I interviewed Akif Azimov who discussed Supply Chain Management Process.
1. Please provide a brief background of yourself
First of all Dustin, I would like to thank you for doing a great job to share exciting stories with the audience interested in supply chain management. I have been in the supply chain for over 20 years and found my aspiration from the first step in the field. My drive to get wider knowledge of supply chain management continued with entering to CIPS to get professional accreditation, first with MCIPS and later with Fellowship from that Institute granted as a hallmark for contribution to the Procurement profession.
My MBA research project from University of Bradford considered issues in E-Procurement implementation. Throughout the research, it was discovered that many implications at the first instance are not driven by concerns over adversarial relationship be put at the forefront for the sake to obtain cost saving, but mainly from the appreciation of opportunity to build long-term supply chain relationship leading to partnership.
I found stimulating to share supply chain management knowledge not only providing consultancy to various organizations to achieve supply chain management optimization of processes, but also delivering training sessions to other professionals through CIPS accreditation program. Management of many organizations worldwide acknowledged advantages of supply chain to manage with process methodology, however not always there is a clear vision on the movements required to undertake to achieve efficiency in operation with supply chain management advancement. That’s why, throughout my career I was very keen to identify supply chain management best practices to bring value to different organizations in terms of increased effectiveness in customer and supplier relationship management, demand and procurement management resulting in process of cost reduction and positively impacting revenue directly.
2. What is supply chain management process?
Supply chain management process in simple words can be identified as business process integration both internally and externally. Many international companies trying to consolidate business processes to achieve efficiency through transparency and it can be realized only with supply chain management playing leading role.
You can ask how efficiency and transparency are linked together in the supply chain management process. Today transparency requirements across supply chain processes are not primarily driven to impose control and strict monitoring; on the contrary, its main objective to identify opportunities or gaps in the sub-processes and find optimization routes to obtain cost savings or cost avoidance.
The objective of the supply chain management process is to achieve integration of Customer and Supplier Relationship Management, Demand and Material Flow Management, Procurement, Product Development and Revenue streams across the whole supply chain. Such supply chain integration will result in costs reduction, quality upgrading, and making operations swift and efficient.
The process is seen as a chain of clearly defined stages, which target to transform input into outcome. It is not possible to look at suppliers and contractors beyond the single supply chain management process.
Hence, supply chain management process shall integrate business processes of all players in the supply chain in one complete process with clear transparency of sub-processes for example such as; product specifications, sourcing strategies, supplier segmentation and classification, supplier costs, performance measurements, framework of metrics, and so on.
3. How is it put into practice effectively?
That is the most challenging task and today, to make supply chain management process effective it requires integration of customers and suppliers working closely, from the stage of product design up to its final delivery to the market. Such supply chain cooperation will allow shortening time to market for product delivery with greater rate of success. This can be achieved through collaborative supplier relationships based on mutually beneficial conditions.
It is of paramount importance to implement arm-length relationship approach rather than adversarial, as all parties in the supply chain shall obtain mutually advantageous outcomes. Otherwise, the effectiveness of the relationship will be weakened resulting in supply chain management process impossible to benefit, even if other stages would develop smoothly. One of the known WalMart example of supply chain management process optimization resulted in sharing cost savings equally between WalMart, suppliers and customers. That’s why Commercialization of benefits achieved through the supply chain shall be profitable to all parties to ensure consistency of successful performance.
It is not coincidence that initially developed ERP system for internal purposes progressed to look for expansion opportunities with supplier and customer relationship management modules and e-procurement. Merger of such systems like SAP and Ariba can be taken as an example, on how organizations shall develop to build strong supply chain management process.
Although, it is critically important to seek opportunity for process integration across the supply chain it is not practically feasible or efficient to seek close collaboration with all suppliers. The importance of segmentation and classification of suppliers demand the readiness of suppliers for complete commitment. That is why, to put supply chain management process into practice effectively, require commitment to sacrifice short term advantages for the sake of the long-terms mutually beneficial relationship and that is the key to success. The process of integration shall start with core suppliers and contractors, which have proved to be reliable and responsive to the needs of the customer.
Therefore, in order to put supply chain management process into practice effectively, it requires to coordinate supply chain sub-processes within internal functions of organizations, as well across key external parties in the supply chain.
4. Where have you seen good results?
As mentioned earlier, the supply chain management process to bring good results shall be linked closely, both with internal and external functions, with smooth coordination and collaboration to realize opportunities in larger scale. Being in consultancy business I have seen good results with consolidation of supply chain management processes between two and more companies. It may sound strange, but it is not rare today, when two competing companies in order to reduce operational costs consolidate the cumulative spent, to obtain bargaining power or economies of scales. Many companies I came across, using this practice to obtain cost savings. It shall be emphasized that the reduction of costs by 100 dollars has bigger positive impact on the profits than 500 dollars in increase of sales.
Nowadays it becomes a widen practice no longer to compete as a single entity. Many companies integrate their supply chains in order to operate as an active player on the market enticing suppliers to collaborate effectively. As suppliers are attracted to collaborate further, expansion of supply chain management process is happened, resulting in adding value to the chain. The time for adversarial negotiations with suppliers to drive their profit margins to economic sustainability coming to an end and opens opportunities for strategic integration leading to partnership relationship.
For Supply Chain Management process to bring good results require continuous relationship development of company with key suppliers, customers and even competitors. I have seen amazing results in Telecommunication business, where several competing operators shared supply chain, operational and maintenance costs to stay effective even at crisis time.
However, integration of supply chain management process is not easy as it could be seen, and in order to gain commendable results, it requires to take into account costs; such as ERP / ICT system implementation, with preparation and structured plan in place and potential risks mitigation strategy.
About Akif Azimov
Director Procurement and Supply Chain