Simple secret for supply chain success: know more, do more and spend less (page 1 of 3)

It was moderately efficient, as far as it went; but it didn't go very far, and it certainly didn't optimise the organisation.

You know the scenario, because it still exists today: different people have their own targets. The purchasing manager may do a fabulous deal for his company by buying in bulk, but that in turn will reduce the stockturn in the warehouse on which the warehouse manager is measured.

The arrival of the integrated supply chain in the boom years of the 1990s sought to fix all that, and the impact has been considerable. Companies that implemented an integrated solution have achieved significant business improvement and wondered how they ever managed without it.

The most recent beyond the integrated supply chain has been the networked or adaptive supply chain, in which all the participants are able to interact with each other. This allows companies to contract out everything, including manufacturing, to the point where sales and marketing are the only core functions within some global brands.

The next stage of supply chain development will be the "snap-on" supply chain, where an infinitely expandable network of suppliers and buyers can collaborate with each other and strive collectively for ever-greater efficiencies. This is the on-demand supply chain, where no integration is needed. It's a grid, where people can snap-on and trade at will.

The supply chain grid will deliver significant opportunities for greater streamlining, cost savings, speed and efficiency. At the same time, we will see supply chain event management become the norm over the next four years. We have track-and-trace for small parcels now, but RFID technology will give us full supply chain synchronisation and visibility.

That's where we're going as an industry, but it's important to remember that about 80% of companies today are way behind the curve: they stand between the traditional "silo" supply chain approach and the integrated model. The challenge for these companies is to transform their SCM approach so that they can move quickly to the networked solution, perhaps even in some cases leap-frogging the integrated stage completely.

Open architecture is the key that allows transformation to a networked supply chain. This was a vision only four years ago but is a reality today. The technology is there, but the barriers are largely cultural - people ask: "How will I be measured?" You can help people to change, but you can't force the pace.

However, early adopters like Toyota, Dell and Sony are continually pushing the outside of the envelope, looking for new functionality and new ways to compete. Their efforts, supported by the leaders in enterprise software, ultimately serve to raise the bar for everyone.

My vision for SCM is simply a world where the majority of businesses across the globe are able to achieve the levels of improvement taken for granted by those early adopters and envelope-pushers.

SCM is not an ivory tower discipline. It's a hard-nosed approach to value creation at the sharp end of any business, where the rubber hits the road, and its importance is recognised at the highest levels of finance and industry. The American Production and Inventory Control Society said in June this year: "Value creation in the supply chain spurs corporate strategies and attracts investor attention." Research by Accenture has shown that the stock prices of public companies that invested in getting their operating model right with the aid of supply chain technology outperformed their rivals by 20-25%.

This demonstrates that companies with the right supply chain model will win in their vertical markets, because the overall cost of serving their customers will be lower.