TODAY’S LEADING PRACTICES HAVE EVOLVED OVER DECADES; INTEGRATING AND ACCELERATING THE FLOW OF GOODS TO THE CUSTOMER
Lean The 80s: Automotive optimizes  inbound supply (JIT) Supply Production Distribution Consumer Responsive The 90s: Retailers optimize  inbound distribution (ECR) Supply Production Distribution Consumer Dynamic The 2000s: Electronics optimizes  the chain flow (CPF) Supply Production Distribution Consumer Customer centric  and integrated Supply Production Distribution Consumer The 2010s: E - Tailers integrate with the  consumer, and leverage  on superior SC  capabilities along the  entire chain JIT Just - in - Time ECR Efficient Consumer Response CPF Continuous Product Flow Lead industries create the examples for future best practices
Evolution of leading practices towards total integration Every practice used in a supply chain is applied to solve a particular problem. The nature of these solutions and the underlying problem can be minor, or major. Sometimes these solutions are “game changing”, leading to totally new ways to design, operate, and run supply chains. The first real movement towards a “chain” practice was the invention of Just-in-Time concepts in the automotive industry. The big challenge in the 80’s for this industry was the increasing level of variety in final products - model range, but also feature variety. In order to cope with the need to manage a complex inbound supply of many components for the assembly timing of a particular end product, a wide set of solutions was created to plan, produce, buffer, and deliver the components. Just-in-Time was born, and was at first internally perfectionized by Kanban Methods, which later on spanned also towards the suppliers. Retailers need products on the shelf - otherwise no revenue, and even the risk of loosing a consumer to a competitor brand. Transparency about purchases was required to collect the sold units to trigger an automated replenishment order. Technically a major challenge which was resolved, but the key challenge is the political willingness of the retailer to share the sales data, and not use their knowledge for price bargains. Electronics had to face short product lifecycles, and high product variety. The biggest cost of having intenvory turned from “cost of capital” towards “cost of obsolescence”. Interestingly, this means a much higher cost (and risk) than the interest rates which dominated traditional inventory considerations. Therefore they combined the concepts of ECR with JIT, added internal planning tools as well as inventory management tools, enabling continuous product flows. But now - E-Tailers control everything. They control the consumer in its move to buy the product, and they control the chain which delivers the product. In this, delivery does not mean the final distribution, but the entire chain of making to the product. This gives them immense power towards both ends, marking today’s leading industry how to design, operate, run, continuously improve, and also to innovate, a supply chain.
Welcome to the origin of today’s leading supply chain practices! Today, we live in a world in which instant availability has become a standard. We got used to fast deliveries, to reliability regarding promised delivery dates, and to a low cost environment But this has not always been the case, but is the result of hard work of many supply chain managers with their teams to create new solutions, and master all the challenges which for long time seemed to prevent their success. Over time, it is interestingly possible to link specific industries to major breakthrough innovations regarding leading practices in supply chains.