How SUPPLY CHAIN 3.0 Can Lead To Tangible Business Benefits (Part 6 Of 6)

Share
Share
Share
SUPPLY CHAIN 3.0

Share:

How SUPPLY CHAIN 3.0 Can Lead To Tangible Business Benefits (Part 6 Of 6)

Following two benefits outlined in the previous entry, in this last entry of the blog series, let us go over the remaining benefits of Supply Chain 3.0.

By Definition, Supply Chain 3.0 Improves Your Cash Position

Recall from the previous blog series that “The second measure of interest to us is in Supply Chain 3.0 is the $eed-to-$tore Efficiency.

I mentioned that this is the darling of the supply chain crowd especially those coming out of logistics background.

Right product, in right place, in right quantity, at right time (there are many other Rs which people add on, but we will stay simple here) – is the catch phrase.

The aim is to churn the cash faster so that more of it sticks around for longer.” In fact, the data from a systematic study carried out by the Aberdeen Group reveals two critical insights.

Firstly, the companies with more robust business networks have far superior cash conversion cycle – nearly 6 times better cash conversion cycle. Take a look at Figure 1 below:

Cash Conversion Cycle in Supply Chain 3.0

Global Supply Chain Group - QWEt

Figure 1: Aberdeen Group, Working Capital Optimization, June 2007

Secondly, and more importantly, their cash conversion cycle actually improved during the 2 years of testing times leading up to the global financial crisis, while the rest of the industry went backwards. As you can see in Figure 2, 92% of business network masters have improved their cash to cash cycle over the two years leading up to the Global Financial Crisis (GFC) while only 18% of business network laggards have improved it, while for 29% of them it became worse.

Global Supply Chain Group - WERVt
Figure 2 : Is the result shown in figure 2 surprising? Hardly, if you reconsider the story of Nokia vs. Ericsson in the last blog entry. Same catastrophic fire nearly decimated one company while left the other one even stronger to later face onslaught of another supply chain 3.0 hero – that of iPhones.

Supply Chain 3.0 Has High Velocity

In economic booms, whether accompanied by economic volatility, or economic stability, supply chain 3.0 allows you to realise higher profits, quickly.

In fact the potential of your company’s capabilities are multiplied many times over, perhaps by a factor of as much as 100 or more, by the leverage effect provided by your supply chain 3.0. How?

Let us consider an example – the booming commodities industry. In the last 10 years to 2012, no other industry has boomed as much as the commodities industry.

Prices of iron ore, copper, coal, gold etc. have gone up exceptionally during this period. Within this industry, iron ore is one of the largest and most capital intensive operations – dominated by three global giants BHP Billiton and Rio Tinto of Australia, and Vale of Brazil.

In this scenario, to build a large iron-ore producer and exporter from scratch took Andrew Forrest of Fortescue Metals the full extent of supply chain 3.0.

To raise finances, to build mining infrastructure, to build and gain access to the logistics infrastructure and to market the product in the international commodities trade,

Fortescue Metals built a capacity in 3 years that many of its much bigger rivals would have taken more than 30 years to build. .

This was only possible through extensive utilisation of business networks that the company built, nurtured and managed effectively into creating a supply chain 3.0

Supply Chain 3.0 Help Smooth Out The Volatility

Recall my earlier example of companies using supply chain 3.0 to configure more flexible labour force through use of sub-contractors and outsourcing.

In volatile times this is essential to smooth out the earnings. Now let us look at a more concrete example, in a highly volatile industry.

Global bulk shipping industry is one of the most volatile industries, with the shipping rates falling as much as 94% with a period of 4 weeks, or rising up to 400% with a period of few months.

In such a volatile business environment, budgeting and planning can become a nerve-racking exercise for all the companies except those which use their supplier networks to cushion the lean periods with long term contracts and find scarce capacity during the boom periods.

We have only seen a few examples of benefits that supply chain 3.0 – a business network of collaborating entities – can create for businesses. I will discuss more examples and as well as how to get there in future blogs.

Related

Share Generously :

LinkedIn
Twitter
Facebook
WhatsApp

Copyright - These concepts, frameworks and ideas are copyright of GLOBAL SUPPLY CHAIN GROUP from the time of their creation. Do NOT copy these without permission and proper attribution.

Notes:

1. These ideas and concepts will be usually expressed by our thought leaders in multiple forums - conferences, speeches, books, reports, workshops, webinars, videos and training. You may have heard us say the same thing before.

2. The date shown above the article refers to the day when this article was updated. This blog post or article may have been written anytime prior to that date.

3. All anecdotes are based on true stories to highlight the key points of the article - some details are changed to protect identification of the parties involved.

