Supply Chain Management Blogs by SAP
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BBC Future’s fascinating report last year on “the invisible network that keeps the world running” stuck with me. Travelling to the far reaches of Korea and China to witness “one of the world’s most dazzling engineering feats”, the journalist gave an in-depth account of a modern world wonder hardly seen nor discussed by the public at large.

His mission was to follow the supply chain of goods coming to the West to its source. What he found was a huge network of mega-ports that “looked closer to science fiction than reality”. That ordinary people rarely seem to discuss such places and what they bring to our lives is testament to the incredible levels of reliability and efficiency these enormous, stunningly complex operations have reached.

Watching it in action, the reporter observed: “It's a hypnotic, fascinating dance: the cranes lifting containers off the ships, the trucks pulling up in time to catch them as they are elegantly lowered down onto steel cables. The complex and precise orchestration behind every move is almost bewildering to comprehend.”

Of course, no one person can be credited with masterminding such a feat. This is the coming together of human knowledge, facilitated by a global computer network and densely complex algorithms. As the BBC reporter puts it: “In a very real sense the crane and truck drivers are little more than elements in a vast robotic system, receiving instructions in their cabs from their computerized managers.”

Although we know there’s a dark side to the global supply chain, it’s difficult not to admire this shipping network of today. It essentially allows millions of us around the world to live like kings, while pulling millions of others out of poverty. It gives us disproportionately inexpensive access to anything we could reasonably hope for and much, much more.

Taking a closer look at global distribution

Of course, the global supply chain is not as straightforward as shipping some containers from China to North America or Europe. That’s just one physical step in what is a deeply intricate, increasingly digital distribution cycle. Let’s take an example from the French company Auchan, the 11th largest retailer in the world, to help us look a little closer.

Auchan has branches in France, and internationally in China, Hungary, India, Iraq, Italy, Luxembourg, Poland, Portugal, Romania, Russia, San Marino, Spain, Taiwan and Ukraine. The company has more than 3,000 stores around the world, as well as its online stores. That’s quite some reach, and quite some complexity. With millions of customers every day taking for granted that they’ll be able to get the product they want for a more-than-reasonable cost, Auchan manages a vast network of 15,000 suppliers stocking its shelves and warehouses through a digital business network.

Making operations as efficient, reliable and streamlined as possible is the company’s secret to keeping prices low. As the usefulness of digital technology grows, new possibilities in standardizing processes, generating cost savings and organizing procurement keep presenting themselves.

To give a recent case in point, indirect spend in the supply chain has traditionally lacked structure, standards and controls for big retailers like Auchan. Chief purchasing officer Pascal Delval said: “Each store decides for itself what it wants, and we had thousands of employees making indirect purchases without guidelines. We knew we had to provide staff with standard purchasing processes and professional tools.”

Auchan created nine buying offices around the world and developed the ‘Oxygen’ program to optimize the costs of all activities and investments across the company. $3 billion worth of activity now goes through this new system annually.

This was one of those ‘internal efficiency’ projects that we seldom care to read about, largely because such initiatives don’t tend to make for a gripping read. However, this is the kind of work that has perhaps the biggest impact on companies like Auchan becoming more competitive and ultimately being able to offer a faster, better, and cheaper customer experience.

It shows us that efficiency in business is a commodity in itself. Working with suppliers to reduce inventory levels, increase fill rates, minimize supply chain risks – these all contribute to a healthier bottom line and a cheaper product on the shelf for customers.

These challenges, like the mega-ports of China and Auchan’s warehouses, may be hidden from the view of our day-to-day lives and easy to take for granted, but they keep the modern world running and improve lives immeasurably. So next time you drive your Japanese car, turn on your Korean TV, or grab a handful of those Uruguayan blueberries, spare a thought for the invisible world wonder that brought them to you.

Join Adrian Gonzalez, one of today’s foremost authorities on logistics and supply chain management, for a webcast on November 30 to learn how logistics tech can drive growth, market share and customer loyalty.