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Revolutionizing Supply Chain: The Advancements and Differences of SCM 3.0
Global supply chain blogs
About the Author
Vivek Sood: Sydney based managing director of Global Supply Chain Group, a strategy consultancy specializing in supply chains. More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available www.globalscgroup.com
Vivek is the Managing Director of Global Supply Chain Group, a boutique strategy consulting firm specialising in Supply Chain Strategies, and headquartered in Sydney, Australia . He has over 24 years of experience in strategic transformations and operational excellence within global supply chains. Prior to co-founding Global Supply Chain Group in January 2000, Vivek was a management consultant with top-tier strategy consulting firm Booz Allen & Hamilton.
Vivek provides strategic operations and supply chain advice to boards and senior management of global corporations, private equity groups and other stakeholders in a range of industries including FMCG, food, shipping, logistics, manufacturing, chemicals, mining, agribusiness, construction materials, explosives, airlines and electricity utilities.
Vivek has served world-wide corporations in nearly 500 small and large projects on all continents with a variety of clients in many different industries. Most of projects have involved diagnostic, conceptualisation and transformation of supply chains – releasing significant amount of value for the business. His project work in supply chain management has added cumulative value in excess of $500M incorporating projects in major supply chain infrastructure investment decisions, profitable growth driven by global supply chain realignment, supply chain systems, negotiations and all other aspects of global supply chains.
Vivek has written a number of path breaking articles and commentaries that are published in several respected journals and magazines. Vivek has spoken at several supply chain conference, forums and workshops in various parts of the world. He has also conducted several strategic workshops on various aspects of supply chain management. He received his MBA with Distinction from the Australian Graduate School of Management in 1996 and prior to these studies spent 11 years in the Merchant Navy, rising from a Cadet to Master Mariner.
More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available on www.globalscgroup.com
Introduction
Supply chain management (SCM) has undergone unprecedented changes over time. The first generation of SCM was targeted for optimizing internal operations to reduce costs and improve efficiency. The second generation of SCM expanded the scope to include supplier relationships, with a focus on strategic sourcing and supplier development. However, SCM 3.0 marks a major change in the way supply chains are managed. In this blog, we will explore the key differences between the three generations of SCM and the benefits of SCM 3.0 for businesses. We will also examine the importance of a collaborative approach to supply chain management for maximizing profitability.
Differences in SCM generations
Supply chain management (SCM) has undergone significant changes over the years. From the first generation to the third, each iteration has brought about new innovations and approaches to managing the flow of goods and services from production to consumption. In this blog, we will explore the differences between all generations of supply chain management and how SCM 3.0 differs from its predecessors.
First generation of SCM
The first generation of supply chain management (SCM 1.0) was focused on achieving internal efficiencies and cost savings. This era of SCM emerged in the 1960s and continued through the 1990s, where the emphasis was on optimizing individual functions within a company, such as production, inventory management, and transportation. The primary goal was to reduce costs and maximize profits by streamlining internal operations.
In SCM 1.0, companies typically managed their supply chains with a linear, hierarchical model. Here each function operated independently of the others. Information was shared vertically within the organization, and there was little to no communication with suppliers or customers.The tools and technologies used in SCM 1.0 were limited, with little use of computers and information technology. Companies relied on manual processes, spreadsheets, and phone calls to manage their supply chains.
Second generation of SCM
The second generation of Supply Chain Management (SCM 2.0) emerged in the late 1990s with the advent of e-commerce and the internet. SCM 2.0 brought about a new level of integration, visibility, and collaboration opportunity within the supply chain. This generation focused on real-time data exchange and collaboration among supply chain partners to enable efficient demand planning, production, and logistics.
One of the key differences between SCM 1.0 and SCM 2.0 was the introduction and implementation of enterprise resource planning (ERP) systems. Compared to modern ERPs these were very primitive in sophistication. These systems enabled companies to better integrate their internal department, process and systems, which led to improved supply chain visibility and coordination. In addition, SCM 2.0 focused the importance of collaboration and information sharing among supply chain partners, leading to the development of new technologies such as electronic data interchange (EDI) and web-based communication platforms.
SCM 2.0 also saw the emergence of new business models, such as drop-shipping and third-party logistics (3PL). Drop-shipping allowed retailers to offer a wider range of products without holding inventory, while 3PL providers offered specialised logistics services such as warehousing and transportation.
