Supply Dynamics Insights
What is the difference between a supply chain and a “SMART” supply chain?
Consider the process of buying a car prior to the internet. You trekked to a dealership, discussed the ins and outs of different models with a sales person, and haggled the ultimate price in the sales office. Perhaps you went to a second or third dealership to see if they could give you a lower price. It became a numbers game -- and you never really knew if you got the best deal.
Today the car buying process has transformed. Without even stepping foot in a dealership, you have most of the information you need to make a buying decision – reviews, model comparisons charts, average sales price, current promotions. You’ve optimized the process with near-perfect insight and information. You’ve become a “smart” car-buyer.
What does this mean in supply chain terms?
Let’s say you’re a leader in the supply chain group of a Fortune 500 automobile manufacturer responsible for procuring fabricated parts. With a lack of information, you blindly send RFQs with little insight into what the actual price should (or could) be.
Alternatively, when you press suppliers for a 1.4% cost reduction, they struggle to deliver on-time because they switched to a less reliable raw material distributor to maintain their razor thin margins.
Or as demonstrated in President Trump's recent proposal to impose tariffs on aluminum and steel imports, you have no idea how much material you use or if potential government regulations could affect your costs.
A "smart" supply chain leverages technology and data analytics to enable flexibility, agility, and responsiveness at all levels of a distributed manufacturing supply network. With the plethora of information a “smart” supply chain brings to light, you can:
- Forecast disruptions in the supply chain long before they occur
- Drive better negotiations with suppliers AND raw material service centers
- Discover hidden tiers of supply
- Better manage raw material price uncertainty
Is supply chain data uncertainty really a big deal?
In a recent HfS Research/Accenture survey of buying professionals, nearly 80 percent of respondent organizations said that “50-90% percent of data is reported as unstructured and largely inaccessible.”
Organizations without intelligent operations that allow supply chain visibility will flounder because companies don't compete with companies, but rather supply chains compete with supply chains.
Raw materials (e.g. aluminum, steel, composites) consist of upwards of 30-60% of the cost of a good. Visibility into your raw materials - including material type, specifications, and manufacturing process - that flow into those goods provides source data from which you can extrapolate opportunities for strategic, competitive savings.
How do I insert “SMART” into my supply chain?
The first step to “SMART” is to ensure you have consistent, structured data on your parts and their attributes such as primary or secondary manufacturing processes, special processes, material type, part finish, part size, etc.
Once you have a structured bill of materials, you can set forth on validating the information with your supply base – all tiers of your supply base using a tool such as SDX. With the information available at your fingertips now, the sky’s the limit. Imagine having validated, accurate, up-to-date information to:
- Translate finished goods production schedules into raw material forecasts and/or capacity requirements
- Leverage material demand aggregation requirements across your supply network to save costs or improve network efficiency
- Reduce the number of materials purchased across a supply network
- Consolidate supply with fewer suppliers to optimize efficiency and reduce costs
In the same study mentioned above, increasing profitability and keeping up with the competition are two of the top three challenges faced by business today. How is your supply chain supporting those strategic challenges? The visibility of your “smart” supply chain will ensure you maintain focus on these priorities instead of just hoping you got the best deal at the dealership.
