-SCM Executive
There’s a lot written and said about supply chains and there’s also a lot about it that many of us don’t understand.
Many people see the supply chain as that: a chain with links that connect one function to another in which materials and products flow from one step to the next.
Over the years, practitioners and consultants alike have formulated different views of the supply chain. Some would state it’s a network. Some would say it’s a stream. Some liken it to an eco-system*.
For those who work in supply chains, they see so much potential. They see so much that can be done for an opportunity of a break-through for the business.
But for many of those who are not familiar, the supply chain simply is where problems come from. Out-of-stock? It’s the supply chain. A global recall of a pharmaceutical product? Something went wrong somewhere in the supply chain. Slow delivery? It must be the supply chain.
For some organizations, if there are no problems in the supply chain, nothing needs to be said or done. The supply chain is doing what it’s supposed to be doing. If there are problems, these same organizations would think something or someone in the supply chain needs to be changed.
The last thing many executives and business owners want to hear are problems and the supply chain is that one place where many believe problems come from. One cause for this kind of thinking is that many business executives aren’t familiar with supply chains.
The supply chain is a field where very few have complete exposure in. The supply chain after all encompasses just about a firm’s entire business operations from procurement to production to delivery. Finding operations managers with experience in at least two basic supply chain functions is hard despite increased interest on the subject over the last few decades.
Many organizations would rather treat the supply chain as a department which they’d rather let someone else handle. Many firms outsource supply chain functions to third-party service providers and relegate support structures such as information systems to contractors. With the advent of artificial intelligence and data science technologies, some organizations are preaching automation of the supply chain in which they believe hands-on human management will eventually become obsolete.
It’s a mistake to not fully define one’s supply chain’s structure even if an organization is outsourcing or automating part or all its functions. One after all must define the specifics of an existing supply chain before one can try to make a computer program for it. Likewise, one must know one’s operations before one can form an agreement to outsource any of it.
A logistics executive of a large retailer focused his warehouse operations performance via the attendance of personnel. The retailer the logistics executive works for has outsourced its warehouse and transport operations to manpower agencies and freight service providers respectively. The logistics executive had decided to replace the company’s manpower agency with another one due to the former’s failure to address high absenteeism.
The logistics executive saw immediate improvement in productivity when absenteeism dropped, and productivity improved as soon as the new manpower agency arrived. He boasted to his bosses that he figured everything out about the supply chain. Just have enough head count and the supply chain will perform successfully. Managing the supply chain was that simple. Because the higher productivity meant lower costs and fewer delays to stores, the logistics executive’s bosses praised him for his performance.
But the next thing the logistics executive said was that he needed to coordinate with the retailer’s purchasers to plan availabilities of merchandise and make them aware of storage capacities. Apparently, the vendors would deliver stocks in trickles or droves to the retailer’s warehouses. There were times there were no items to deliver to stores or there was too much stock that people had to find space for.
The logistics executive felt he was driving excellence in the supply chain with better head count attendance. He was bringing about productivity that contributed to the business. But in his mind, his department’s productivity could do far better if the retailer’s purchases were more well-coordinated. He therefore initiated meetings with the retailer’s purchasers to streamline inbound deliveries with the end in mind of preserving his logistics productivity gains.
On one hand, the logistics executive heralded the success of supply chain management via the idea that having perfect attendance was the ultimate solution. But on the other hand, he identified issues which hobbled productivity, and he set forth fixing it for the good of the logistics department. He saw logistics as the core of the retailer’s supply chain and prioritized improving the productivity of his department.
The supply chain shouldn’t be identified by just one department such as logistics or purchasing. It shouldn’t be defined by even several of its functions. The supply chain should be defined by the interaction of all the functions where materials and merchandise flow through. The retailer’s supply chain was absent of a structure that would define these interactions. Logistics & purchasing managers and other departments were probably doing their own things without much focus on the bigger picture.
I build supply chains to build the interactions between supply chain functions. Building means building structures. Structure counts in how people and systems interact. Structure defines policies and procedures, roles and responsibilities, and how systems would be set up to govern the flow of goods and information. Structure provides the framework for how an organization interacts with the outside world of vendors, customers, consumers, and other just-as-important service providers such as maintenance contractors and parts suppliers.
Many consultants like to focus on performance when it comes to supply chains. I like to think a supply chain should be assessed (at least first) by its structure. Performance measures just show symptoms. Structures are where the root causes are.
Supply chains are one of those things in business many of us don’t understand very well. They make up a field in which those who are in it see so much potential and in which those who are outside of it see problems that they’d rather delegate to other people to do. Some people see supply chains by one or several of its functions. We should see it in its whole, in how its functions interact. This is where building supply chains becomes key. And this is what I do.
I build supply chains to build their structures and build the interactions between their functions. I build supply chains to build business.
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