The Economist Intelligence Unit white paper on The Future of Business: Supply Chains (recommended) uses examples to explain what is happening:
- Inditex, the Spanish parent of the Zara chain of “fast fashion” retail outlets, is perhaps the most famous example of supply chain agility. The company has been able to speed up design, production and delivery, allowing it to deliver “on-trend” clothes at bargain prices to broad audiences. Zara ascertains demand by using sales data from its retail outlets. Instead of manufacturing in Asia, like most of its competitors, Zara makes most of its goods in Spain and nearby locales in Europe. The higher labour costs are offset by the flexibility of having production close to its centralised warehouses and distribution centres, a strategy that has been widely copied by competitors.
They conclude that, “Speed is crucial. Product cycles are becoming shorter and more fluid as customers press for quicker development and delivery of new products and services. Companies need to improve their response times to meet those demands, changing organisational structures and business processes as necessary.”
The main focus now should be on removing complexity through the use of data, digital tools and business networks by:
- Using new sources of data
- Proactivley querying the data
- Working in synch with suppliers
- Expanding the network of suppliers to give the flexibility and agility that is needed today.
CTMfile take: Improved flexibility and agility in the supply chain is a must in today’s ever more competitive world. Many corporate treasurers will need to support an increase in the number of suppliers in their group’s supply chain and providing innovative ways to finance and pay their suppliers.
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