GS1 and the transformation of supply chain management

The Association for Supply Chain Management defines supply chain as the “global network used to deliver products and services from raw materials to end users through the engineered flow of information, physical distribution and cash.” The private sector, seeing the efficiencies in World War II, adopted a military approach to supply chain management where the deployment of personnel, armaments, provisions and other equipment were needed and strategized to ensure victory with the least losses and costs. The belief then was supply chain was a cost component in doing business — a necessary evil, business had to deal with.

GS1 standards and solutions have been globally accepted by the fast-moving consumer goods, health care, transport and logistics, food service and fresh foods and technical industries.

The KPMG Supply Chain Management Benchmarking Series Report for 1999-2000 showed that the total supply chain cost of averaged companies was 9.8 percent of revenue while the top 25 percent was only 4.2 percent of revenue. This got industry to rethink the value that various members and processes of the chain added, as well as those that added no value. Thus, the term value chain” came about. Business had to gain some competitive edge in the market by streamlining the supply side activities to maximize customer value.

The mantra was cost reduction and improve deficiency.

While the supply chain management continues to be a work in progress, the new technologies and disruptions will continue to make business take another view of the supply chain — this time as a growth potential, risk reduction, innovation and customer satisfaction and empowerment.

The evolution of the supply chain model may be traced to the time when many fragmented silos or sections existed. These fragmented silos were reduced by integrating them to single functional silos as in material management and physical distribution. More functional silos were consolidated in the ’80s. This process was later dubbed as logistics management. In the 2000s, information technology, strategic planning and marketing were included to bring about “value capture.” This transformation made supply chain a profit center rather than a cost center.

GS1, an international customer-centric, user-driven and neutral institution that has presence in more than a hundred countries, the Philippines included, is able to bring together all the participants in the supply chain to create and develop standards and solutions to issues in the supply chain

while ensuring the protection of customers. GS1 assures interoperability with its unique global identification system and data management guidelines. GS1 has an agnostic system of standards for the unique identification of products and services in machine readable formats. The smooth flow of e-commerce and facilitation of applications of data science allow data to be identified, captured, shared and used by stakeholders in the supply chain while adhering to standards that everyone has contributed and adopted. The introduction of blockchain technology has even enhanced security of information and totally eliminates any form of identity theft.

Supply chain systems should be able to communicate and exchange information electronically about product info, transaction details and events to ensure supply chain visibility. Full visibility provides awareness of and control over specific information related to orders and shipment that enable a customer to react and adjust to any disruption in the process. GS1 provides a common and globally accepted language of business for the purpose of supply chain information exchange. To date, GS1 standards and solutions have been globally accepted by the fast-moving consumer goods, health care, transport and logistics, food service and fresh foods and technical industries. In the Philippines, the pharmaceutical and cosmetic industries have been in the forefront of said standards. Government has still to completely get on board to ensure customer protection and seamless cross border trade.

Supply change management will continue to evolve. As more automation is introduced, technology will change the face of the supply chain management. Transformation is occurring at a much faster pace, accompanied by innovative and disruptive technologies. There will be no recourse but to be prepared as we transform ourselves into flexible, resilient, customer-centric organizations which give priority to scalability, innovation, responsiveness and agility.

It must be understood that digital technologies will enhance business but technology is an enabler, not an end in itself. Sustainable competitive advantage will come from a cultural change that involves appropriate organizational restructuring, business model and processes and people.