Leadership for the Future, A Supply Chain Management perspective

Future leadership will not only require, but demand higher levels of thinking. It will be necessary for combating the competitive and uncertain landscape of evolving business. Integrity coupled with the ability to learn and execute compelling business strategies will be needed to achieve success. Business agility to lead ahead of customer’s lifestyles and expectations through customer-enabling and engaging resources will allow this achievement and stay ahead of the competition. The accuracy of anticipation of the customer’s expectation will be essential to success. Additionally, embracing more inherent risk and uncertainty will allow innovations and the ability to stay calmly focused toward the end result.

Human capital will no longer exist as an asset, but as an essential tool for survival in the new world of global business. Customer and knowledge management systems will not only improve interactions and engagement, but allow opportunities to be exploited effectively. Real-time value between suppliers and customers (value chains) as well as corporate accountability and governance will be demanded by customers. Social responsibility will govern and direct innovations and sales. This will take planning, education, implementation, and execution of various initiatives. One vital aspect will be planning for risk and ensuring business continuity. Leadership must understand the interlocking and dependence of technology, processes, systems, security, energy sources, supply chains, customer logistics, and people for seamless business continuity.

The key to this interlocking dependence of interactions is the human capital residing within a company. The success of these interactions is directly related to the discipline of intent established and reinforced by the leadership of the company. Decision, made by people, make or break any situation. Slow decision-making causes handicaps in favor of your competition. The quicker and more effective decision-making processes are, then the less disruption occurs. People ensure business continuity, not machines. Business systems and strategies need to be flexible, agile, and adaptable to disruptive events of uncertainty created in the global business landscape.

One suggestion is to adjust to listening and focusing on the customer’s needs and expectations and to stop marketing in order to shape the customer to what the company wants the customer to want. Listening skills must be dramatically improved among all the employees and needs to start at the top and work down to the lowest level. Develop this skill throughout and disrupt the present and create the future. This is because there is a continuing of convergence of technologies occurring, which will include nanotechnologies, biotechnologies, information technology, cognitive science, and all other technologies.

There will be a great future demand for fluid markets, which rely on technology to provide a seamless flow of communication and money in a virtual creation that services the real world. This will create the need and opportunities for:

v Virtual Supply Chain Networks
o Super efficient and fluid
o Establishment of digital currency as the norm to increase market interactions
o Establish relationships and drive commerce for specific projects and timeframes
v Knowledge-Value Engineering Processes and Systems
o Virtual supply chains leveraging positions globally
o CRM and KM exploitation in a virtual interactive environment
v Security and Risk Management
o Business continuity
o Energy terrorism
o Leverage and exploit green technologies
v Food Production and Distribution
o Focusing on local suppliers
o Logistics used to maximum sourcing
o Virtual supply chain management
v Nanoenergy and Nanotechnology

Future business environment will have a much greater degree of complexity, fierce competition, and accelerated change. Innovations will be across all boundaries and will be disruptive technologies to the present norm. It will technology and peoples ability to exploit emerging technologies that will enable companies to increase their market share, profitability, competitive advantage, and survival rates. This will encompass supply chain management (SCM), supplier relationship management (SRM), and supply chain execution (SCE) interacting with manufacturing execution systems (MES) and transforming entire processes and systems through human assets. These supply chain transformations will be the beginning of virtual engagement. This evolution will include the convergence of finance, economics, manufacturing and procurement tasks into one fluid engagement, which will be essential for business. The movement of goods, services, transactions, and interactions from the manufacturer and the end customer must occur instantaneously or very fluid. Distribution channels currently driven by physical distribution will have to become virtual and digitized, which will drive these value chains into automatic engagements.

Economic dominance of a company or industry will depend on the degree of sophistication and complexity achievable in the SCM realm. The power and value of the supply chain vale chain will be the continuity proactive approach to inventory management and procurement. Processes and systems must become derived from models that have been developed for predicting the emergence of proactive actions that must be seized and executed in real-time. This will be facilitated by virtual cooperation and collaboration between companies and all of their values chains. This includes the reduction of inventories (improvement in the company’s cash flow) without worrying about delivery and price increases and an overall improvement in workflow. Information technology (IT) processes and systems (eProcurement and eLogistic) will be leveraged and exploited in order for a company to differentiate themselves in the future market from their competitors.

