Volatile Times Demand Pervasive Visibility and Flexibility to Mitigate Risk

The U.S. government officially declared a deadly type of flu a pandemic. The governments of several large European countries followed suit the next day. This resulted in a large spike in demand at a well-known global vaccine manufacturer. The Senior Vice President of Supply Chain who received calls from the Sales and Marketing Executives of each one of the countries in question confirmed that his team will deliver the orders on time and in full. The executive chose not to share with them that the actual orders came in a little sooner than what their forecast indicated. To make matters worse, one very large lot of vaccines could not be released as a result of a potential quality problem, which is currently being investigated. Instead, the executive assembled an emergency task force composed of top lieutenants that know their ways through the organization and various information management systems who worked all weekend to figure out where safety stock of the needed vaccine resided in the supply chain and that of their customers.

Why in this data and networking-intense world today does it still take an emergency task force to respond to a spike in demand? That's what supply chain leaders all over the world want to know.

IBM recently conducted a study into the challenges that are keeping supply chain officers awake at night and the results are surprising. While cost containment is the perennial concern, visibility into the supply chain and risk management have moved to the top one and two pressures our supply chain colleagues are worrying about.

We sat across the desk and spoke to just short of 400 executives worldwide, in 25 countries, and 29 different industries. We learned a lot, and here are three of the highlights.

Number one is supply chain visibility. This includes visibility with suppliers, transportation and logistics providers, customers, but also visibility to other parties that are often considered outside of the supply chain - such as financial institutions or the government.

What's surprising is that organizational silos, information management systems fragmentation and hence lack of visibility into demand signals and inventory levels are worse than ever. Despite all the tools we have for communicating and collaborating -- such as ERP systems, Internet transactions, real-time data capture -- there's still a lack of ability to turn data into information and thus a competitive advantage. It's what we call data smog.

A second surprise in our study is that risk management has moved from near bottom of the list to number two behind visibility. In today's world, supply chains are becoming increasingly global, complex, interconnected and hence interdependent. This makes them more vulnerable to disruption, be it meteorological, financial or political. In this context, supply chain executives find it critically important to identify, characterize and quantify the various types of risks their supply chains may be exposed to and devise adequate risk contingency plans.

Third of the top three concerns is globalization. We found in our survey that while the initial impetus for global sourcing was the need to reduce supply cost, a substantial and more strategic benefit is access and proximity to new emerging markets.

These results make us believe at IBM that our point of view about tomorrow's supply chain should resonate well with supply chain executives around the world and across industries. In our report titled 'The Smarter Supply Chain of the Future", we take the position that tomorrow's supply chain will be Instrumented, Iinterconnected and Intelligent.

We believe that sensors, actuators, meters and other smart devices like radio frequency networks will become pervasive and will automatically count and locate inventory on store shelves or on pallets in data warehouses, making inventory level information readily available and current at all times, hence lifting the data smog that supply chain executives fight all too often.

We also believe that supply chains will be better connected internally but also to suppliers, customers and other stakeholders, increasing the level of visibility and responsiveness that today's world requires.

Finally, tomorrow's supply chain will be more intelligent. For example, supply chain organizations will build sophisticated, mathematical, predictive models for the evaluation of risk and other key business considerations such as profit or revenue maximization, leading to continuous supply chain optimization and risk minimization.

Maybe the most exciting message that permeated through the IBM's Chief Supply Chain Officer Study is that undoubtedly the supply chain is no longer relegated to a tactical role but rather is playing a role of ever increasing strategic significance.

Sanjeev Nagrath is the Global Supply Chain Management Leader and Lori Steele is the Global Distribution Sector Lead for IBM Global Business Services. IBM Global Business Services provides clients with deep business process and industry expertise across 17 industries, using innovation to identify, create and deliver value faster. www.ibm.com/gbs

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