Digital disruption challenging supply chain dynamics

Digital age has changed a lot of things like DVDs, Cameras, cassette players, phones etc. and this space will keep on disrupting itself in near future also. A recent study published about Fortune 500 organizations, said that since 2000, 52% of the companies in the Fortune 500 have either gone bankrupt, have been acquired, ceased to exist, or dropped out of the Fortune 500. End to end supply chain visibility, which is also impacted by Digital Disruption, has changed a lot. Some of the organizations (very few) have adapted and are using digital technology to their advantage whereas the others are facing new challenges. According to Gartner, by 2016, less than 20% of the organizations will be able to provide end to end supply chain visibility. Also, as per them, 70% of large companies cannot achieve the Supply Chain Maturity required to be winners in 2020. Logistics, which is intrinsic part of any efficient supply chain, is becoming most important than ever and while its costs vary from a low 2.4% for a pharmaceutical industry to a high of 10.8% for CPG industry, the challenges are very similar across industries.

Modern Supply Chain needs to be more mobile with ubiquitous visibility and access, have more insights with real time information for best decisions, more collaborative for faster responsiveness from all stakeholders/participants and more engaging. Let us take an example of optimization of logistics. Digital tools available these days not only help in route and capacity optimization but also landed cost simulators will provide costing in different scenarios so that a decision can be taken after considering all parameters in terms of mode of transport, inco terms, exchange rates etc. These tools combine the knowledge of Wiki, social bookmarks, forums, blogging, in house multi team collaboration and even photo sharing & video campaigns to provide strong input to the supply chain planners.  New ideas that keep floating at different digital platforms will form the core of supply chain planning and innovation around it. Going forward, digital platforms will capture, develop and prioritize ideas, generate proposals, optimize investment and will help in commercializing ideas.  

The major benefits expected are faster speed to market, higher product revenue, improved product margins, better fill rates, improved product launch performance and improved sales effectiveness. 

 

The above article has been written by our guest Sam Page – Supply Chain Leader in a Fortune 500 organization.

iPad supply chain success shows why Apple is no. 1 in AMR Top 25 supply chains

The hype around iPad reached its pinnacle when Apple announced that from 12th March this year, they will start accepting pre-orders and from there their journey to fulfill the demand across US started. Nothing unusual, they planned to make things work in terms of high percentage of on-time delivery but the way responded to the market dynamics and improved their supply chain in record time is commendable.

To start with, they planned to have enough stocks at hand when the actual shipping’s were to start not knowing that the best of their forecasts are to be defeated this time as the actual demand for iPad exceeded everybody’s imagination. Though they played a nice card with a condition that one customer can pre book at the most 2 iPads to make sure that the reach is more and people do not stock them to resell at more price in case of shortages from the company, but still a small hiccup at their manufacturing facility ensured that they got delayed in their first shipping. The actual shipping stated from 3rd April this year which was a small but impatient 4 days delay for the prospective buyers but once there, Apple ensured seamless availability in announced markets.

Looking at the unprecedented demand (they sold 200000 units on the first day itself), they further fine tuned the supply chain with improved forecasts and negotiations with their key suppliers to bring their lead times down substantially. The suppliers they talked to, included Broadcom, Samsung, Foxlink technology, Toshiba, Cirrus Logic, LG Display and Seiko Epson and this showed an excellent example of practical collaborative planning where Apple started sharing actual demand and choice pattern with their suppliers and end to end collaboration with dedicated teams at each supplier and Apple made sure that they have the most efficient and effective supply chain for iPad.

The consumers had something else in mind and the excitement generated by iPad’s revolutionary design and features was too high to resist by a lot of people. This further increased the demand and again posed issues with Apple’s supply chain teams. But unlike Amazon which failed to cater to the peak in demand particularly when Oprah endorsed their recently launched product “Kindle” in one of her shows and had to delay the shipping by multiple weeks, Apple’s team seemed to be well prepared for the new situation and handled this quite well. The result was evident by their sale numbers which said 2 Million units sold in 60 days. An accomplishment noticed by Chief Supply Chain Officers across the globe.

When AMR Research announced the results of “The AMR Supply Chain Top 25 for 2010”, Apple again topped the list for consecutively the third time thus scoring a hat trick. As per AMR, “Apple dominates because it consistently brings both operational and innovation excellence to bear in some of the most competitive markets in the world. From a supply chain perspective, the company's ability to ramp volumes both in hardware and software while redefining what a mobile telephone is supposed to be has been impressive. Unwilling to rest, Apple has continued to push innovation with its launch of the iPad, which is another new platform product for digital content and a further extension of the brand”.

All three major ingredients of today’s best in class supply chain that are embedded innovation, networked supply and demand shaping, are the pillars of Apple’s supply chain and this is one main reason why it could push out companies like Proctor & Gamble, Cisco, Wal-Mart, Pepsi, Dell, Samsung etc. each one of whom are infact supply chain icons across the globe and are followed with respect.

Hats off to Apple SCM Team!

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