Paradigmatic shifts of supply chains must provide smart solutions and support real-time decision-making, which will facilitate the speed and accuracy of deliveries will be essential for the next generation. Companies will have to embrace and understand the limitless web-centric technologies, present and emerging, because these systems will become the foundations SCM. On-demand supply chains, business intelligence, and transparency will be the only way to develop, seize, and exploit opportunities. Companies must be able to leverage

v Proactive Predictive Forecasting
o Data mining for niche markets
o Anticipation of customer needs
o On-demand for customer demands
o Transforming information into the ability to drive on-demand decision-making into a business asset.
v Knowledge Management Systems
o Instantaneous cooperation and collaboration of human capital
o On-demand information and knowledge about competition, customers, value chains.
v On-Demand Service
o Driven by customer expectations and not cost or efficiency
o Flexible and agile where the customer’s wishes are anticipated with efficiency and low cost (defines the leader).
v Interconnection of Networks
o Interacting of knowledge across all systems via advanced IT systems.
o Value chain efficiency driven
v Electronic Markets
o Systems that allow all systems, networks to communicate – regardless of company, IT structure, or country.
o Elimination of manual or paper Accounts Payable (AP) systems and development of an electronic instantaneous transaction system.
o An interactive structure that allows customers to customize their degree of engagement.
v Smart IT Systems and Collaborative IT infrastructures
o Drilling down to transparency in transactions, communications, confirmations, and validation.
o Decision support structures with customers, suppliers, partners, and competitors.

This will be supported by the development and execution of artificial intelligence and knowledge management systems, which have embedded decision-support structures for improving the algorithms for predictive modeling and automatic logistics management.

Finance and banking infrastructure will be the tie in, but invisible to the value chain system. The strategic influence of procurement and its relationship with finance is needed for future success. The collaboration and alignment gap that currently exists needs to be closed in order to capitalized on present and future opportunities. On-demand and real-time data mining will drive decision making and the maximization of resources. Continual optimization through continual updating and improvements in data mining will fluidize the flow of the value chains. This will develop the futures and options markets, which will be based on virtual supply chain systems. This will consist of customer relationship forecasting and anticipating the customer needs. Purchasing interests in supplies before the customer realizes they even need them will be the measure of success. Eliminating lead times due to options trading of customers and hedging for investors. Inventory futures will be a portion of the supply chain and a means to earn money on residual cash or cash in transit.

There will be a reshaping or paradigm shifts in the value chains that include supportive linkages, alliances, and channels of distribution. Strategic planning must incorporate and take in consideration future business objectives, landscapes, and the evolving customer needs and demands. Transformations in education, training, financial systems, and manufacturing will occur and lead to their eventual convergence. The world will become reshaped through disruptive innovation where the irrational presence becomes the rational future and the reality of tomorrow.

Fierce battles for talent, intellectual property, capital expertise, and technical expertise will be waged in the near future. Proactive companies with strong leadership will stride through these times effortlessly and become the global leaders. Leaders will have to create order in the mist of chaos and provide fulfillment to the demands of employees and customers. Leaders will have to simultaneously plan for today and tomorrow. They will be the glue that holds the organization together. The most valuable asset will be the leader that has the ability to adapt and remain nimble throughout chaotic environments.

Supply chain relationships will need to be a strong focus. Sustainable competitive advantage in the global market will be through continuously innovating with supply chain partners. The partnership will have to be not only dynamic, but multifaceted and acknowledgement of the
v Benefits of a close-knit collaboration
v Supply chain processes and their improvements
v Technologies underlying in them and the emerging technologies
This will take global vision and focus will consist of
v Instantaneous expectations of delivery
v Necessity of quicker speed to market
v Continuous innovation of disruptive technologies
v Flexibility, agility, and nimbleness to react to change
This will be supported by a collaborative network which provides
v Strategic relationship focus on goals
v Supportive IT portals and visual platforms
v Forward thinking toward the end customer with a focus on outdated and cumbersome intermediate distribution channels.
v Demand-driven value chains which will become a must and not a nice to have.
v Real-time management of operations, inventory, finance, suppliers, and customers where decision making processes deliver instantaneous results that feedback into a continual loop.
v The convergence of sales, marketing, procurement, operations, and finance through interactive and supportive processes that move swiftly to proactively meet the customer’s demands.

These collaborative networks will be leveraged and designed to improve responsiveness and to reduce uncertainty. This allows engagement into collaborative efforts to become fluid and transparent. The key that allows any of this to function and operate is people and their interactive skills and talent. This will be facilitated by a standardization of IT structures and platforms. The interlinking of customer responses and reactions into scheduling, inventory and operational management systems will result in a powerfully effective knowledge management network. Standardization will be aided by an intermediate step of a web-centric platform, which will support various IT structures and allow them to freely interact. Financial planning and forecasting as well as value chain execution will help drive this end. Poor forecasting and excessive inventories will become a huge handicap in the SCM system. Proactive and predictive modeling through these knowledge management systems will support JIT inventories and eliminate these inefficiencies. This is all facilitated by supply chain intelligence (SCI), which is driven by
v Continual, focused, and disciplined evaluations
v Plan-Do-Act cycles
v Access to real-time data about global responses within the value chains
v Development of security plans that support business continuity and recovery plans

