High speed and low cost have become the holy grail of supply chain management. Studies however have shown that this alone doesn’t translate to improving supply chain bottom lines. In the United States in 2000, supply chain efficiency was greatly improving. Yet, this was followed by the rise of marked down products from 10% to 30% by 2000 and decreased consumer satisfaction, according to Director of the Stanford Global Supply Chain Management Forum Hau L. Lee. It’s clear that there is a fundamental flaw in the way most businesses approach supply chain.
Believing that an effective supply chain is key to the delivery of high quality products that work for the end users, Bahtera has made this one of our key focuses. As part of a company-wide business transformation, we recently set our new vision: To be an inspiration in the creation of a globally recognized upstream supply chain through increased productivity and effectiveness. To deliver this vision, we look at how we can improve the existing supply chain process.
According to Lee, three key characteristics define top-performing supply chains: agility, adaptability, and alignment across the supply network. While agility pertains to the ability to respond to changes in market supply and demand, adaptability has more to do with the supply chain process as a whole. Economic progress, technological advancement, and market trends require companies to make constant adjustments to their supply chain process. Meanwhile, alignment means taking into consideration the business interest of all parties in the supply chain for an optimal process.
How does this look like in practice? Let’s take a look at the supply chain darling Zara. The $14.7 billion Spanish apparel retailer has been touted as one of the best in supply chain with the ability to get a product to store in just two weeks. While other companies focus on the supply side of supply chain, Zara puts the same level of commitment to the demand side. The brand uses technology to capture data on consumer preferences on their stores, which are linked to their production and fulfillment systems. This allows them to create products that fit the customers’ latest tastes, without adding unnecessary pressure to the production and distribution process. Zara also sets a series of parameters for their design and production teams, effectively reducing lead times and streamlining the supply flow. All of these result in extremely high visibility on capacity, cost, and availability.
While the supply chain need differs from industry to industry, the underlying concept remains the same. A good supply chain must be an intertwined system that covers the entire business pipeline. The chemical industry is no different. According to a BCG report from 2017, the chemical industry’s supply chain leaders have successfully improved their supply chain bottom line by shifting toward a supply chain management that puts customers as a focus.
This is a vital move for an industry that still puts much of its attention towards R&D and production in a world where higher expectations on customer satisfaction have extended beyond the retail sector. By employing this approach, the industry’s supply chain leaders record 14 times inventory turnovers with 2.2% transportation costs, while their lower-tier counterparts record only 6 inventory turnovers a year with 3.6% transportation costs.
Bahtera tries to replicate this holistic process with our partners and principals through our three solutions of Marketing, Product Development, and Supply Chain. Market data is captured on an ongoing basis through Bahtera Marketing Solution. We then use these data to refine product concepts and formulate new products for our partners as part of our Bahtera Product Development Solution. All of these are supported by Bahtera Supply Chain Solution, which focuses on integrated inventory management and product delivery from factory to door.
Through this approach, we hope to lay down the groundwork for the creation of an agile and resilient supply chain in the chemical industry. Borrowing from Lee’s adaptability approach, development, refinement, and improvement will continue to be made to this approach. The same thing must be made for the chemical supply chain in general to create a supply chain that is truly effective in producing high quality products for the market while improving business bottom line for manufacturers.
