Better, Faster, Cheaper... and Smarter

As risks increase in the marketplace, supply chains are evolving into more intelligent and interconnected networks.

In the wake of severe sickness and even deaths attributed to breakdowns in the global supply chain (e.g., salmonella traced back to peanut butter in the United States, contaminated dairy products in China), risk management has emerged as one of the top-of-mind strategies for supply chain decision makers. According to a recent study conducted by high-tech giant IBM Corp, 70% of global supply chain executives say their No. 1 challenge is trying to make sense of overwhelming and fragmented data. Paradoxically, relatively few of the 400 executives interviewed are directly addressing this "visibility" problem because it is costly, difficult, silos are worse than ever, and respondents say they are just too busy. Only 16% claim they're effective at integration and visibility of information across the supply chain with external partners.

So how do you get smarter? The study indicates that the greatest opportunities are in smart devices and integrated ERP systems that capture real-time visibility, forecasts/orders, schedules/commitments, pipeline inventory and shipment lifecycle status. Automating real-time detection with smart devices increases flexibility, speed and accuracy to promote better decision-making.

"As important as cheaper, faster, better is, this year we're beginning to hear a new verse -- a clear message about the overwhelming need for greater visibility and flexibility to manage risk," says Sanjeev Nagrath, global leader, supply chain management, with IBM Global Business Services. "A crisis in one country or region can now ripple very quickly across the world economy, creating tremendous turbulence. As supply chains have become more complex, global and stressed, the executives we spoke with believe they must drive far more intelligence throughout their supply chains if they are going to anticipate, rather than react."

The second-most significant challenge to respondents is risk management, as 60% say risk is increasing as a concern. Based on the survey results, 38% are managing risk and supply chain performance in some manner, but with separate tools and processes. Respondents point to the lack of standardized processes, insufficient data and inadequate technologies as the main impediments that are preventing effective risk management. Successful companies are incorporating risk management into their plans, and using analytical predictive tools to mitigate risk while identifying new opportunities.

The IBM report recommends that future supply chains become "thoroughly instrumented, interconnected and intelligent." The next-generation of supply chains will optimize the use of machine-generated data that flows out of sensors, RFID tags, meters, actuators and GPS. The entire supply chain, the report suggests, will go beyond connecting suppliers and customers to also include parts, products and smart objects that can monitor supply chain events.

The report also suggests that the evolution of traditional logistics and purchasing managers into chief supply chain officers is a continuing trend in the marketplace.

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