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CSCB Report

Value-Added Supply Chains and the Logistics Professional

by Carol West

Here’s a text-book definition of a supply chain: “A supply chain is the global network used to deliver products and services from raw materials to end customers, through an engineered flow of information, physical distribution and cash.”

How will technology change the role of the logistics professional in this network?

The quick answer is that, if we are smart, our role will move from purely tactical one – maximizing efficiency and minimizing costs throughout the supply chain – to a more strategic, value-added role. Explaining why, and what this means, is a bit more complicated.

Traditionally, companies view the operation of supply chains as a tactical issue, not a strategic one. The role of the logistics professional is not to add value to a sale, but to help execute the transactions necessary to complete the sale throughout the supply chain. When a seller ships product, our job is to make sure that it gets to the right place, at the right time, at the right price.

New technologies, especially Internet-based technologies, help us do that job better. They give us tools to automate the process of managing and exchanging information with our business partners. This in turn helps us to reduce fulfilment costs, shorten delivery times, and provide a more consistent, reliable service from start to finish.

Viewed this way, the technologies we use don’t change what we do, they just help us to do it better. Unfortunately, it is also a short-sighted view of what’s really happening in the Internet-enabled economy.

The Internet is about universal communication, universal access to markets and speed. From a buyer’s point of view, it means instant access to suppliers anywhere in the world. From a seller’s point of view, it means enormous competitive pressures to meet increasingly complex customer demands – demands for “total solution” transactions that might include anything from highly customized products to inventory management services, specific sourcing requirements and tailored financing, with goods delivered when and where they choose.

To meet these demands, companies are starting to develop new business models that bring together multiple players in flexible, often temporary strategic partnerships to create virtual commerce networks – networks that integrate the sales, production, delivery and service capabilities of many different companies. To succeed, these partnerships must be able to form quickly, change as needed and operate seamlessly as though they were one organization.

This is impossible, if we view technology primarily as something that lets us do old things better. We have to use it to do better things. Just as information technology helped re-engineer business processes within corporations over the past decade, it is now helping to re-engineer processes between companies. For many, this is where the real power of the Internet lies, and its impact on the marketplace is just beginning.

It is here that we should be thinking hard about our role as logistics professionals, and the ways that we can use technology to facilitate new kinds of strategic partnerships.

Our role can, and I think will, change in three fundamental ways.

First, we will need to focus not only on tactical issues – executing specific logistics transactions – but on strategic issues affecting the performance of the supply chain as a whole. When the supply chain consists of multiple players, and the players themselves may change quickly, we need to use our expertise to constantly maintain optimal performance throughout the network.

Second, we need to develop appropriate technology and information support systems. These systems must go well beyond automating existing business processes, to support strategic management decisions within and between all parties involved in a transaction. And we have to develop the strategic business skills – an understanding of corporate-wide business processes – so that we can provide our clients with the value-added service they need.

Third, we need to leverage our expertise in managing knowledge and managing relationships. As supply chains become increasingly flexible and fragmented, managing the flow of information between all the players, and the business relationships involved, becomes more critical than ever before.

Anyone involved in logistics management is liable to find their role changing. While any logistics professional has a tremendous opportunity to develop new skills, apply new technologies and leverage their expertise into a more strategic, value-added role in the supply chain, it is customs brokers who have been among the first to recognize and respond to this changing role. As the longstanding managers of the most complex cross-border transactions, and because they have always played a role in managing complex trade relationships, customs brokers are perfectly positioned to find opportunity within the networked economy and to provide exactly the type of value-added service that is required today.