Maintaining the competitive edge

The exploitation of the supply chain has historically been undervalued as a primary contributor to overall competitiveness. Whilst it is common for organisations to focus on reducing their expenditure on products and materials as an aid to the bottom line. The concept of exploiting the supply chain as an asset base and mainstream development process has not been widely recognised. In an ever more competitive world the pressure to find innovative ways of maintaining market edge is crucial.

Competitiveness is not simply a question of price, though clearly this will always remain a facet of the evaluation. The wider spectrum of factors that identify advantage are more abstract in many cases. These softer issues are more likely to influence a gap closing strategy with the customer. Included amongst these differentiation elements are areas such as;

• Quality
• Service level
• Reliability
• Life cost
• Relationships
• Trust
• Communications
• Ethical and environmental standards

Therefore meeting the customer’s expectations is a complex process and challenge. This complexity increases when viewed against a market place that is progressively more fluid and dynamic.

The pace of globalisation and competition from the world market has been clearly identified as a major risk to many business strategies. The impact arising from the speed of change has further heightened the view that traditional business models and thinking may not be sufficient to maintain market share or growth.

The deployment and implementation over the past five years of Internet technology has greatly influenced the reach of organisations in the supply chain. Greater visibility both vertically and horizontally creates further pressures to be managed and exploited.

The focus of most organisations has been to contain the impact of its purchase spend through leverage and globalisation of supply. As a result, despite an average 50-60% dependence on supply cost the internal culture of organisations has not truly shifted. Failing to recognise or consider the potential, which remains untapped in the supply chain. This lack of integration into mainstream business thinking and strategy may prove to deter growth and restrict sustainability.

Differentiation will remain a key factor for marketing operations. The cultivation of innovation and relationships should be a key constituent of business strategies going forward. Developing the wider perspective of total cost and driving out duplication of effort to concentrate on performance based value added service.

This strategic approach to the supply chain, however, is unlikely to be successful without a drive to establish workable trust based relationships. Which can foster the maximum utilisation of interdependent skills and exploitation of the knowledge base. Being deployed through multiple levels of the supply network to reap the advantages and benefits, which currently remain untapped.

Future business models will, with the proliferation of the Internet, open channels to an extended flexible networked supply chain. Providing the opportunity to create global value based solutions, which can expand and contract to meet changing demands. Under pinning this concept will be the development of partnerships and collaborative commercial agreements. Developed around clusters of interdependent suppliers that can maximise their joint capability.

Traditional trading approaches may be found to be too rigid to accommodate the implications of the ‘wired world’. The continual drive towards ever-lower prices puts at risk many historical relationships, which through time have become complacent. Whilst low cost supply markets will support optimisation of short-term gain. These windows of opportunity will progressively become smaller. Coupled with political and environmental pressures they do not provide for sustainability in the longer term.

Market volatility will increasingly undermine long term planning and the interdependence that past strategies have created. Therefore as organisations move further towards the need for extended outsourcing programmes so inherently the risk management profile grows.

There will be no overnight solutions to this conundrum. The lack of investment in developing the culture and skills to manage this environment needs to be addressed. Short-term focus has to be replaced with a longer-term strategy. Providing a balance between quick returns and a more durable proposition.

Initially organisations need to recognise both risk and potential developing the new skills necessary to exploit the future of a dynamic supply chain. Creating a versatile platform of relationships with greater emphasis on integration. Building forward strategies based on mutual objectives and targets, combined with an investment in shared resources, skills and knowledge.

Traditional supply relationships may be pressured to meet new low entry competition, whilst customers may resist alternative Sourcing. The short-term impact may then force established suppliers to withdraw. Sharing knowledge and risk will provide alternative scenarios, where the benefits of a wider supply network could maintain relationships whilst reducing the cost base.

This ‘pull through’ concept needs to be created within an enhanced style of relationship. Particularly when overseas customers may drive towards increased levels of localisation. Working with long-term suppliers and supporting their deployment of localisation provides a platform that can be mutually beneficial. Whilst at the same time building on historical patterns and knowledge to ensure continuity and risk management of change.

Developing a wider perspective, which is not solely driven by vertical trading. Will enable the creation of innovative thinking within stable relationships. Recognising the longer-term implications for all parties ensures that greater flexibility can maintained. Enabling the continued and sustainable focus on competitive edge.