Supply chains are the lifelines of the products & services of enterprises. Hence, executives should manage their enterprises’ supply chains to ensure they will meet strategic goals.
Nice answer. Wrong question.
Supply chains don’t fit into the priorities of enterprises. It’s the other way around. Enterprises must fit into the supply chains they are linked to, to enable the enterprises to meet their strategic goals.
Supply chains are made up of relationships forged via pacts between enterprises. Enterprises are not the centres of the supply chain worlds. Executives negotiate contracts and transact with other enterprises to buy merchandise, engage services, and sell to customers. The supply chain is not subservient to any one enterprise.
Many executives, however, don’t share this line of thinking. They would prefer to assert dominion over their vendors & customers than to collaborate and form pacts.
Walmart, the very large North American retailer, for example, insists vendors comply strictly to the corporation’s quality & delivery protocols. Vendors who don’t comply or violate Walmart’s rules are either penalised or threatened with termination.
Walmart also had set up a network of distribution centres to complement its huge warehouse stores in North America. Walmart, thus, asserts its influence over the consumer goods supply chain from vendors to customers.
Walmart, however, does not rule over all vendors and customers. Some vendors won’t sell to Walmart, and not all consumers shop at its stores. There are products not sold at Walmart’s shelves. Walmart also competes with other large retailers like Sam’s Club, Costco, and Target who have respective large customer bases. As much as it may try to, Walmart does not hold 100% sway over the consumer goods supply chain.
Walmart does negotiate and forge contracts or pacts with vendors, especially large ones like P&G. Collaboration in many cases is the norm. And it is by working and being flexible with suppliers that Walmart remains successful. Domination may work some of the time but collaboration for win-win partnerships is the ideal.
Still, executives attempt to have supply chains adapt to their companies’ cultures rather than their companies adapt to the realistic intricacies of supply chains. It works to some extent, but it won’t work to the full. Somewhere down the line, enterprises end up collaborating and making deals.
No one enterprise dominates an entire supply chain. Some would try. Some would partially succeed. But they eventually don’t.
Enterprise executives shouldn’t ask how supply chains can work for them. They should ask how they could work better with supply chains.
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