Inventories are money not earning interest and a waste of working capital’s potential, which is drain on net profits, shareholder value creation, and liquidity. Radio frequency identification device (RFID) is a growing technology that facilitates automatically and transparently receiving, storing, and shipping goods with minimal human interaction. This eliminates human error and speeds up the transactions. RFID allows for real-time interaction to occur between multiple parties simultaneously. The supply chain needs to be designed to
v Ensure continuous availability of goods and services.
v Provide the uninterrupted supply of materials at the highest quality (feasible).
v Allow for real-time engagement of Sales/Marketing data and information and customer trends.

Focusing in on working capital optimization helps improve financial performance as well as maintain and even improve customer satisfaction. This can be achieved through supply chain finance perspective and paradigm shifts in inventory management practices. Working capital improvement metrics include
v Reducing inventories (finished products, raw material, and work-in-process)
v Days Sales Outstanding (DSO)
v Measuring the effectiveness of the use of short-term financing
v Measuring the effectiveness of investing cash in the short-term
This can be driven by improving the accuracy of operational budgets, which reduces the need for cash-on-hand and increases the investment opportunities in the short-term. Improvement in cash management are driven by
v Accuracy of Operational budgets (including RM, Finished goods, etc.).
v Active and interactive cash management strategies.
v Improve the accuracy and functionality of cash flow forecasting and strive toward real-time cash flow balances.
v Active engagements of the Sales force to reduce DSOs.

Facilitating accurate real-time cash flow balances will allow for better cash management, lead to a reduction in costs of transactions (eInvoicing and A/P), and elimination of finance charges within the supply chain structure. You will not get extended payment terms from your suppliers. Actually to strengthen the supply chain and reduce your inventories and improve supplier reaction times is counter intuitive. Need to strive to reduce the payment terms and then demand JIT and other strategies from the supply chain in return. This will help drive all of the efficiencies out of the supply chain.

Corporate risk management also needs to be a strong focus. The complexity, uncertainty, and inherent risk in the global markets require continual monitoring of emerging problems and issues. Risk management involves
v Re-evaluating global strategies
v Strengthening of core competencies
v Becoming more risk-adverse by guarding against over-extension of resources.
This includes focusing and developing a strong SCM program that fully integrates the operational aspects of the business. These programs must be developed, implemented, and executed from a strategic and tactical perspective instead of the current basic operational perspective of today. This is because to do so may lead to
v Poorly engineered products and processes
v Products recalls
v Excess inventory costs, thus a drain on cash flows
v Unsellable inventory that must be reworked or scrapped
v Diminished levels of customer satisfaction
v Loss or erosion of market share and profitability
Long distance suppliers may have multiple intermediaries or steps which include
v Manufacturer to port and warehouses
v Transport and logistics providers
v Forwarders, stevedores, etc.
v Customs brokers, etc.
These are all information intensive transactions and include various complexities that must be recognized and dealt with, which include
v Dealing with custom agents and forwarders
v Monitoring of long distance suppliers
v Planning and forecasting for long transit times
v Addressing and adapting to cultural differences
v Financial issues such as currency exchange issues

There are means that companies can work with the US customs department to minimize some of these complexities and thus potential delays in deliveries to facilities. One program is the Customs – Trade Partnership Against Terrorism (C-TPAT). Companies bringing in goods from outside the US can register and become responsible for the security aspects of their supply chain. This allows goods to be quickly processed through customs and reduces the transit time as compared to competitors. Global trade will be dominated by those companies which can navigate the ever-changing custom requirements and regulations the best. Companies must focus and map out global transport and demand further efficiencies. Inefficiencies include poor port clearance documentation and poor duty payment coordination. Systems and processes must create a responsible and knowledgeable environment about containers and various shipments from cradle to grave. Companies will be required at any given time and step to
v Know the shipments contents
v What is in the container, packages, etc?
v Who has opened it?
v Who has moved it, loaded it, etc.?

Actively and proactively managing the supply chain has financial aspects that directly impact inventories and working capital. There are balance sheet implications include goods in-transit inventory, which start with purchase order issuances or master POs. This works further back into the chain and the development of Vendor Managed Inventory (VMI). There needs to be a trigger for the financing or payment when inventories are pulled and used in Production. This will be further facilitated by the trend to move away from traditional methods of payments (letters of credit, banker’s agreements, etc.) and move to more innovative open account SCM finance structures and systems.