number 2

Innovation and Process Management

 

According to Daniel Flint (2007) “when discussing what it means to be innovative, and why should we care? To many, the term "innovation" connotes a dramatically new technology that may even mean a dramatically new technological product that improves our living condition, making us more productive or efficient” (Flint, 2007, n. p.). Technically though, innovations span a range from incremental to radical and can apply to products, services, and processes -- in addition to technology -- and can emerge within virtually any discipline, including those seen as the realm of art and creativity. When it comes to supply chain innovation, we generally mean improvements in the way that supply chains operate, and more specifically, in the way that products, information, work, and funds flow (and are temporarily stored) throughout supply chains (Flint, 2007, n. p.).

 

So why should we care about supply chain innovations? In a search for competitive differential advantage, many managers of world-class organizations around the globe have come to realize that differentiating on processes is more sustainable than differentiating on products, even if product differentiation still exists. Product differentiation is more fleeting than process differentiation because products are easier to see and reverse engineer (Flint, 2007, n. p.).

 

Supply chain management processes, those that span multiple organizations and focus significantly on the flow of goods, information, and funds can be quite complex, requiring intra- and inter-organizational coordination and collaboration. But resources applied here often create significant cost savings or improved customer service through product availability measures. Both cost savings and improved service levels can be leveraged in the marketplace. For example, Caterpillar (CAT), a global industrial equipment manufacturer and supplier, has been successfully differentiating in part on service parts availability, holding to turnaround standards internationally that exceed most competitors. This serves as a differentiator because service part turnaround time affects customers' equipment downtime, a very important metric for developers, contractors, and mines. This gives CAT a competitive advantage in the marketplace (Flint, 2007, n. p.).

 

Developing dramatically improved processes such as parts availability without simply adding more inventory to the system requires a bit of innovation. And this kind of supply chain innovation can be seen internationally across industries. FedEx created an entirely new market simply through the creation of a radically new logistics service for which customers were willing to pay. Similarly, Wal-Mart, Ikea, the Walt Disney Co., UPS and many other similar firms are often highlighted for their own version of supply chain management mastery and innovation (Flint, 2007, n. p.).

 

What is interesting is not simply the innovations themselves, whether supply chain or product in nature, but the processes that lead to such innovations. Despite extensive research into new product development processes, the place where product and technology innovations take form for the marketplace, new service development and in particular supply chain process development research is relatively new. Some research we have been conducting however is showing that supply chain innovations can emerge from a customer-focused process aimed at uncovering clues to changes in the marketplace that might be addressed by supply chain management innovations and valued by customers (Flint, 2007, n. p.).

 

According to our textbook chapter 4 & 5, Poirier, Charles C., Quinn, Francis, and Swink, Morgan. Diagnosing Greatness: Ten Traits of the Best Supply Chains (2010) today, supply chain professionals are chasing any and every opportunity for improvement across the business network. Toward this end, they’re asking:

• Are we gaining the best return on our investments in assets?

• Where should the factories and manufacturing sites be located for best overall performance? Do we have the data that will enable making the correct decisions?

• Who should own and operate the assets that deliver the products and services being provided? • Which facilities should be shuttered? Which enlarged? Which consolidated?

• Which suppliers should take responsibility for a larger part of the final products and services?

• Are our cycle times at industry-best standards? What would improving those cycles mean to our financial performance?

• Do we need more or less warehouse space? Does central distribution make sense? How much direct shipment should we be doing?

• How can we continue to please ever more demanding customers while?