If a week is a long-time in politics – as some halfremembered British prime minister once put it – what does that make ten years in supply chains? In some ways 1993, when this magazine was born, seems an age away. In other ways, nothing much seems to have changed.
We may have bounced through the longest boom of modern times, but now we’re slipping back into recession – certainly as far as much of Europe’s manufacturing industry is concerned. And some of the supply chain problems we knew when the previous decade was young are still with us.
During the past ten years, we’ve had no end of advances in IT, business process re-engineering and any number of fancily- named Japanese quality theories, and what’s the result? We still get into a hoo-hah when something unexpected happens in the supply chain. Which, these days, seems most of the time.
When something goes wrong
IT was supposed to revolutionise logistics. But it forgot that supply chains are a bit like people – they often don’t work the way you want them to. Now if we could only have a computer that would tell us what to do when something goes wrong… Well, actually that may not be such a daft idea.
But, first, a small but instructive tale. In 2000, a fork of lighting hit Philips’ microchip manufacturing plant in New Mexico. It started a fire and the factory burnt to the ground. The biggest loser in all this wasn’t Philips – no doubt the factory was adequately insured – but Ericsson, the Swedish telecoms giant that was beginning to cut itself a useful slice of the mobiles market. Except that, with the factory out of action, Ericsson didn’t have enough chips to put in its mobiles and couldn’t keep up with demand. Its sales went into decline, it lost market share and, eventually, outpaced by rivals whose chip suppliers were fire-proof, quit the mobiles market.
Now, not every company is faced with such a devastating emergency in its supply chain. But plenty of companies face everyday glitches caused by late or wrong deliveries or some other problem which means that something that should have happened hasn’t – with all the knock on aggravation that that brings.
Which brings us back to IT and the new wonder software – supply chain event management (SCEM). The supply chain software we’ve been using for the past decade is pretty good now at helping us to create long-term plans and monitor performance against them. The problem is that it’s not so hot at telling us what to do when something unexpected happens. So could SCEM software help?
A number of pioneers seem to think so. RHM Foodservice, for example, uses SCEM software to keep track of unexpected events in its food supply business. The software triggers e-mails to relevant managers when things go wrong or don’t happen on time. Maybe a customer’s regular order hasn’t arrived and needs to be chased. Or perhaps a customer has amended an order at the last minute and the invoice must be changed.
Sainsbury is using SCEM to keep track of issues such as shelf availability, customer returns and the demand for promotions. The ability to get real-time information could be increasingly important for retailers because responding quickly to changes in demand is the key to sustaining volume sales. According to the SCEM gurus, the software can help a company monitor what’s really going on in its supply chain. Alert messages warn decision-makers about things that have happened which shouldn’t – or the reverse – and even about developing trends.
The key is that the software is supposed to help the decision-maker actually to look at ways of dealing with an exception in the best way – ie straight away. Perhaps goods can be diverted from one customer to another. Perhaps a component order can be spread between two instead of one production line. It all sounds too good to be true. And, in some ways, it is. Partly, that’s because SCEM software is still very young and, thus, immature. And that means it often won’t deliver exactly what it says on the box.
But the biggest problem in winning the benefits from SCEM will be learning how to use it effectively. Eventually it could be delivering big performance improvements. It shouldn’t take more than about – what – another ten years.