Supply chain change innovation

Drivers of Supply Chain Change Six drivers of change The role of innovation The flexibility imperative Criteria for a great supply chain... 

Without innovation, the push for supply chain change would be much more limited than it is. Product innovation increases the value of products to customers. The reward is more than a minimal profit over cost — the kind of proht enjoyed by innovators such as the developer of a new pharmaceutical and software seller Microsoft. The profits fund new investment, enrich producers, and fuel more innovation. 

Products that are relatively inexpensive and do not change much exhibit stable demands. They are also known as functional products. At the other extreme are products that evolve rapidly due to new technology and/or new composition, positioned for volatile demand, and are expensive. They are known as innovative products, and companies need to be very responsive to customer needs to remain competitive in such products. As Fisher (1997) points out, the stmctuie and operations of supply chains for innovative products need to be markedly different from those of functional products in terms of inventory positioning and replenishment, capacity configuration, logistics contracts, information sharing, and collaboration. 

The economic framework conditions for hazardous substance substitution have thus also changed considerably in the course of the past twenty years. Many commodities are produced today in globally organised supply chains the origin, quality and application conditions of process chemicals and product components is complex. Developing appropriate management systems for product quality and product safety requires considerable organisational innovation by the companies involved. 

The opportunities for this form of computer technology are increasing within the changing regnlatory environment, encouraging more innovative uses of technology found in other industries and the use of Process Analytical Technologies (PAT), which offer potential supply chain efficiencies. 

Throughout the first three decades of supply chain leadership, the greatest advancements in business results were made by companies that could invest in process innovation holistically and cross-function-ally. As we get ready to run the race for Supply Chain 2020, we are at a juncture where process innovation is needed. There is more unknown than known. New data, new technologies, and market changes make process innovation an important element of readiness to run the race. 

The model in Figure 3.1 shows innovation as the engine of change, affecting both products and the processes needed to produce them. An innovation in product technology, such as nanotechnology or improvements in diesel engines for automobiles, will act on current supply chains for related products and services. 

Most managers may also assume that every product innovation must fit existing supply chain processes. Inertia, existing hard-to-change information systems, the required behavior change, and functional barriers make it difficult to alter those processes. Everyone is used to how things work now plus expensive investments in systems, staff, and facilities may be needed to make needed changes for the new product. 

The last driver arising from innovations is what we call the supply chain flexibility imperative. Absence of flexibility infers a static supply chain that is unable to flex as environmental changes require. This is based on the assumption that few organizations do not face environmental change of some sort. Lack of flexibility also characterizes supply chains that serve different customers who have different needs with a one-size-fits-all approach. They fail to take into account the needs of different customer segments. 

Most products we buy day-to-day are in the mature phase. In the mature phase, the profitable high-growth days are behind. Often, some fail to see the change from growth to maturity and fall behind, particularly if they have not innovated their supply chains to provide more product features and lower costs. As growth slows, they drop out of the market. 

For many products such as automobiles, there are both functional and innovative products. Fisher notes that a functional car such as a Taurus should use an efficient supply chain with as much cost squeezed out as possible. But a high-margin convertible could earn more profit with a flexible supply chain that is more responsive to demand. Note that this can be done without changing physical distribution but by modifying the business rules for finished goods and key component inventory. 

Despite these changes in industry supply chains. Acme maintained a one-size-fits-all supply chain approach based on its historic direct-sales channel from Acme to the aircraft manufacturer. There were no accommodations for emerging industry segments such as developing an activity system for a sphere designed to distributors requirements. Lack of innovative products and ignoring new supply chains caused most of Acme s... 

---