaction reliability, data visibility and intelligence for decision making may find it difficult to implement such an important business process.
2. The role of SCM System in launching a New Product:
In the twenty first century, as we all are aware that quality of innovation determines the sharpness of the competitive edge of any company in the marketplace. This aspect of competitiveness will be increasingly more and more important. Unfortunately, despite having this cutting edge many highly innovative companies have been experiencing great problems while launching their innovative new products in the market.
As we have seen from the recent media reports, two examples indeed stand out:
- Delays in the launch of Airbus 380 wiped off five billion euros of the value of its parent
- Another important example was the enormous problem that Sony faced to make adequate
number of Play Station 3 consoles for the holiday season.
These illustrations indicate that conceptualizing, developing and finally launching new products is becoming increasingly more and more difficult. It is now widely believed that the key issue is inadequate understanding of the critical role that the supply chain plays in the innovative process of an organization.
SCM – a key success factor for a new product launch:
In most of the companies, the world over, the marketing team decides on the product launch decisions. Fortunately now we have started understanding though gradually but surely that the success of a new product launch very heavily dependent on effective co-ordination on all aspects of the supply chain from design to sourcing to manufacturing to distribution.
Therefore, in order to succeed with a new product launch, concerned company will need to ensure that Product development, Sales and Marketing, operations planning and supply chain work very closely together as a coherent team. Such co-ordination between these functions is now an absolute imperative. Close co-ordination even within the various activities of SCM systems play a critical role on the quality and nature of an innovative product or services and thereafter for an effective logistic support to the finished new products.
3. Innovation and measuring SCM effectiveness:
Quality of innovative ideas implemented in various levels of the SCM process along with the operational excellence will determine the ultimate effectiveness of a SCM system of a company.
Operational excellence is usually measured through the effectiveness of various parameters set for the same like. These parameters may include order fill rate, cost of the SCM process followed and the speed that it adds right from the material procurement process to the delivery of required SKU’s right up to the retail chemists.
Similarly effectiveness of innovative steps taken in the SCM process is measured by many on parameters like, the return on new product development and the speed of launch.
To make a new product launch successful, companies will increasingly require to work out not only an effective process for launch, but will also need to ensure that marketing, finance, operations and SCM with innovative steps built into it, work very closely together to help create, deliver and realize both tangible and intangible value of a new product, most effectively, to contribute significantly to the stakeholders’ value.
By Tapan Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion