Globalisation has steadily increased complexity of supply chains over the decades.
Management of supply chains has moved through three distinct phases from decentralised decision-making where functional departments operated in isolation, to centralised decision-making were corporate planning and purchasing decisions were done at head office, and finally to a combination of both.
Supply chain management (SCM), the process of planning, organising and controlling the flow of materials and services from suppliers to customers has been the focus of successful business of late. The pendulum is currently swinging towards centralised planning combined with decentralised execution.
The post World War II era to the 1980s represent phase 1 of the transformation process. Each department planned and operated in an isolated environment.
Enterprise-wide supply chain planning was often not effective because the decisions were taken from largely functional perspective. This was caused by the lack of standardised business information, coupled with poor data integrity and analysis support, incongruent technology systems, and incentives that did not promote sharing of information.
Decisions were reactive based solely on criteria that were applicable to that particular functional area. Internal divisions competed against each other without taking regard of repercussions of other silo’s operations.
Phase 2 represents the incremental changes that occurred from the 1980s to 1990s. During that period, corporate leaders started seeing the benefits of aligning their organisations, along with the associated business objectives and performance incentives for executives and underlying business processes.
The lower cost of computing and advances in technology increased penetration of computer-based planning technologies.
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This facilitated advanced planning and scheduling systems and enterprise resources planning systems in conjunction with business process re-engineering. Supply chain planning was now driven by cross-functional teams.
With the Internet phenomenon that facilitated collaboration in SCM, value networks have been developed. Integrated and centralised supply chain planning is becoming more effective and information for planning process is flowing bottom-up through the enterprise. Demand forecasts are being planned routinely and updated accordingly where there is need.
The supply chain execution decisions are becoming more increasingly decentralised. Supply chains are migrating from push models to pull models because of the availability of real-time information that allows flexibility and responsiveness to changes in customer demands and product lead times.
The benefits of adopting phase 3 of the evolution in Zimbabwe are that geographically spread institutions will not need to tie a lot of capital in stock just in case there are supply challenges. Where decision-making and operations are decentralised, the aggregate cost of stockholding is huge and thereby reducing overall stock turnover ratio.
At institutional level, products and services costs will be standardised by centralised decision making whilst execution is decentralised.
This will eliminate cost and price discrepancies for geographically spread operations. Centralised procurement decision due to economies of scale attract lower prices boosting business profitability.
At central government level, the Ministry of Public Works, Education and Health, and parastatals and statutory bodies such as Zesa’s generation and the transmission and distribution companies, DDF, Zinwa, Zimra and others in private or public in similar circumstances need to look back and assess themselves.
Due to the change that is coming fast and furious, supply chain professionals need to be up to date with trends within the profession.
It is about time you ask yourself again, how much has my organisation evolved in supply chain management?
