Supply Chain Improvement Doesn’t Start with Fixing One’s Own Operations

It’s a popular notion that we fix our operations before we think about collaborating with our partners, i.e., vendors, service providers, & customers.  We, after all, would like to show a position of productive strength when we negotiate with our partners as we try to convince them to enrol into whatever agenda we have (e.g., higher discounts on purchases, shorter terms of payment from customers). 

I would, however, advise the opposite.  We should negotiate and collaborate with our partners before we invest in improvements.

Supply chains are composed of not only operating relationships between departments within an enterprise but also those between our enterprises and our partners.  Supply chains don’t stop with the vendors or our customers we directly deal with but continue with connections with upstream enterprises who sell to our vendors and with the downstream individuals who buy from our trade customers.  Supply chains commonly have multiple sources than single ones as various components, parts, & ingredients would make up the merchandise that flow through them.  And likewise supply chains would have multiple final end-users for the different items & services that stem from their links. 

In short, our enterprises aren’t the centres of the supply chain world.  Supply chain productivity is dependent on how well we as linked organisations work together.  It is therefore logical that we prioritise negotiating and collaborating with our partners. 

We don’t have to be in positions of strength to negotiate with vendors & customers.  Rather, we must have strong clarity regarding our values & principles. 

And we should listen and be flexible as well to the insights our partners may convey about their values & principles. 

We hear about large corporations flexing their muscles and arm-twisting suppliers to adapt to their rules, standards, & terms of payments.  Some large corporations ‘invite’ vendors and tell them they are lucky to be chosen.  But if the vendors don’t comply with the conditions the corporations set, the corporations would expel them immediately, without hesitation. 

Some multinationals would also even dictate to customers on how much to buy and how much & when to pay.  Some consumer goods companies, for example, would choose a few customers to be exclusive dealers, and punish those who encroach and sell in another customer’s ‘territory.’ 

These influential enterprises see this kind of domination as advantageous as they believe it expands their market share and provides a means for revenue growth. 

But a domineering style has its limits.  Newcomers (who some firms would call disruptors) would find creative ways to work around and compete with the established behemoths.  Individual online traders, for example, would sell directly to consumers, bypassing the middlemen and exclusive dealers. 

Vendors also won’t sit still for long under what they would consider oppressive relationships.  Some would study the standards of their large customers, learning their ways of management, and develop more superior products & services.  We had seen this happen among former semiconductor vendors who introduced their own product lines against the likes of Apple, Intel, and Motorola. 

Supply chain improvement doesn’t take place without at least some basic collaboration with partners.  A big successful business enterprise may at the onset commandeer the supply chain of its products & services for some time, but eventually, it would be to its benefit to work with partners, no matter how much smaller they are.

Of course, we as entrepreneurs or managers should be always aiming to expand our spheres of influence.  But to do so requires empathy, synergy, and a win-win philosophy.  It would be a laborious path, certainly, but the rewards would be long-term. 

Supply chain improvement begins with working with partners, not without them.    

About Ellery’s Essays

The Two Fundamental Tasks of Business

A business enterprise has two fundamental tasks:

  1. Create demand;
  2. Fulfil it. 

All activities of an enterprise revolve around these two tasks. 

Demand creation is about cultivating an idea, enrolling followers to that idea, and manifesting that idea in products or services that the followers would buy. 

Demand fulfilment is about making available or delivering those products and services that the followers want to obtain. 

Marketing and selling products and services traditionally are the activities of demand creation while the procurement, manufacture, and delivery of products and services are the basic elements of demand fulfilment.

Demand creation and fulfilment go hand in hand.  The success of each depends on the other.  Demand created and fulfilled results in added value to the business enterprise. 

The tasks of demand creation and fulfilment are not necessarily limited to Sales, Marketing, and the Supply Chain.  Finance, Human Resources, and Research & Development (R&D) play active roles as each provides the resources and strategic guidance to the enterprise’s management in the exercise of both tasks. 

The manifestation of demand is the customer’s order or desire to purchase.  This comes in many forms such as consumers choosing and paying for items at the supermarket, the purchase orders from a buyer to a vendor, or a signed contract for importation of merchandise. 

There are some private companies that stress demand creation over fulfilment and there are others who focus more on fulfilment than creation.  Entrepreneurs starting out would tend to prioritize demand creation while mature corporations may opt more for demand fulfilment.

