Supply Chain as a Service: Your Answer to Greater Agility & Profitability
Today we can have nearly anything at our fingertips with the click of a button. As consumers we can order pizza online from Domino’s, see who’s making it and track it real time to our door. While we wait for our pizza to arrive, our Netflix account guesses what we want to watch and serves up our favorite new bingeworthy show we didn’t know we loved. As all this is happening, our new plates are delivered from Amazon just in time for us to receive our steaming hot pizza. On-demand products and technologies have brought us massive time savings. Product costs too are reduced along with purchase risk. Why then can’t we have these same on-demand benefits applied at our companies? Today you can. Forward-thinking leaders are embracing on-demand support models, like Supply Chain as a Service, for their day-to-day business operations to realize the same proven results we’ve experienced as consumers.
Supply Chain as a Service is empowering leaders with a compelling strategic lever to gain greater company agility and profitability, and presents a rare opportunity in business to reduce costs while enhancing organizational capabilities. If adopted, this new way of doing business is poised to save, not cost companies money.
Trends Driving Adoption
“Minimizing risk while maximizing reward is a critical practice when it comes to optimizing your supply chain.” — American Production and Inventory Control Society (APICS)
Day-to-day supply chain management such as developing and launching new products and executing continuous improvement projects is critical to the ongoing success of your company. Unfortunately, it’s challenging to balance traditional expensive fixed-cost investments in people, software, facilities, equipment, tooling, inventory, fulfillment and logistics. In a predictably unpredictable competitive global economy, it’s too time consuming and risky to lead, manage and execute your supply chain alone.
Economic headwinds from tariffs to pandemics to recessions have led to an increasingly volatile market requiring enhanced supply chain expertise to navigate. Ongoing business trends from eCommerce to global sourcing to drop shipping have increased supply chain complexity, requiring precision supply chain execution to profit. Considering this environment, perceptive leaders are focusing more on core company capabilities and partnering with outside firms for non-core ones, resulting in more virtual enterprises with expanded overall capabilities. Customers’ desire for accelerated new product innovation is further pushing leaders to compress timelines calling for new, more agile approaches to accomplish more in less time. Lastly, cloud, mobile and artificial intelligence software technologies are affording leaders more productive “pay as you go” on-demand support options.
Progressive leaders are moving beyond simply outsourcing parts and non-core services to partnering with a newer breed of business process outsourcing (BPO) and technology enabled services providers to enhance capabilities, shorten product time to market, foster innovation and leverage variable cost structures to lower costs.
Waves of these types of service providers are disrupting markets from transportation (Uber) to hospitality (AirBnB), and now supply chain. Engaging on-demand “X as a Service” strategic partners to execute portions of one’s day-to-day business operations — from accounting to supply chain — is now accelerating across automotive, heavy truck, building products, consumer products and many additional industries. Small to midmarket companies can now acquire world-class capabilities at a fraction of the cost.
What is Supply Chain as a Service?
Supply Chain as a Service (SCaaS) is an on-demand “technology enabled managed service,” combining experienced professionals with cloud-based productivity software to support all or part of a company’s supply chain. A virtual SCaaS team partners with a company to execute procurement, supplier quality, production control, manufacturing, warehousing, order fulfillment and logistics operations.
SCaaS offers businesses a flexible service model to attain virtual economies of scale on day one without the up-front investment. Supply chain resources are determined based on an organization’s needs and they can scale as the company grows instead of recruiting and onboarding full-time employees. This innovative approach allows companies to realize lower and variable cost structures using proven technology and systems, and to gain instant scalability to generate up to a 4x ROI while freeing up valuable time to focus on customers and new product development.
“Supply Chain as a Service could solve multiple business problems in a single offering and help create a more demand-driven environment, which allows companies to adjust more quickly to end customer demand.” — Institute for Supply Management (ISM)
Variable Cost Support
A technology enabled managed services, “Supply Chain as a Service”, business model is a mix of fixed and variable costs, and scales to the customer’s needs on demand to reduce supply chain management cost, time and risk while ensuring consistent alignment. It’s comprised of two fees, one for managed services and another for delivery, and cloud-based productivity software empowers teams to be more agile, lowering supply chain task costs.
Because of the flexible ongoing support model, there’s no need to hire full-time supply chain team members or purchase supply chain software, which reduces fixed costs. Managed services providers accomplish this by optimizing fixed-cost support via one reoccurring fee for managed services that remains constant. This protects customers from downside risk (lower-volume forecasts) by lowering the up-front investment and overhead.
In addition, managed services providers protect customers’ upside risk by attaching the execution of supply chain (purchase of parts, etc.) to a percentage of costs to coordinate project needs with the necessary support. This creates short- and long-term alignment by providing fewer or more resources as a project may dictate.
Lastly, managed services providers utilize their established global supply base and part-buying power to further reduce customer cost, time and risk.
How it Works
A SCaaS managed services provider will analyze a potential customer’s data and build a tailored support proposal at no cost. Then, the managed services provider’s team will review the customer’s information and use their experience, cost library, and strategic supplier relationships to develop a proposal.
The value proposition of Supply Chain as a Service is to make obtaining supply chain support as simple as possible. Typically, streamlined proposals, supporting charts and tables are utilized to clearly outline customers current costs (either baseline or market) compared to future costs, cost savings and ROI.
Once a customer decides to move forward with SCaaS, they’re assigned a Program Manager and the managed services provider initiates support to execute supply chain operations. To reduce onboarding risk, a managed services provider should follow a standardized process for transitioning operations — i.e., a four-step process, to assess, set up, launch and deliver a customer’s product idea to production. Program Managers typically host weekly supply chain leadership meetings to summarize the prior week’s accomplishments, plans for the current week and for future.
Customers, managed services providers, and suppliers can all collaborate in real time using cloud software to exchange part costs, lead times, and technical requirements, accelerating product timelines. And customer engineering teams can work together in productivity tools like Automated Plan For Every Part (AutoPFEP) to develop and optimize future generation products. The customer’s cross-functional teams can also submit requests for specific supply chain support — e.g., supplier technical assistance and one-off purchases — via Agile Project Management software.
To make repeat indirect, service part, and maintenance repair and operations (MRO) purchases, customer teams can place orders in a mobile software application using a designated smartphone or tablet device at any customer location. The SCaaS team then ensures order availability, checks for optimal pricing, and leverages its buying power to reduce costs while delivering consistent and timely supply for customers.
The ability to utilize world-class supply chain professionals, processes and technology puts growing companies on a level playing field with larger competitors.
Foster a Competitive Advantage
SCaaS helps organizations improve agility and profitability by experiencing the same on-demand conveniences we enjoy as consumers. Its flexible, on-demand support model better positions companies to contract during economic downturns and scale during upswings, leading to quickly realized benefits in cost and time, and a foundation for lower-risk growth. The net result: partnering with a SCaaS managed services provider saves businesses money while fostering a supply chain competitive advantage.