Third generation of SCM
The third generation of supply chain management, also known as SCM 3.0, represents a significant shift from the traditional linear model of SCM. Unlike the first and second generations, SCM 3.0 emphasizes collaboration and communication among all players in the supply chain network, including suppliers, manufacturers, distributors, and customers.
One of the key features of SCM 3.0 is the use of advanced technology and data analytics such as SaaS, AI powered business interfaces to optimize the entire supply chain process. This allows for real-time tracking of inventory levels, production processes, and customer demand, enabling companies to make faster, data-driven decisions that improve efficiency and reduce waste.
The edge in SCM 3.0 is a focus to customer-centric approach for product design and development. R&D teams from multiple organizations work together in tandem to create products that meet the specific needs and preferences of their target market. This approach results in more innovative, high-quality products that generate greater customer loyalty and satisfaction. Another important aspect of SCM 3.0 is the use of sustainable and ethical practices throughout the supply chain. Companies are increasingly focused on reducing their carbon footprint and promoting social responsibility, and SCM 3.0 provides a framework for achieving these goals while also improving profitability.
Feature | SCM 1.0 | SCM 2.0 | SCM 3.0 |
Focus | Internal efficiency | Collaborative networks | Customer-centric design |
Coordination | Hierarchical | Cooperative | Networked |
Information | Limited | Shared | Integrated, real-time |
Innovation | Limited | Incremental | Disruptive, rapid |
Responsiveness | Reactive | Proactive | Anticipatory, adaptive |
Performance | Cost-focused | Quality-focused | Value-focused, end-to-end view |
Key Actors | Individuals | Organisation | Networks |
Economic Guru | Adam Smith | J.M Keynes | Barry Nalebuff |
Visual Metaphor | Torch | Laser | Sunlight |
Conclusion
Each generation of supply chain management has brought about new innovations and approaches to managing the flow of goods and services from production to consumption. The first generation focused on optimizing the supply chain within their organisation my improving each department individually. The second generation focus on linear integration with suppliers , manufactures with use of data . The third generation focuses on collaborative network for advancement in business operations. SCM 3.0 represents a significant departure from the traditional linear model of SCM and has the potential to revolutionize supply chain management as we know it.
Introducing.....
The global supply chain of products is an immense and complex system. It involves the movement of goods from the point of origin to the point of consumption, with intermediate steps that involve resources, materials and services to transport them. A supply chain encompasses activities such as purchasing, production, distribution and marketing in order to satisfy customer demands. Companies rely on a well-managed supply chain to meet their business goals by providing quality products and services at competitive prices.
Efficiently managing a global supply chain requires considerable effort, particularly when dealing with multiple suppliers located around the world. Complex logistics tracking systems are needed to monitor product movements from one place to another. Technologies such as artificial intelligence (AI) can help companies keep track of shipments across different locations for greater visibility into their processes.
what did Our Reader say?
GARRY BADDOCK
Chief Operating Officer Graphite Energy
I have experience with many of the well-known top-tier strategy firms but chose Global Supply Chain to support me on my supply chain projects. They always meet and exceed my expectations due to the quality of the work, the ability to work collaboratively with internal teams, and the flexibility to adjust the project approach when required.
PHILLIPPE ETTIENNE
CEO - Large Global transnational corporation From: FOREWORD - OUTSOURCING 3.0
When I engaged Vivek’s services for supply chain transformation in one of the companies I was heading, we expected the careful and methodical approach that he was famous for... I was pleased to note that the original target set for 3 years was surpassed by almost 70% in just 18 months.
TONY FEDOROWICZ
Vice-President Supply Chain Asia Pacific
I have used their services for several business transformations and workshops in many companies. Each time an outstanding workshop and project result was delivered ensuring the success of the business transformation project. Savings surpassed $25 Million per annum in one case. Very powerful ideas, were implemented very diligently.
Jean-Briac Le Dean
Co-Founder & Agen
Vivek is a very collaborative and open leader who leads teams by example. Whether internal teams, or clients teams, all are impressed by his intensity, energy level and drive to make things a little better.
Lorna Calder Johnson
Omni-Channel Product Marketing
P & L Executive
Vivek's transformation expertise is apparent from his results and dedication to operations and supply chains. His strategic expertise, knowledge and network make him a standout even among an excellent team.
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