Business firms that sell products that are in constantly high demand but in which the firm has limited resources and capabilities would probably put more emphasis into demand fulfilment.  Cement companies, for instance, would be planning more on increasing capacity than on advertising especially when the construction economy is strong. 

Consumer goods firms, on the other hand, would invest heavily on marketing and sales to spur demand while at the same time stress on delivery reliability.  Cosmetic firms, for instance, would spend heavily on promotions and display counters at department stores to attract customers while at the same time stock inventories of multiple items to ensure outright availability. 

Demand creation and fulfilment are not limited to enterprises with tangible products.  Service companies also fundamentally create and fulfil demand.  Insurance companies, for example, aggressively sell life and non-life coverages and fulfil the demand via signed policies.

In a world where business has become more complex due to issues such as corporate governance, climate change, disruptions, and social upheavals, we sometimes tend to lose focus.  As much as demand creation and fulfilment are fundamental to our business, we can be distracted by what other people say are more important things to address. 

Business is about reaping value for stakeholders. No matter how cynical it may seem, we manage our enterprises to translate ideas into the reality of demand. 

“Great things in business are never done by one person.  They’re done by a team of people”

-Steve Jobs

About Ellery’s Essays

Why We Shouldn’t Ignore the Purchase Order

Vendors selling to a manufacturing company were really angry, a newly hired purchasing supervisor discovered on her first week on the job.  They complained that their bills weren’t paid for months after they delivered materials or parts.  At the same time, supervisors from other company departments were voicing complaints that their purchase orders (PO’s) hadn’t been processed for many weeks.

Upon inquiry, the company’s accountants told the purchasing supervisor there weren’t any pending long unpaid bills on their records.  The supervisor also checked her computer and found no pending PO’s to be filled, other than what she already received since her hiring date.

The supervisor checked the purchasing computer and saw that there were missing PO numbers.  She made a thorough search of the purchasing office and discovered two boxes of PO’s that were underneath a desk of a former employee.  The PO’s, which were unsorted and dated up to two years before, consisted of undelivered PO’s and PO’s that already were fulfilled but were left unpaid and unrecorded in the company’s accounts payables. 

When the purchasing supervisor reported the discovery to the company’s finance manager, an audit was done which showed the company had staggering debts to vendors.  The company couldn’t outright afford to pay the debts at once. 

Angry vendors blacklisted the manufacturing company and refused to sell to the company unless the company paid cash for new purchases.  Because of tight cashflow, the company could only buy materials in small quantities.  Delays in inbound deliveries caused shortages and disruptions at the manufacturing company’s production lines which resulted in late deliveries to customers, who in turn stopped buying the company’s products. 

This is a true story and a sad one.  But it didn’t have a hopeless ending.  The manufacturing company eventually settled its bills although the company’s purchasing department had to rebuild relationships with its vendors.

In many accounting systems, PO’s that are yet to be delivered by vendors or PO’s that have not yet been submitted to the accounting department are not yet considered payables and are therefore not yet included in financial reports.  This would distort financial statement reports and hinder management of cashflow. 

PO’s are therefore a blind spot in organizations.  As operations managers request and seek approval for them, they are not visible as liabilities.  This can create sudden problems for companies just as what happened to the manufacturing company mentioned above.

Internal audits would catch this problem but only if or when audits are done.  Absent a visible purchasing management system, managers wouldn’t be seeing the status of PO’s.  This lack of visibility of PO’s can upset a firm’s budget and financial strategy. 

An energy company allocates a sizable budget for maintenance every fiscal year.  The company’s engineers submit PO’s to requisition spare parts or to contract services for repairs and maintenance of equipment and buildings. 

The engineers, however, tend to submit most of their PO’s towards the last quarter of the year to use up any of their unspent budgets.  The end-of-the-year rush of PO’s would spike spending, push payables up, and cause a drain in cash-flow.  As some PO’s are submitted at the last few days of the final month of the fiscal year, a good number of purchase order liabilities would lapse into the succeeding year which would disrupt financial cash-flow forecasts. 

The management of PO’s depends a great deal on the purchasing manager.  Purchasing managers are responsible for instilling discipline in how PO’s are processed from requisition to bidding to negotiation to fulfilment.  

But interestingly, there isn’t much discussion about how to manage PO’s.  When it comes to purchasing, more of what are talked about are collaboration and negotiation.  Purchase orders belong to a basic system that doesn’t receive much recognition. 

