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Big Switch to Technology and Consultants 18 August 2008

Carbon reduction and optimization, inventory optimization and risk management are set to be the major issues as supply chain professionals face up to escalating global pressures.

The next few years are also likely to see supply chain professionals on the lookout for all the technological help they can muster, and more and more companies will be turning to technology to address increasingly-complex supply chain issues – a move likely to spark-off a growing call for consultants to plug the skills gap, at least in the short term.  

Against a background of supply chain costs escalating by a massive 60% over the past decade, and an economic world hit by increased global volatility, rising interest rates, rocketing fuel prices, the growing industrial aspirations of China, Russia, India and other regions, having the right software in place alongside the required skills to make it work to its best advantage is likely to prove the key to ultimate success or failure as the world of the supply chain pro becomes ever more complex.

Given the knock-on effect of globalisation – not least, distance between customer and suppliers, poor supply chain visibility, increasingly complex communication issues, time-zone differences, language barriers and dangerously-stretched lead-times – ­ wider use of technology is poised to prove the key to supply chain success for many companies.

Governmental pressures, increasing consumer choice and competition, shorter product life-cycles, and complex customer and supplier relationships resulting from mergers and acquisitions, will also be playing more influential roles in the way businesses conduct themselves.

That’s why Barloworld Optimus has launched three major new tools this year alone: CAST-CO2 which draws on well-proven technology not only to calculate carbon emission, but also to map-out ‘best-case’ supply chain optimization in terms of carbon footprint; CAST v10, the latest version of the company’s world-leading network modelling application now enhanced to make this latest version significantly faster than previous CAST releases, Vista-compatible, and with the latest GIS data particularly in Asia, Africa and the Americas; and CINO (Combined Inventory and Network Optimization) a new super-advanced supply chain optimization tool specifically developed to combat the potentially fatal downside of multi-sourcing and multi-echelon inventory flow with the added ability to build and compare complete ‘what if?’ scenarios.
 

Carbon reduction and optimization

The rising tide of public demand to address the twin issues of global warming and corporate social responsibility look likely to have prompted seven out of ten UK companies to turn to technology to help them slash their carbon emissions by 2013.

There are three certainties about to unroll on the issue of carbon: one that it’s inevitable that big changes are afoot. Two, that the onus will fall on businesses.    And three, that legislation will soon follow – the consequences of which could prove terminal to those not toeing the line on greenhouse gas emissions.

Yet, with the new technology now available, it only takes 25 days or even less start taking positive steps to dramatically reduce carbon emissions ahead of dire financial and other penalties likely to stem from future anti-pollution legislation.

‘Real-life’ proving trials on the company’s newly-released CAST-CO2 program have already returned results including 28% reduction in carbon emissions alongside a 9% decrease in transportation costs.

 

Inventory network optimization

Inventory network optimization is set to be the next big wave in the line of supply chain defence, and the supply chain optimization software market is rapidly taking on a new urgency. Barloworld Optimus’ Optimiza is an advanced inventory optimization application that, unlike traditional inventory re-ordering systems, takes into account the unique supply and demand characteristics of its supply chain, effectively reducing stock levels by between 15-50% while increasing service levels by as much as 20%.

In a recent high-success application with aviation metals provider Apollo, Optimiza resulted in forecast accuracy up by 70%, backorders reduced by 80%, inventory reduced by 25%, and availability improved by 16%.

 

Risk Management

The changing face of supply chains means that success either stands or falls on having effective early warning and detection systems and that companies that have planned recovery procedures will recover fastest and minimise the impact of a disruption – typically, terrorist attacks, labour relations, factory fires, unexpected demand surges, unstable labour relations in countries with an ever more sophisticated workforce, Customs delays, machine breakdowns and natural disasters any of which could strike, at any time.

As in the high-profile case of Ericsson when a 10-minute, seemingly petty fire in a manufacturing plant escalated all the way up the supply chain to result in a staggering $1.68billion loss in its mobile phone division, many potential ‘disasters’ can be predicted and alternatives planned to reduce or cope with the associated risk, and those that learn from the event and redesign their supply chains to make them more robust to the disruptions will be more resilient in the future.

Although software tools cannot easily assess unforeseen risk, they can accurately model the effects, and one of the prime in-built features of CINO, (Combined Inventory Network Optimization) is the ability to build and compare complete ‘what if?’ scenarios.

 

Increased use of consultants

The state of the world is such that a big rise in the use of consultants in supply chain planning and implementation is also poised to become a major feature of the supply chain armoury over the next few years.   

A recent research paper commissioned and funded by Barloworld Logistics revealed that most successful companies tend to be those calling on consultants to bridge the skills shortage gap – with supply chain and logistics managers consistently citing ‘improved performance’ as the key driver.

Companies ensuring they have the right skills and capabilities to cope with global complexity in their supply chains are up to 6 times more profitable than their competitors and peers, and the skills and capabilities of companies’ supply chain staff is one of the most consistent challenges facing companies the world over.

The evidence bears out the fact that the most successful companies are likely to be those that call on consultants to bridge the skills shortage gap.