New era of service provision

31 Jan 2003

When the e-business bubble began to rise at the end of the Nineties, its biggest challenge was to overhaul the supply chain.

By the time it burst in 2001, customers had taken on board the hype associated with the internet and came to expect improved delivery systems while the many would-be exponents of it were in financial free fall.

In the middle of this madness the National Institute for Transport and Logistics (NITL) was set up by the government in Ireland and earmarked for five years of funding to be managed by Enterprise Ireland as part of the National Development Plan. It was the kind of public investment in an enterprise project that turns other countries green with envy. Today, that steadfast commitment to improving awareness and implementation of supply chain management (SCM) is starting to look like one of the Government’s better strategies. The training courses organised by the institute have the highest number of students of any similar schemes in Europe.

Amidst growing concern about a shortfall in Ireland’s knowledge base and IT skills, it looks as though we should at least be well equipped to move up the value chain as far as logistics are concerned. There is, however, more to the NITL than training. As its marketing director, Leonora O’Donovan, explains, NITL has three main objectives. The first is to create awareness of SCM issues, which it does through its publications and roadshows. Secondly, it offers companies support tools such as self-order packs and technical fact sheets. Finally, there are the training and research and development (R&D) programmes.

“We conduct research that looks at international trends to help benchmark where Ireland is at in the bigger picture,” says O’Donovan who stresses that there is still a lot to be done. “Organisations are frequently in a rut. They continue with day-to-day trends that they’ve been doing for a number of years when sometimes they just need to stop and ask what it is their customer really requires and then set themselves some key performance indicators.”

This is a core message from NITL. The end customer should be the prime consideration when attempts are made to modify the supply chain. It is no good investing heavily in a technology solution if a firm has incorrectly identified the problem that needs to be solved.

“Companies need to take a long hard look at their supply chain and drop processes that don’t add value to their customers’ needs. The other thing to remember is that SCM is not the answer on its own, it needs to go hand in hand with strong marketing and R&D,” she adds.

A winning company, she says, is the master of these three elements. R&D leads to strong product, which then has to be carefully marketed to reach its target audience. The final part of the process is to deliver it on time with the specification and quality the customer expects.

The institute has presided over the most radical period of change in SCM history, particularly from the logistics service providers’ point of view, as Edward Sweeney, director of education and training, explains: “As the economy has become wealthier, there’s less emphasis on old-style manufacturing and moving boxes around the place. What used to be transport companies and freight forwarders have become logistics service providers. And as their customer’s business models change, they are attempting to become supply chain integrators.”

This, in turn, has led to the outsourcing of a lot of traditional supply chain activities such as manufacturing, transportation and warehousing. “Companies want to concentrate on their core competencies such as design and marketing,” explains Sweeney, “so, they look to find a one-stop-shop to be their supply-chain integrator.”

Despite the post-dotbomb downturn and the impact the recession has had on the technology sector, Sweeney is no doubt about the role that IT will continue to play in all of this. “What links it all together is information technology. We see it as possibly the only way of achieving effective integration across the key supply chain functions,” he says.

When the Government conceived of a body to further Ireland’s supply management skills it was deemed vitally important to keep the IT multinationals happy. And it’s still true today.

“A lot of them are saying to us that they need better service levels from our suppliers,” says Sweeney. “And what the likes of Lucent and IBM are doing is focusing on being good in design and marketing products. They outsource supply chain management as much as they can. This doesn’t mean they abdicate responsibility, it just means they have to manage the relationship with their provider.”

In other areas, Ireland has been accused of being slow to adopt outsourcing as a model. Is this true of SCM? “Not always. In some sectors, such as clothing, it has happened as a matter of survival. You can’t cost effectively manufacture bog standard textiles in Ireland. The clothing companies have recognised that if their product is manufactured thousands of miles away, they can concentrate on the brand and marketing. So supply chains have become more virtual because of outsourcing and also more global. The consequence is that cross supply chain integration becomes more important, more difficult and more critical. The business model is becoming more complex,” he says.

Sweeney has a realistic take on how technology in particular will rise to the challenge of this complexity. “Ten years ago, artificial intelligence was going to take over but it just didn’t happen. Expectations were moderated and a lot of that technology eventually went on to do some good in a much more realistic and modest way. That will be the same with SCM solutions,” he concludes.

Pictured: Leonora O’Donovan (second from right), director of business development at NITL, talks with Paul Naughton, director EMEA supply chain of Dell, Maurice McIernon, chairman of supply chain network at Gentech, and Ger Carey, production controller of Schaffner

By Ian Campbell