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Knowledge Management for improving the organizational supply chain

1 May 2009
A hand touching a touch screen

The supply chain is a synchronized array of organizations, individuals, activities, information and resources involved in supplying the product or service from the supplier to the customer. The supply chain's activities turn raw material and components to a complete product supplied to the edge worker. The supply chain is responsible for five main organizational units: purchase, production, storage, distribution and transport. Each unit is an equally vital part of the chain and its success depends on the units' integration. Supply chain management is the approach taken by organizations that have understood that correct management and supervision of the supply chain will lead to integrated optimization of all the chain's 'links', which will in turn lead to an increase of profitability and improve the organization's positioning compared to its competition. This approach quite simply illustrates one direction of the process, i.e. the material being mobilized from the organization to the customer. However, it ignores the knowledge and information supplied from the customer to the organization, and from the organization to the suppliers, sub-contractors and business partners.

The more we delve into the flow of material, data and information via the supply chain the more we see that they shouldn't be taken for granted. Material and information may flow adjacently (products with complementary documents) or in an opposite direction (products vs. orders). They might flow from a number of sources (such as sub-contractors providing assemblies and suppliers providing price offers) and a number of destinations. They might flow "consecutively" from one link to another or skip one link (e.g. a supplier calling the distributor directly to schedule a transport).

It is no secret that knowledge and information are two of any organization's most important resources and that managing a supply chain efficiently requires its sharing, correct use and distribution. Supply chain managers should base their decisions on this knowledge and information.


Jack Welch, legendary CEO of General Electric, strongly believed in the concept of an organization with no boundaries, i.e. an organization that operates with no clear distinction between various functions: engineering, production, marketing and all the rest. According to Welch, this process starts with getting rid of the physical partitions between the different units and include customers in the process together with their suppliers. In his book, Welch expresses his faith that the "no boundaries" idea will open the organization to receiving the best ideas and procedures of other organizations. In a paragraph titled "maximizing the organization's brain" Welch states that "taking the best ideas and distributing them broadly is the big secret. There is nothing more important".


Information in the supply chain can be tagged according to a number of aspects:

  • According to those sharing the information and knowledge: intra-organization; organization-supplier-partners-customers; cross-organizational (such as security-related knowledge).

  • According to the stage in which the information and knowledge was created or put to use.

  • According to the information/knowledge's content area.

  • According to the knowledge/information's level: is it aggregate amalgamated from several sources or specifically sourced?

  • According to its nature: quantitative or qualitative.


The knowledge and information in the supply chain flows to all directions, serves different purposes and sub-purposes and is of different nature and quality. However, this knowledge shares one ultimate purpose: providing the organization with efficiency and better position facing competition and decision making.

Managing the supply chain's knowledge and information enables the organization to promote innovation and improve the efficiency of its performance. Hereby are a number of possible general notions to improve the flow of knowledge and information via the organizational supply chain:

  • Integrating the system's various information systems into one central system: ERP (Enterprise Resource Planning). If necessary, linking to other organizations via internet-based systems.

  • Collaborating the various components of the supply chain and utilizing the knowledge held by customers, workers, suppliers, sub-contractors and business partners.

  • Transparency of data and information via the organizational portal and portals shared by suppliers, sub-contractors and business partners. These portals supply all the knowledge these different parties require.

  • Utilizing sales arenas that interface between buyers and sellers; approaching electronic tenders.

  • Linking knowledge "islands" in the organization that hold knowledge and information on the supply chain via the interant-based systems in the organization and internet-based systems outside it. Merging knowledge from experts of different disciplines to benefit the entire system and networking the knowledge held by individuals with similar fields of interest.

  • Retaining and monitoring knowledge. This can prevent knowledge from vanishing from our organization, e.g. people leaving the organization and "taking" the knowledge with them, by documenting it then widely sharing it.

  • Incorporating the KM into the organizational culture and implementing the 'learning organization' approach via case studies, practice studies, learning lessons and applying them.

  • Personalizing the relevant information to the different participants in the supply chain according to their respective suitable aspect.

  • Analyzing and processing knowledge and information related to the supply chain in BI systems and other decision-supporting systems.


Specific examples:

  • Stock management: information and knowledge that include the nature of some request, storage cost, order cost, report transparency and sensitivity analysis that enable adapting the stock to the optimal amount.

  • Transport/deliver: knowledge that teaches how to deliver (land, sea or air), supply methods, vehicles, how to save transport costs, extra-organizational transport/deliver; the insight base can be utilized.

  • Devices: information and knowledge for planning the size and location of the storage devices.

  • Marketing/sales-promotion: information and knowledge regarding when marketing campaigns are more effective and which sale/promotion is more efficient

  • Production: how much to produce of each product; where to invest most resources (decision-supporting systems and BI systems).


Conclusion

Knowledge Management enables organizations to utilize the data and information in their favor. When discussing the supply chain, we usually refer to each component separately. However, sharing has its business advantages regarding knowledge and information: sharing between among the different organizational parties, sharing between the organization and its suppliers and sharing with the organization's customers. The more we share the more comprehensive an optimization of the supply chain, competitive edge and business benefit we can attain.

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