Innovation and continuous improvement.

Does your organisation have a program for applying innovative approaches to your supply chains? If your business is a 3PL, then such a program is very rare (as identified by the Australian Bureau of Statistics) and if you are a brand or product business, then your efforts will not be known outside the company.

Innovation is to “…make changes by introducing something new” It is not just new products and materials, but can also be technologies, techniques and processes. What makes Innovation different to continuous improvement (doing the same thing better) is that it requires: new perspectives on the particular challenge; be a novel approach; and preferably have an elegance and simplicity in the solution.

Continuous improvement has been a feature of supply chains since at least the growth of trading companies in the 17th century – long before the term supply chains was used! Examples are: increased speed of transport; size of ships, aircraft and trains and the speed of data transmission

Commencing with operations research and industrial engineering in the 1940s, examples of innovations in techniques to improve supply chains have been the Materials Requirements Planning (MRP) concept; Just in Time (JIT) approach to the elimination of waste, leading to lean and agile thinking; total quality management (TQM); store ready merchandise (SRM) for managing global consignments and the supply chain operations (SCOR) model. Examples of innovative technologies in supply chains would be barcodes, RFID and high rise warehouse racking.

Innovation in your organisation

While these examples provided new thinking, they only became innovative when organisations saw them as relevant to the business and they were effective in implementation. So, it is the early adopters who implement supply chain innovation. A company that adopts barcodes today is not innovative.

Of course, innovative approaches may not provide the returns (computer integrated manufacturing – CIM of the 1980s was an expensive example) or only be applicable for a period of time, such as the much acclaimed Dell supply chain structure, that was discarded when the company changed its strategy.

What will drive Innovation in your supply chains? We behave how we are measured is a true statement, so supply chain metrics are the most likely driver for Innovation? Unfortunately, many businesses do not have the metrics such as the probability of delivery in full, on time, with accuracy (DIFOTA), cost to serve, constraints and their inventory and capacity buffers and level of complexity (variability, uncertainty). More recent metrics are being applied to the sustainability of supply chains.

So, before thinking about the excitement of Innovation, make sure that you have the measurement regime in place so that your team understand the drivers of your supply chains and the team can put up a convincing case to senior management for innovative approaches – your logistics may become mobile and cloud!