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Supply Chain’s Secret Weapon for Innovation

Everyone dealing with the electronics supply chain knows that speed is critical for success. Customers wanted their parts yesterday, making just-in-time delivery seem slow by 2013's high-paced standards.

But what if speed — or resilience or flexibility, if you prefer — were not only a requirement, but also the secret weapon for supply chain innovation? What would the high-tech sector look like if companies spent even a portion of their R&D dollars on developing speedier supply chain solutions or, if not speedier solutions, at least ones that better address inventory management and forecasting analytics (which if properly addressed would make the supply chain more responsive and therefore faster)?

In this day and age, shouldn't innovation go beyond a product design upgrade or opening a new market segment?

Myths, debunked
I got to thinking about this while reading a recent article in the Financial Times called “Three Innovation Myths” (you may need to register to access the story). Booz & Co. partners Barry Jaruzelski, John Loehr, and Richard Holman debunk some commonly held business perceptions, namely, puncturing holes in theories that say:

  • More spending equals better performance. They argue that throwing more money into the R&D pot doesn't guarantee that companies will have breakthrough innovations. But, they say, companies can spend too little, and that does impact innovation. Their point, though, is that innovation improvements are more determined by how companies spend R&D funds, not the amount they necessarily budget.
  • Smaller is better. The three partners claim that smaller companies aren't necessarily more nimble than larger ones. They say just because smaller companies spend more on R&D as a percent of sales, it doesn't always follow that they have better financial results compared to their bigger counterparts.
  • The more patents, the better. Booz & Co found that there was no relationship between patent activity and sustained financial performance. And, while it may be the case that companies that spend more on R&D as a percentage of sales produce more patents, the major consideration related to financial performance isn't about the volume of patents — it's about the patent's quality and impact on customers.

These three points play out in another significant way. In its most recent “Global Innovation 1000” report, Booz & Co. asked survey respondents to name the companies they thought were the world's most innovative. Not surprisingly, look who ranks among the top 10: Apple, Samsung, GE, Toyota, IBM, and Amazon.

These companies aren't famous just for their fancy-schmancy products that “delight customers.” What makes them so remarkable are their world-class supply chain practices — practices they invested a fortune in over an extended period of time. The investments these companies made in building superior supply chain capabilities have made them more resilient, more responsive, and yes, faster than their closest competitors.

If we accept that as true, maybe the supply chain's secret weapon has nothing to do with things like new software platforms or bigger teams of people doing repetitive tactical activities. Maybe the most innovative way to advance supply chain strategies is to put some R&D muscle into it.

So today's question is: How is your company spending its R&D money this year?

5 comments on “Supply Chain’s Secret Weapon for Innovation

  1. HM
    March 27, 2013

    While its a very good point that companies may spend good amount of funds in innovation of supply chain but in reality its very rare. Still electornics industry want to spend their R&D funds only in design updates. Because if it works its a direct profit. But I do agree that innovations in supply chain must be encoraged as a part of company's vision to see overall growth and profit.

  2. Himanshugupta
    March 27, 2013

    A company may be spending more or less with bigger R&D staff or not but if we can decode what makes company tick in Innovation then we can find a holy grail of innovation. Its still not clear whether better innovation require better management guidance or superior engineering staff or better work policies which foster technical growth in staff among other things.

  3. prabhakar_deosthali
    March 27, 2013

    In my opinion, for a company , if it wants to be ahead of its competition, It is not just the management, R & D budget or better engineering dept but above all these a company requires a think tank which comprises of level headed people who can assess the innovation requirements in their company's products, systems ( supply chain included) and dispassionately  asses the return on investment.

     

  4. Houngbo_Hospice
    March 27, 2013

    It is indeed good for the Supply Chain industry to innovate to suit customer's demand. But this can only be succesful if the management understands the benefits that the design of a new product or a new service will bring to the industry. Otherwise it is better to focuss on improving the existing products that have worked well so far.  

  5. Houngbo_Hospice
    March 27, 2013

    !@HM,

    ” Still electornics industry want to spend their R&D funds only in design updates”

    It is all about security and not dive into what they don't know. As I said in a previous post, companies don't rush to change their operation processes unless something/somebody is pressing them to do so. But it is really important that the Suppy Chain industry not lag behind the adoption of new technologies to improve its services. 

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