How digitization changed the nature of supply chain management
- Supply chain management has shifted from a focus on lowering costs while maintaining quality and service, to a focus on increasing sales, according to an article on Supply Chain Movement.
- Companies like Adidas and Amazon are undertaking expensive supply chain ventures, like omnichannel and drone fulfillment, in order to increase sales and therefore profits. The shift can be attributed to increased digitization, which has allowed the resultant supply chain initiatives to be quantified.
- In the past, adding a new fulfillment channel would have registered only operating costs. But new data helped reveal, for example, that when Adidas implemented ship from store in Russia the new channel reduced returns from 70% to 40-50%, in addition to increasing sales.
The skills the supply chain manager of the future will need are changing with the role of the job. While executives have typically considered supply chain as a profession of cost containment, better data and connectivity is showing the power of the job to drive up revenues as well.
While the shift will affect all industries, retail appears to be the first frontier. The old tenet of maintaining customer service and quality has forced supply chain managers to upgrade their services as consumer expectations rise. Quick fulfillment and omnichannel are no longer an option for retailers looking to survive, despite the expense. Amazon may have taken years to turn a profit, but its supply chain is constantly lauded as one of the best. It's a paradigm shift for the profession.
The changes are not going unnoticed, either. Every link of the chain is changing, all the way up to the corporate offices. Supply chain professionals are rising to CEOs and using their full-chain vision to increase business efficiency. Procurement, operations, quality assurance and logistics all matter to the supply chain professional; provided a seat at the table, they can provide a 30,000 foot view.
The missing tool, according to Supply Chain Movement, was the ability to provide evidence of the value of initiatives. Picking accuracy may have risen 5% due to an initiative, but unless the change in return rates can also be tracked, it is difficult to take credit for increased revenues. Big Data changes all of that: As unit-level tracking, product data and customer data becomes available, it only takes the supply chain manager to connect the dots.
- Supply Chain Movement Supply Chain 4.0: Adidas and Amazon re-write the rules