4. You are encouraged to comment below - your real identity and email will not be revealed when your comment is displayed. Insightful comments will be featured, and will win a copy of one of our books. Please keep the comments relevant, decorous and respectful of everyone. All comments represent opinions of the commentators.

Our Quick Notes On Five Flows Of Supply Chain Management

Part of our new “Quick Notes” series – this report answers your most pertinent questions of the topic.

LIMITED TIME
USD 20
FREE

. What are the five flows of SCM?

. Why are they important TO YOU?

. How can you map, track, and optimise these flows to serve YOU?

. What is the importance of difference between "Supply Chain" and "Value Chain"?

. What are the stellar case studies of each of the five flows?

MORE INTERESTING READING

Leave a Reply

Your email address will not be published.

Table of Contents

ABOUT THE PRINCIPAL AUTHOR

Today, Vivek and his partners are among 20-30 people on the planet earth who have this deep understanding of supply chain systems, practices and tools. CEOs, COOs, executives and Boards call them in most challenging situations once they know the full potential of supply chain based transformations. Following are key milestones in Vivek's journey:

  • Started in 1983 as a merchant navy cadet at 18 years age, worked his way to qualify as a Captain – qualified to take command of any merchant ship, worldwide.
  • Earned a top tier MBA from UNSW at the top of his class.
  • Joined highly regarded strategy consulting firm Booz Allen & Hamilton, consulting to the CEOs, Boards and senior management of global corporations within Australia.
  • To learn and specialise in supply chain – against all odds, sought out the co-inventor of supply chain in Germany and convinced him to be a partner in his firm, GLOBAL SUPPLY CHAIN GROUP, launched in January 2000.
  • More than 500 successful blue chip projects with high impact business transformations in large corporations using the full power of SUPPLY CHAIN MANAGEMENT.
  • 4 Seminal and path breaking business books IN SUPPLY CHAIN MANAGEMENT – these are available in bookstores and universities and libraries worldwide.

Limited Time

FREE

This offer expires in

Our Quick Notes On Five Flows Of Supply Chain Management

US$20

USE CODE "FREETODAY"

WHAT OTHERS ARE SAYING

Our Clients say it better than we ever could:

TRENDING POSTS

OUR CLIENTS

Our Clients come from a variety of industries – yet they have a common element. They rarely rest on their laurels, and are always looking to do better.

OUR PROJECTS - EFFECTIVE TRANSFORMATIONS

In the last 20 years we have completed more than 500 projects. Click below to see a sample of our projects.

OUR TESTIMONIALS

RELATED POSTS

Our Books

5.0
5/5

THE 5-STAR BUSINESS NETWORK

If you are deeply passionate about the world of business and supply chain networks as I am, and enjoy digging answers to critical questions that will help build and steer your business with wisdom, then join me. This book is a journey of exploration through the world of business networks that run along the veins of today’s commercial world.

4.3
4.3/5

OUTPERFORM OUTSOURCE OUTPROFIT

The trend of outsourcing continues to grow unabated with the whole gamut of services, from simple to mission-critical tasks. There is not a single company on earth that does not outsource anything. It is not just about cost arbitrage, it is also a finer expression of division of labour at the organisational level. Like all leverage, outsourcing is a double-edged sword too. On one hand, it allows you to do more, faster. On the other hand, if it goes bad, it can easily kill your business. If you do not believe that is possible – you can google the Fox Meyer saga from the 90s and see for yourself.

4.3
4.3/5

UNCHAIN YOUR CORPORATION

Businesses Are Chained By Unseen Chains. If You Are Looking For Ways To “Unchain Your Corporation” A Successful Business Transformation Is Required.

Successful Business Transformations Are Difficult, Yet Rewarding.

Business Transformation Is Fast Becoming A Question Of Survival In The Modern Globalised Era.

Modern Supply Chains Integrate Businesses And Economies Faster By Systematic Information Sharing From Internal And External Sources.

Companies Can Multiply Profits By Progressively Ramping Up Cohesion And Collaboration Of All Moving Parts In B2B Network To Achieve Tighter Integration.

4.3
4.3/5

GREEN SUPPLY CHAIN – AN ACTION MANIFESTO

It is generally accepted that environmental consciousness is now changing to environmental proactiveness as organizations are discovering that it makes good commercial sense.

Boards are asking the management to review their policies related to environmental norms, not only to bolster their corporate social responsibility aims, but also because consumers are asking for greener supply chains

It is also widely agreed that consumers will increasingly prefer to buy more and even pay more for products or services provided in an environmentally sound manner.

FOR SENIOR EXECUTIVES AND DIRECTORS

YOUR HIGHEST VALUE ADDED IN YOUR COMPANY