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4.5 Supply chain innovation

ICT also enables supply chain innovation – new forms of collaborative relationships within industry and business supply chains, with suppliers at the beginning of the chain, and with retailers (and increasingly final consumers) at the other.

ICT enables manufacturers to work closely with supply chain integrators who link initial supply with retail outlets. The food processing industry often refers to an integrated ‘paddock to plate’ supply chain. The ability to move data at the same time as physical goods is the essence of an efficient supply chain. Bar codes, radio frequency identification devices (RFIDs) and remote sensors are key ICT enablers in this process.

Supply chain innovation in food processing

Food processing is one of the largest manufacturing industries in the OECD, including Australia where it makes up 23 percent  of the manufacturing sector ( Australia. Department of Agriculture Fisheries and Forestry, 2004). However, the industry is fragmented; and with many firms operating at each level of the supply chain inter-organisational cooperation is a challenge. The demand by stores for products in bulk and at a relatively low cost, and high transportation costs pose particular challenges for firms in this sector.

A key challenge therefore is logistics management. This ends inside the store, where employees can use ICT (in the form of hand-held units) to improve ordering and even in some stores where customer self-scanning is being introduced. Manufacturers though are more interested in the larger efficiency gains that are possible through collaboration, information sharing and integration with suppliers and transporters outside the store.

Computer assisted ordering and vendor managed inventory are examples of such collaboration.

Regulation and compliance at various points in the value chain (such as health inspection and customs clearance) is also enabled through ICT. The concept of the virtual corporation is probably the pinnacle of supply chain efficiency where fulfilling customer demand is used to focus and drive the close management of supply chain relationships, service agreements and outsourcing.

In the clothing industry the influence of effective supply chain management (SCM) in the short term can be significant, with large savings and profit increases. Firms without excellent supply chain management capabilities will fail to be competitive. The underlying problem that SCM will solve is matching supply and demand, but tremendous demand uncertainty remains.

Successful retailers and their apparel and textile suppliers have taken advantage of huge changes wrought by ICT and which have made traditional manufacturing practices largely ineffective. In an increasingly fashion-oriented world, companies have had to respond to the practice of lean retailing – the effective management of inventory based on accurate and timely information (Abernathy,  Dunlop, et al. 2000). That is:

  • The retail, apparel and textile sectors are increasingly linked as a channel through information and distribution relationships. Thus, the channel, rather than the firm, becomes the basis for competition.
  • Supply chain management is the key to success for textile and apparel manufacturers. It enables them to use sophisticated information links, forecasting capabilities and management systems. Companies that do this well tend to be successful.
  • The factory can provide competitive benefits only if other, more fundamental, changes in supply chain management have been introduced. Unless firms change their distribution practices, there is no change to the bottom line.
  • As retailers and manufacturers respond more quickly to consumers’ demands, clothes will take on the characteristics of a perishable commodity.  To stay successful, companies will need to adjust their manufacturing paradigm in response to these flow on effects.

Bonds Clothing has demonstrated success in these areas.

Through the aggressive integration of multiple companies, supply chain speed and flexibility can be achieved while, at the same time, providing a higher quality of products and services to a broader spectrum of customers in a dynamic marketplace. ICT has been and will continue to be a critical enabler in this evolving production and market environment.

Inclusion in ICT enabled supply chains requires manufacturers to have an ongoing commitment to quality, consistency, reliability and product integrity. For example, food retailers and supply chain integrators have developed quality systems and other forms of accreditation and certification that provide the basis for manufacturers to enter into, and remain within, industry supply chains ( Australia. Department of Agriculture Fisheries and Forestry 2001, 2002; Howard and Higham 2002).   

ICT not only provides for monitoring of manufacturer performance in industry supply chains, it also provides for feedback and the basis for corrective strategies – and exclusion where standards are not being met.

 

 

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  • Document ID: 29115 |
  • Last modified: 5 February 2008, 10:31am