In some companies, requisitioners for materials, parts, and services sometimes bypass the purchasing department and order directly from vendors.  When asked, their reasons from range from “I need the parts urgently” to “purchasing is too slow.”  When it becomes normal for employees to buy directly, purchasing departments are left just processing orders and payments.  Costs can run sky high as buying becomes uncontrollable. 

A basic PO system simply needs clear policies, procedures and enforcement to set standards to function well and contribute to a company’s budget and cashflow strategy. 

It starts with visibility and that means regularly updating the purchase order database and periodically reviewing reports.  It continues with consistently acting on requisitions and moving the PO’s through bids, negotiations, and fulfilment in a manner that is timely and on target to pre-set performance standards.  Direct purchases should be avoided, if not prohibited. 

Just ensuring PO’s don’t remain pending too long and that they are processed for payment in a timely manner can be a big help in improving reliabilities of supplier deliveries, not to mention maintaining mutually beneficial relationships with vendors. 

Actively managing the quantities, payment terms, and the timing of PO’s in coordination with requisitioners can make a big difference in managing working capital.  Finance managers shouldn’t worry about spikes in procurements. 

Purchasing is not just about bidding and negotiating for better value.  It is also about how purchases themselves are managed within the confines of an enterprise’s internal supply chain.  There is no dispute that purchasing’s key role is ensuring what is bought shall deliver the best value to an organization.  One just should not forget the value of the system that governs the buying itself. 

About Ellery’s Essays

Collaboration: The Secret to Supply Chain Success

It’s hard to find a supply chain success story.  Either there isn’t any or enterprises would prefer to keep it private, not wanting to share any secret they consider proprietary. 

Some so-called experts (ones like me who write blogs and claim they are) say companies like Apple, P&G, Walmart, and Toyota are supply chain successes.  But these are companies, individual stand-alone enterprises.  They don’t represent their respective supply chains; they’re just components or links. True, they may dominate their vendors & markets, but it does not necessarily mean their supply chains are wholly successful. 

What in the first place is a successful supply chain?

Some would say that they are the ones who consistently deliver to customers at the right time, right quantity, right quality, at lowest cost.  Others may say it’s one that simply fulfils demand to the satisfaction of customers.  Or it’s the steady stream flow of goods and services through a series of operations, in which inventories are kept to a minimum, if at all. 

A large corporation that sells food condiments boasted a 98% order-to-delivery performance, i.e., it fulfilled its customers’ orders on-time and complete just about always.  Two of its biggest customers, however, say that’s false.  They say that the condiments corporation order-to-delivery performance is at best 60%, in which the customers slapped penalties for the 40% of deliveries that are late or incomplete. The corporation tells its stockholders & employees it is a success, but its customers claim it’s a laggard.

Supply chains aren’t limited to one enterprise.  It’s made up of linked participants: the enterprises or organisations which trade goods or services with one another.  We see supply chains via activities such as the sourcing of raw materials, the manufacture of merchandise, the storage, handling, & conveyance of goods, the execution of services, and the exchange of information between customers, vendors, & service-providers. 

The successful performances of one enterprise’s operations, however, do not necessarily translate to the success of supply chains in their entireties.  Enterprises are dependent on their vendors, customers, & service providers, as much as they are independent in how they manage themselves.  Enterprises define their own standards, plan their own strategies, and decide whether their own performances are up to par or not, but they don’t dictate to their vendors & customers. 

Are there supply chains that consist solely of one enterprise?  Some of us may cite the armed forces of nations.  Armies of countries, federations, & empires set up their own infrastructure and oversee their supply lines as they defend or conquer their territories.  The Greeks sailed ships, the Romans built roads, and the notorious Wehrmacht of World War 2 Germany constructed autobahns & railways to transport troops & war matériel quickly to front lines. The success of a sovereign country’s military may be traced to the success of its supply chain. 

But single entity supply chains are more of a myth than real.  Logisticians of leaders of vast empires like Alexander the Great and Genghis Khan had to negotiate with farmers, fisherfolk, livestock breeders, & villagers to obtain food & supplies.  As much as they could threaten and subjugate those who wouldn’t agree, the benefits of cooperation and contracts outweighed the costs (e.g., there was no long-term worth to pillaging a village which wouldn’t be able to supply anything in the aftermath).  From the past until present, there is hardly any supply chain with one dominant or single entity.  Any successful supply chain would have to have at least some sort of synergistic relationship between linked participants.  Militaries depend on vendors & contractors.  Large conglomerates need to convince consumers to buy their products. 

