The world of supply chain management is constantly evolving as players endeavour to gain a competitive edge. FOCUS finds out how supply chains have changed and what developments we can expect in the coming years.
Regent Business School describes supply chain management (SCM) as the movement and storage of materials, data, inventory, goods and finances from the point of origin to the point of purchase.
In other words, it encompasses all activities involved in the sourcing of raw materials, as well as manufacture and distribution of the final product to consumers.
According to Barloworld Logistics, in recent times SCM has grown further to include end-of-life functions such as reverse logistics, waste management and the circular economy, as well as data-driven functions such as payment solutions, data transfer and analytics.
It also includes functions such as supply, demand planning, procurement, manufacture and logistics.
Basic supply chain principle
Despite being different with regard to scope and objective, logistics and supply chain management remain interconnected. At its most simple, SCM is the integration of activities from multiple businesses to create competitive advantage within an industry.
Meanwhile, logistics refers to the physical movement and storage of goods within a single organisation to create customer satisfaction.
Grocery retailers provide us with a template for the efficient implementation of SCM. The process begins at the management company where office staff supply a directive after compiling extensive research and planning activities.
From there, buyers approach approved vendors (such as farmers and suppliers) to discuss terms and conditions. Items discussed may include brand packaging, the amount of product to be supplied or produced over a period of time, when it is to be delivered and at what cost.
Later, after the vendor has received the purchase order from the supply chain manager it will dispatch the goods for delivery at the distribution centre. Alternatively, the supply chain manager will arrange for collection and packaging.
After being received by the distribution centre, the goods will be stock piled and later pulled for delivery at stores.
The distribution centre must ensure that it communicates effectively with the buyers, so that it always has enough stock of a particular item to cater for the demand coming from stores.
If the warehouse has too much stock, it may ask its retailers to place certain products on promotion to drive sales. All of this is part of the distribution centre’s demand-planning activities.
Part of SCM at individual store level involves order planning, so that the store doesn’t run out of stock.
In January, Barloworld Logistics published an article called: Through the looking glass. South African supply chains in 2019. While offering further comment, Kamogelo Mmuthana, chief executive at Barloworld Logistics, outlined some of the potential challenges and opportunities supply chains may face during 2019.
Mmuthana begins on a positive note by relaying his optimism for increased international investment, growth and stability in South Africa. However, 2019 is also an election year, so markets may be affected as the elections loom in May. Other economic impacts may include the United States versus China trade war and Brexit in Europe, he says.
Barloworld Logistics is of the opinion that the growth of micro businesses may result in a shift in demand patterns. Mmuthana says: “This is likely to fundamentally challenge the distribution channels available locally, requiring supply chains to swiftly adapt to smaller loads, more frequent drops and sharply fluctuating demand.
“Alternative and micro solutions are adding diversity to the market but, at the same time, are eroding centralised demand. This means that the future of mega distribution centres and full-truckload transport may be in question.”
The era of social responsibility and corporate citizenry has arrived. “Customers expect organisations to take responsibility for more than their own manufacturing. They are, therefore, holding partners to higher standards of social and environmental responsibility.
“Furthermore, the carbon footprint, integrity and origin of products are becoming more and more critical when establishing competitive advantage,” adds Mmuthana.
Barloworld Logistics believes that systems that offer traceability from origin to destination will result in the level of transparency consumers seek in order to buy responsibly managed products.
The adoption of technology not only provides a competitive edge, but is needed to give customers what they want. For example, business-to-business customers expect the same experience as those who purchase consumer goods.
Mmuthana explains: “Consumers want instant and accurate information about their shipment at their fingertips – on every device, at every hour of the day. There is no longer any doubt that digitisation and technologically driven processes can deliver the level of customer satisfaction and cost saving required to remain relevant in a modern economy.”
Barloworld Logistics also identified artificial intelligence as another technology that is fast becoming the new source of advantage, as it allows supply chains to intuitively react to demand, to respond to customers without human intervention and to source and deliver as and when needed without complication.
According to Barloworld Logistics, ownership and access to data will start becoming both a burden and privilege for organisations. The security measures necessary to ensure the safety of records, while necessary, may hamper collaboration and analysis.
However, it goes on to explain that any supply chain is, in itself, an active and accurate means of data collection. Mmuthana says: “Once organisations begin to utilise this data to match, understand and predict consumer behaviour effectively, they will discover a powerful weapon in their competitive arsenal.”
The more supply chains strive ahead, the more they are expected to be environmentally and socially responsible. At the same time, the more tech-savvy the consumer experience becomes, the more personalisation is required.
In an industry where costs are increasing and customer expectation is peaking, SCM will need to be further optimised for maximum efficiency and customer satisfaction. Since technology has the capacity to satisfy both of these objectives, this is sure to remain a focus point going forward.