The principles behind supply chain management (SCM) are not new, the technology is not new, and the need to cut costs are certainly not new. But suddenly it`s a huge thing in SA. What has changed? Nothing - except lower interest rates and the dropping of heavy import duties on many items.
For the past five years, supply chain integration (and its more recent offspring, trade partner integration) has been a hot topic at specialist conferences for logistics people, IT people and procurement people. The concepts were fairly straightforward: use the immediacy and error-free nature of direct electronic communications to slash costs and delays in moving stock from A to B. In the last year, SCM has suddenly leaped to the top of the agenda in the South African boardroom as well.
It`s not that the technology became sexier, or that the basic business rationale became more compelling: it`s mostly to do with lower interest rates and cheap imports. Many industries, especially the retail industry, have simply increased their prices every year, keeping their bottom lines healthy and shareholders happy. Suddenly we had lower interest rates and inflation, and prices had to be kept down. Supply chain costs that had simply been absorbed suddenly became the 2% or 3% that needed to be pulled out to keep the bottom line healthy. At the same time cheaper imports meant long supply lines to far off countries, with associated logistics complexity. Without effective SCM, imported goods could become a liability baking in the sun on a dock somewhere.
So now that everyone wants to get their SCM sorted out, any number of technology firms have come to the fore with SCM solutions. Unfortunately the supply chain is there to move physical objects, so the technology and information aspect is only a part of the puzzle. Information needs to be exchanged, which means technology systems need to be integrated between supplier and customer to allow pricing, ordering and fulfilment information to be securely, accurately and reliably transmitted and received. At the same time, however, logistics systems need to be carefully studied, otherwise many of the benefits of electronic data interchange are lost because trucks are routed inefficiently, or stock orders are physically too large to fit into the available distribution centre space.
This is where your SCM solution provider will very often succeed or fail, because experience in technology does not necessarily translate into experience in the real world of inventory, transport, storage and delivery, especially when goods are increasingly coming in from (or leaving to) other parts of the world.
It`s not that the technology became sexier, or that the basic business rationale became more compelling: it`s mostly to do with lower interest rates and cheap imports.
Kevin Simpson, marketing director, Safmarine Computer Services Africa
SCM aims to reduce inefficiency through basic operational improvements: reduce lead times and deliver only what is needed by the retailer or distributor when they need it. This means the reseller sharing inventory, sales and forecast information with the supplier, who in turn shares capacity and planning data, as well as giving transparency on its ability to deliver. This is summed up in the industry standard model for collaborative planning, forecasting and replenishment, pioneered by Wal-Mart as C-FAR (the "P" came in later).
This is not an easy task, as companies are normally loath to expose themselves to other companies (especially as supplier/retailer relationships are often prickly at best). The technology challenge alone is significant; the challenge of planning and managing physical logistics is even more so.
The "real world" challenges can be severe, especially with imported goods. Lead times can be months instead of days; there are innumerable possible hitches (from customs clearance to shipping problems to errors in paperwork). This is why an SCM solutions provider must be an expert in knowing how goods are moved, because in international shipping there are moves afoot to simplify and make shipping processes electronic. This speeds up the process (if done correctly), and gives the retailer or distributor a lot more visibility on their incoming stock, which is key to the information and planning stage.
As SA increasingly becomes a part of a global market, we need to be able to talk the same language as the rest of the world, and have the bird`s eye view perspective of not only our customers, but also our customers` customers. We need to understand not only our suppliers, but also our suppliers` supplier. And we have to know the difference between transmitting an EDI instruction, and getting a box delivered.
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