In the new business environment, businesses have to play a new balancing act. They have to balance lower costs with higher product and service quality. Increasing competition is forcing companies to find new ways to cuts costs, while increasingly demanding customers are pushing companies to provide higher quality. Companies have found that IT solutions may help create a balance between these seemingly diverse objectives.

Supply Chain Management (SCM) technology is one such IT solution. More and more companies are finding that efficient supply chains can help cut costs and deliver higher value to customers. The companies are not only looking at their own internal processes but have started to expand beyond their own boundaries and are evaluating their suppliers’ processes as well to build greater efficiencies. This trend will eventually impact all companies operating in the B2B space as their corporate customers are going to select suppliers not only based on price but on internal efficiencies.

A Conference, addressing the issue of need for greater collaboration between companies to build supply chain efficiencies, called ‘e-SCM…. Collaborating to Compete’ was organised by SCM Worldwide at the Regent Hotel, Mumbai on October 4-5, 2001. The delegates included representatives from topnotch companies like Colgate Palmolive, P & G, Asian Paints, Godrej. A leading provider of SCM solutions, i2 technologies, sponsored the event.

While the Conference focussed on technological solutions in SCM, certain emerging industry trends also came to light. Some of these are:
 

• Collaboration- Companies are beginning to collaborate closely with suppliers and reap the benefits of greater communication and transparency. To this end, companies treat their suppliers as another department rather than an external entity. While this is happening, research suggests that there is scope to increase collaboration tremendously. A global study done by internationally reputed research outfits in March 2001 reveals that more than 64% companies feel relationship with suppliers can be enhanced. The biggest hurdle in this process is seen to be the unwillingness of the concerned parties to share information freely.
• Tierisation- This has become quite evident in the automobile sector and is slowly starting to appear in other industries as well. Companies are categorising their suppliers in Tier I and Tier II. The Tier I are the critical and preferred suppliers and companies are beginning to build collaboration based on supplier status.
• Outsourcing- Companies are outsourcing non-core activities so as to focus on building their core competencies. In some cases, this could entail outsourcing the manufacturing base. Thus companies no longer deal with raw material and parts suppliers but with contract manufacturers, a trend which is becoming obvious in the pharma industry.
• Technology adoption- Increasingly e-SCM is being viewed as a tool for competitive advantage. Technology is providing a tremendous input to build collaboration. Companies are ensuring technology interface exists between their own internal processes and that of the suppliers. In cases where the suppliers are not big or sophisticated enough to have their own technological infrastructure the companies are making investments on behalf of their suppliers or alternatively are providing a web-enabled platform, which the suppliers can log onto.
• e-Procurement- Finding the benefit of using the internet to seek better suppliers, companies are moving their procurement activities to the Internet. Earlier, e-procurement mainly involved indirect materials, but the trend is now towards online procurement of direct materials also.

Taking advantage of the need of better technological solutions to address the new trends, IT companies are offering more products in the SCM domain. Some of the areas of the Supply chain that are being addressed by current IT solutions are:
 

• Design and Manufacturing: This solution enables companies to share product content, schedules and constraints to execute integrated workflow across extended supply chain.
• Supply Collaboration: Helps to identify timing and quantity of purchases helping to match supply with demand.
• Demand Management: Helps to anticipate demand patterns considering sales and marketing, events and new product introductions through joint planning with customers, distributors, suppliers and key partners.
• Supply Chain Event Management (SCE): Helps to enable advance planning, promise intelligently to customers and manage events in the supply chain to deliver as per promise.
• Collaborative Planning Forecasting and Replenishment (CPFR): This tool enables real time collaboration by enabling companies to share information ranging from purchase orders to manufacturing schedules. In the ideal scenario, the ERP systems of the companies start transacting and sharing information.

The Conference also included case studies highlighting SCM initiatives by P &G, Shell, IBM, Glaxo Smithkline and Siemens. What is noteworthy is that all the case studies were of MNCs. It is anybody’s guess that it is but a matter of time before Indian companies and their supplier base will have to catch up on this global trend.