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Supply chain innovation and change are the driving forces behind today’s modern supply chain, and, according to Nye Longman of Supply Chain Management, the rate of change isn’t going too slow. However, new trends in technology, process automation, and better customer-relationship management tools are essential in responding to innovation and change. In the supply chain, supply chain practitioners have always focused on several key fundamentals, e.g. revenue, profitability, and service, explains CJ Wehiage of Kinaxis.

Supply chain practitioners must embrace newer fundamentals, such as the use of social media, the Internet of Things, easy-to-implement supply chain management tools, and software-as-a-service systems. However, keeping an eye on fundamentals is not quite as easy as it seems. Instead, supply chain practitioners must focus on understanding what comprises supply chain innovation and change, why the supply chain relies on fundamentals, what these fundamentals are, and how supply chain partners must work with these fundamental to benefit the future of the industry.

Defining Supply Chain Innovation

Merriam-Webster defines innovation as follows:

  • An idea, method, or device.
  • A means of introducing a new idea, method, or device.

Based on these definitions, change seems to be the inevitable counterpart of innovation. However, change can sometimes be left behind, and innovation is only partly embraced.

For example, a supply chain entity deploys new analytics software throughout the entire organization. Analytics provide real-time insight into the current performance of the company, but the information lacks value if not applied, which is where change comes into play.

It would seem that change management is the natural successor to innovation and change, as defined by TechTarget. Yet, change management simply refers to a systematic approach to dealing with changes. In reality, change management does not actually embrace the change, it prepares for it. For supply chain entities, innovation and change must be prepared for and addressed directly.

Why Does Supply Chain Innovation Rely on Business Fundamentals?

Supply chain fundamentals form the building blocks of the supply chain. Without the application of revenue, profitability, and service, the supply chain would cease to exist. However, many modern supply chain entities have forgotten the need for these three factors of the supply chain.

For example, some supply chain partners have become overly focused on social media, sustainability, and visibility. Although each of these focuses make up a new basis for the supply chain, supply chain entities cannot forget the importance of the original, three fundamentals.

Additionally, modern fundamentals of supply chain management are not without flaws, but many of these flaws can be overcome through the use of traditional fundamentals.

For example, a company who has difficulty in implementing a new warehouse management system may feel lost. However, many newer warehouse management systems can easily integrate with the company’s existing warehouse management tools to make the transition seamless. Essentially, this goes back to the service and profitability part of the supply chain.

Companies who work with supply chain partners to develop these newer technologies have a vested interest in ensuring the supply chain entity is able to maintain profitability and enhanced customer service through the use of their software. These basic fundamentals are what allow the modern supply chain, asserts Nye Longman, to succeed the traditional supply chain.  

What Are the Fundamentals of the Supply Chain?

The fundamentals of the supply chain reflect basic fundamentals of nearly every business on the planet. These include improving customer service relationships, increasing the welfare of employees, maintaining profitability with stakeholders and partners, and improving production. However, the supply chain must grow and adapt to the demands of modern society. The historic rationale for increasing fuel efficiency of vehicles relied on decreasing the cost to the consumer. Today, the modern supply chain must make these changes to improve sustainability, a focus of many modern governments and regulatory agencies. Failure to meet these requirements could also result in severe implications and blow back for the company.

For example, Shell Oil recently had a dispute with environmental activists over the right to drill for oil in the Arctic, explains Time magazine. Although a judge ruled in favor with Shell Oil, the environmental activists were able to successfully push back the launch of a vessel to sea for several days.  Within five months, the Obama administration had successfully blocked the attempts of Shell Oil to obtain a drilling permit for the upcoming drilling season. As a result, the actions of the environmentalists could have been inferred to directly cause a delay for the company, which impedes all future abilities of the company during the current administration.

If a small number of individuals, in this case, less than 200 Greenpeace volunteers, can successfully halt the work of an established oil and gas giant, it stands to reason that supply chain practitioners would have no choice but to seek out and improve sustainability and environmentally friendly measures in a similar situation. If modern supply chain entities failed to make this connection, they could face the wrath of today’s watchdog organizations, which are often far more skilled than the company in terms of social media followers and ability to generate hype over the company’s plans.  

How Do Supply Chain Partners Work With Fundamentals to Benefit the Future?

Where does the future of the supply chain innovation rest? Jean Murray of SupplyChainBrain has spoken at length with different individuals and supply chain leaders, such as Frederick Hartung, about how embracing change and innovation are critical to ensuring the survival of the company. Frederick Hartung went on to explain how big data and analytics are two of the most common terms in modern supply chain management. However, most supply chain entities do not take advantage of the true benefits and value of these abilities.  

As explained by Gartner, companies that have embraced innovation and change are the two primary characteristics of top leaders on the Gartner Supply Chain Top 25. Although this seems trivial, there is a 36 percent gap between these leaders and other entities on the list. These remaining entities focus on strategy and change management, yet many of these companies do not actually implement changes. The defining hallmark between the top companies and the lower companies is action, not preparation.

supply chain innovation gartner top supply chain 2015

New technologies are being developed every day, and the applications of new technology range from improved biomedical engineering to automated shipment tracking to decreased frustration for consumers with unique product needs.  As the modern world continues to fill the existing void with new technologies, capabilities, and insight, supply chain partners must be willing to embrace and respond to supply chain innovation and change. However, companies must remember the fundamentals of the supply chain. After all, where would the supply chain be without revenue, profitability, and service-centered ideals?