Charlie Covert is the vice president of customer solutions at UPS. He recently gave a supply chain presentation at the Automotive Aftermarket Industry Association (AAIA) Aftermarket eForum conference. He spoke with Aftermarket Business World to expand on some of the points he made in that presentation.
What technology developments do you think are having the biggest affect on supply chain management?
The biggest impact from a macro view is how much visibility is available in different transactions, and the ways companies are using that information to impact the experience that their trading partner or customer has. When you look at having visibility on inbound shipments, if you've got sporadic visibility, something like 60 percent visibility for example, there's not a lot you can do with that because the reliability of that information isn't really high enough to be actionable. But if you have a higher amount of reliability and you can make decisions on inventory in motion, then you don't have to wait to physically receive it to allocate it. If you can make those allocation decisions on inventory in motion, you can drive inventory levels down, which has tremendous cost savings. That cost savings can either be something that goes straight to margin, or it can allow you to be more aggressive on your pricing strategy. That can be the difference between being competitive or not being competitive.
Are the technologies that make that possible being deployed more at the third-party logistics level, or are the suppliers and buyers implementing these strategies?
Probably both. Our technological capabilities increase every year. What we do with that investment is try to take those innovations and give smaller suppliers the ability to provide that information more easily. EDI connectivity between ERP systems used to be the domain of big companies, for example. If you make that easier and more repeatable and standard, then smaller suppliers can participate who otherwise wouldn't have the resources to do so. It enables that kind of commerce.
What do you think is the biggest supply chain challenge your customers face?
It is the changing expectations of their customer base. Consumers in general are looking for product to be delivered to them configured in a certain way, or in smaller, more frequent shipments, and there's a lot of price pressure as well. Customers want smaller, more frequent shipments faster, and on demand, but at same time they want a lower cost structure. Those things don't move in the same direction when you are working the math.
When trying to figure out how to strike the right balance, we try to encourage our customers to look at things other than cost. If you just look at the cost of a decision, you might be sub-optimizing to a low cost but give up revenue or cash flow. If we can use visibility to accelerate the cash conversion cycle or accelerate various payments that trading partners are making, there is a tremendous value for that. We really try to look at the cohesive, larger picture, not just the transactional cost.
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