Focus on supply chain to retain edge

11 April 2007
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12 April 2007 | Paul Snell

The performance of the supply chain could soon determine companies' ability to compete with one another, according to a leading academic in the sector.

Martin Christopher, professor of marketing and logistics at Cranfield School of Management, told delegates at last month's Extended Supply Chain 2007 conference conventional methods of reducing costs were now having less impact on a firm's competitive advantage.

"The only remaining step-change is in the supply chain. The opportunities for internal cost reduction are relatively scarce, but they are significantly greater in the supply chain," he said. "Competitive advantage has moved away from the product. It's now really about process. More and more firms will compete through capability."

Christian Verstraete, a worldwide senior director at IT company HP, agreed. "It's not enough to have operational efficiency, because competitors are doing the same," he said. "It's no longer company against company, but supply chain against supply chain."

Christopher said people who work in the supply chain should think less about reducing costs from end-to-end and more about the value the supply chain provides to the customer through its service.

He urged professionals to make their supply chains more flexible and agile in meeting customer needs. Kevin O'Marah, senior vice-president of strategic research at AMR research, said buyers should look closely at the way customers influence the supply chain.

Because supply chains were now more like a network, he claimed, rather than the linear model used in the past, buyers could use supply chain planning to mitigate risk. This might include introducing promotions or discounts on products to relieve surplus stock.

But Verstraete said it would take a company time to convince its suppliers it wanted to pursue a collaborative, rather than adversarial, relationship. He added this approach needed to be developed through building common systems, relationships and trust, which could take up to a year.

Alan Waller, chairman of the European Logistics Users, Providers and Enablers Group, said leadership from the board was vital. He suggested introducing a supply chain advocate to the board.

Improving people skills was also advised, but Christopher maintained processes were key. He cited the example of a firm that achieved "brilliant results from average people using brilliant processes," compared with companies "that got average results from having brilliant people using broken processes".


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