As recently as 20 years ago, the most reliable way to ensure on-time delivery of materials was to buy from companies that were close at hand.

Manufacturing businesses moving to “just-in-time” production methods ensured reliable deliveries of parts by setting up on-site supplier parks, such as those at Nissan’s UK plant in Sunderland, or Volkswagen’s commercial vehicle operations at Hanover, where supplies are fed directly into production lines by way of a 360m-long “logistics bridge”.

But the rise of global sourcing means that those logistics bridges can now be thousands of kilometres long, with western manufacturing and retail companies sourcing ever more of their products from further afield, especially eastern Europe, India and China.

Without effective technology, such extended supply chains could quickly unravel, leading to production stoppages, empty shelves and lost profits. So it is hardly a surprise that Accenture, the global consultancy firm, says that the supply chain is a hot topic in almost all boardrooms.

“When it comes to the supply chain most companies are trying to achieve two things,” says Gary Hanifan, the UK head of Accenture’s supply chain management practice. “They start by trying to drive out costs but they quickly realise that each supply chain is competing with every other, so they try to make it a differentiator.”

Companies such as US retailer Wal-Mart and computer maker Dell have used their mastery of their respective supply chains to build a phenomenally strong positions in their markets. Fashion is another industry where a slick supply chain can make the difference between category leadership and a struggle to compete.

But isolating the elements that make up an effective supply chain is complicated. It is certainly not just a question of technology. As Jon Chorley, vice-president for supply chain management strategy at software vendor Oracle points out, effective supply chains depend on physical as well as electronic communications. The ability to travel easily and efficient ports are just two areas that he believes are critical to effective, long-distance supply chains.

Nor is the term “supply chain” necessarily appropriate to the way commerce operates in the 21st century. “It is not so much a supply chain as a supply web,” says Harjot Sachdeva, director at supply chain software specialist i2. “There are many more parts and the more parts there are, the more complexity this brings to the picture.”

According to Oracle’s Mr Chorley, “There are two problems with the term ‘supply chain’: supply, and chain. That is not the world we live in. Instead, we have ‘demand’ and we have a ‘network’: a network with mutual value between the participants and a complex web of interconnections.”

As a result, even the best-run company will face challenges, if they are to make the most of the potential offered by global sourcing.

The first issue is ensuring that the company has visibility into all the parts of a long supply chain. This includes warehouse stock, shipping data and capacity from tier one, two and possibly tier three suppliers. In some highly advanced scenarios, retailers are attempting to link data from their point-of-sale systems right through to the systems of their suppliers’ suppliers.

“Supply chains are becoming ecosystems, so getting visibility into those systems and putting the measurements in place to help understand what they are doing and what business partners are doing, especially where there are long lead times, is hard to do,” cautions Tim Payne, a research director at industry analysts Gartner. “It is hard to pull together a meaningful picture.”

Improving IT and communications infrastructure – with the ability to link distant computer networks in almost real-time – is certainly helping companies to monitor extended supply chains with far greater accuracy than was the case even 10 years ago. In addition, emerging technologies such as radio frequency identification (RFID) tags allow monitoring of goods as they move from production into distribution.

Yet none of this technology will help businesses if they cannot trust the data or act on it. Accurate measurement and ensuring data integrity is a key element to a successful supply chain management system. And just as vital is giving managers the tools they need to change supply plans, if an unexpected event occurs.

“Technology is the enabler,” says Accenture’s Mr Hanifan. “The easy part of sourcing from lower-cost countries is making the deal. The hard part is getting the goods to the customer without losing margin. There can be problems with Customs, with payments, with quality and even natural disasters can have an effect on a business’s ability to drive out lead times.”

The notion of greater agility underpins a significant proportion of current supply chain management projects, especially for businesses that are embarking on their second or even third generation of supply chain IT projects.

Companies want to be able to react to scenarios as diverse as a component shortage or an earthquake. Increasingly they are building models to test how their supply chains would react to an adverse event, and may well have separated supply chain planning from supply chain execution or management.

At the same time, companies are not focusing their efforts purely on the supply side. Although businesses want to ensure that retailers, for example, do not run out of stock in their stores, supply chain managers are spending an increasing amount of time modelling demand, as well as perfecting the art of reliable supply.

Nowhere is this more evident than in the fashion and consumer electronics industries. With rich demand data available in close to real-time from point-of-sale systems, no retailer has an excuse for not knowing what their customers are buying.

Passing this demand information down the supply chain enables not just warehouse managers but manufacturers to react quickly to anything from a change in tastes to an unexpected spell of good weather. “If you understand what is selling early in the season you can make more of those products,” says Mr Hanifan.

Ensuring that suppliers make the investments necessary to react to these demand signals is another challenge facing companies that want to be at the leading edge of supply chain management. It is no longer enough to work with islands of data, however efficient.

A business needs to extend the data flow, including access to critical enterprise resource planning and CRM systems, to both suppliers and customers, and this means ensuring that all parties have something to gain.

No amount of supply chain management technology will bring long-term success, experts warn, if it is used merely to drive down suppliers’ prices. “The biggest challenge in visibility is customers asking their suppliers for more and more data, but only giving poor demand forecasts in return,” warns i2’s Mr Sachdeva. “It has to be a win-win for everybody.”

In many cases, this will mean that businesses have to think again about the “supply chain bargain” it makes with its suppliers.

Cost cannot be the only factor in an effective supply chain: a cheap supplier that constantly delivers late will prove a poor partner. But the latest generation of supply chain management tools means that when businesses have to make such trade-offs, at leas the choice will be an informed one.