Owning the supply chain – critical or not?

From production to delivery, supply chain matters. Supply chain is a complex mechanism, made up of everything – logistics, technology and resources – that contributes to a product’s creation and sale.

In theory, a company which controls its supply chain has certain advantages. It can manufacture products at a lower cost and pass these savings on to customers. Being accountable for the end-to-end experience, a company may also be able to raise service standards. They have operational flexibility, meaning they can respond to external actions from competitors or customer behaviour. Tighter control over inventory management means less over or understocked goods and can facilitate just-in-time manufacturing where they assemble products when an order comes in. These factors allow business to run at a lower cost, increasing profits.

There are disadvantages with those approach too. Owning one’s supply chain, or at least a greater part of it, is a hefty investment that can be a drain on cash flow. Managing the supply chain is hard work with employees bearing bigger responsibilities. Why not outsource and let the experts handle it?

Whether a business chooses to handle the process themselves, like Amazon, or bring in specialists, it is clear efficient supply chain management is vital to any business operating today. Employees with a degree in logistics are becoming increasingly sought after by businesses looking for supply chain management skills.

The programmes and curriculum at University College Dublin (UCD), offered in conjunction with Kaplan Higher Education, are tailored to meet industry needs now and in the future. What’s more UCD is ranked within the top 1% of universities worldwide by Times Higher Education 2016-17.

Additionally,In fact the UCD College of Business was awarded Triple-Crown Accreditation by The Association to Advance Collegiate Schools of Business (AACSB), The Association of MBAs (AMBA) and European Quality Improvement System EQUIS). 1

“The logistics and marketing courses at Kaplan Higher Education respond to industry needs and are strongly aligned with industry job requirements nationally and internationally,” says Dr Brian Fynes, Professor of Supply Chain Management at UCD.

“Students cover several modules that equip them with the necessary knowledge to provide valuable input to the industry.”

As far as supply chain goes, global brands like Amazon, Apple and 3M have not hesitated to disrupt the status quo.

Amazon, a leading e-commerce platform, cemented its position in the industry with the launch of service Amazon Prime in 2014. With a low membership fee, eligible customers in the United States can receive goods within two days, on the same day or even two hours after an order is confirmed.

But a 2013 internal report, meant for Amazon’s senior management, revealed that the company had bigger plans – running an international shipping and logistics operation. 2

Named “Global Supply Chain by Amazon”, the platform hopes to wean merchants off established carriers DHL, United Parcel Service and FedEx. By consolidating orders across the world, it plans to offer delivery via third-party ships, trucks and planes at reduced rates.

“Sellers will no longer book with DHL, UPS or Fedex but will book directly with Amazon,” the report states.

“The ease and transparency of this disintermediation will be revolutionary and sellers will flock to FBA given the competitive pricing,” it added. FBA stands for Fulfillment by Amazon.

Amazon has also formed a team to do research on self-driving technology, and whether it can be used to improve logistics.

Earlier in April, Apple made a move to own its supply chain by dropping supplier Imagination Technologies. The latter designs graphics processing units, which are key to products like the iPhone. Apple has said that it will create units of its own within the next 15 to 24 months.

This decision allows Apple to reap full profits from upcoming technologies like augmented reality. “The performance advantages to owning the whole hardware stack are substantial,” said Mr. Ben Wood, Chief of Research at CCS Insight, to CNBC. 3

Adding: “One of Apple’s successes has been built on the fact they tightly control all elements of hardware, software and services, it’s a unique set of assets.”

Multinational corporation 3M takes pride in manufacturing around 85% of its products, which range from the Post-it® to packaging and computer accessories.

“Our supply chain is a significant competitive advantage for us. If we were to outsource manufacturing, we would be walking away from some of this advantage,” said Mr Paul Keel, 3M’s Senior Vice President of Supply Chain.

“For instance, in supply chain our proprietary process technology and manufacturing scale support the lowest unit costs in most of our categories,” he told Supply Chain Navigator. 4

Strengthened with synergy

Despite the benefits, not all companies can manage a supply chain alone. Collaborations with partners, who may have existing logistics infrastructure, can fill the gaps.

Lazada Group, which is backed by online marketplace company Alibaba, runs an established e-commerce platform.

Since its launch in March 2012, Lazada had to overcome problems like low credit card penetration and a lack of awareness of online shopping, explains Mr Pierre Poignant, Chief Operations Officer of Lazada Group. It now has 14 fulfillment centres, 112 last- mile hubs and an extensive delivery fleet.

Brands like Xiaomi, Samsung and Nestle have partnered Lazada to gain access to 560 million consumers in six Southeast Asian markets.

A partnership between Lazada and Unilever allowed both companies to share expertise and offer customers a greater variety of products and lower delivery costs.

“Lazada’s rapid growth has been anchored by strong investments and high standards in our operational infrastructure and technology,” says Mr Poignant.

“We believe that the best approach to tackle supply chain and fulfillment challenges in Southeast Asia is to build our own logistics and technology capabilities while deepening partnerships with third-party vendors and the ecosystem.”

When hiring for roles including dealing with logistics, supply chain and technology, the bar is set high.

Lazada looks for individuals of integrity who are proactive. “He or she must also be broad-minded, enterprising and a strong communicator,” says Mr Poignant.

These are the same values championed by UCD courses, which are helmed by a global faculty attuned to changing industry needs.

Under- and postgraduate students will be taught by experienced local lecturers and international staff. By understanding and meeting the demands of a supply chain, they will be geared to make valuable contributions at work.

Be prepared for a future in logistics. Enrol in the University College Dublin’s (UCD) Bachelor of Business Studies (Honours) in Logistics and Supply Chain Management (Full-time), Bachelor of Business Studies (Honours) in Logistics and Supply Chain Management (Part-time) or Master of Science in Logistics and Supply Chain Management (Part-time)