It’s hard to find successful supply chains, and we can that in everyday challenges.  We as customers complain about not getting our products on time or sometimes, not at all.  We see empty shelves in supermarkets.  Some of what we buy don’t meet our expectations.  Ships lose merchandise at sea.  Inventories are too much or too little.  Soldiers in the battlefield didn’t receive the right weapons or uniforms.  Employers lay off workers because of lack of components on the production lines.  Citizens clamour for food in one country while farmers throw away rotting vegetables in another. 

What makes supply chains successful is not in how well enterprises manage their own operations to prevent or handle failures but in how linked enterprises work together.  Linked participants must agree among themselves what constitute success for their supply chains, otherwise there will inevitably be failure from the very start.  A vendor may agree with an enterprise on performance measures but a supplier to the vendor may have a different idea.  The same goes down the line to customers and their trading partners. 

Supply chain success begins with consensus from linked participants on what successful means.  Consensus requires negotiation and collaboration.  Adversarial relationships must be avoided.  Synergy must be the goal and the standard.  We succeed when we work together, not by trying to dominate. 

We may recognise supply chains as visible models to better manage the flow of goods and services from sources to end-users.  But until we as actively linked participants realise the need to collaborate and agree on what would make our supply chains successful, we will continue to live with non-optimal unproductive relationships that shall lead to frequent failures.  

Supply chain success will remain elusive as long as we don’t cooperate. 

About Ellery’s Essays

My Phones Die Once a Month

Every month, like clockwork, the telephones at my office and warehouse die. As in no dial tone.  As in no one can call in and no one can call out.  Sometimes they are dead for a few minutes; sometimes they are dead for a week.  The point is they die at least once a month, without fail. 

My office is a leased space on the second floor of a school & office supply retail store.  When my office phone dies, it means the phones of the store died too.  Our neighbours’ phones also die at the same time, making it obvious that the problem isn’t due to a local circuitry glitch within our office or warehouse premises.

Why do the phones die? I had asked the question over and over whenever I report my phones as ‘out of order’ to PLDT, the very large telecommunications company where I subscriber my telephone services from.  PLDT does not give me an answer beyond what it says is a ‘network outage.’  In my opinion, ‘network outage’ and ‘out of order’ are synonymous, therefore PLDT just parrots what I’m reporting and does not tell me the cause.  The short answer is I don’t know.  

PLDT seems to want to tell me the causes of my dead phones are none of my business, and so, they just tell me to ‘wait.’  They frequently tell me to wait like from 24 to 36 hours for what they call ‘service restoration.’  They sometimes give me a ticket number which I’m supposed to punch in to their portal whenever I’d like to follow up the ‘service restoration.’  And whenever I do follow up, I get the same canned text message: ‘the restoration of your service is still in progress,’ which in translation means ‘wait.’ 

I (and I would assume anyone who works in an office) can’t work productively without a landline phone. True, I (and just about everyone) possess smartphones which I (and just about everyone) would use in lieu of busted landline phones.  Wireless services in the Philippines, however, is dismally horrible in which users suffer bad signal coverage dropped calls, and awful reception.  Using the smartphone is also more costly than calling via a landline. 

I have tried contacting human beings in PLDT when it looks like my telephone service won’t be restored within the day of reporting.  Often, I end up talking to a chat-bot, which is a robot that responds with programmed answers.  There were times I thought I was talking to a human only be realise it’s a chat-bot, when the ‘human’ kept on saying ‘I don’t understand what you’re saying’ to my questions.

I did go a few times to one of PLDT’s customer service centres, which are mostly located in shopping malls.  Every time I visited, I’d find myself spending 2-3 hours waiting till a human behind a counter could talk to me.  And when I did, the human would tell me to again (yes, you got it) ‘wait’ while he or she follows up via sending a message to whoever is in charge of repairs (PLDT won’t tell me who this would be nor would they provide a contact number). 

We can conclude that whatever a subscriber does to expedite an urgent request for repair of dead phones is frustratingly futile.  With our phones out of order, I, the school & office supply store, and my neighbours cannot receive calls from customers or clients.  My business, the school & office supply store’s business, and my neighbours’ businesses suffer.  Lucky us if PLDT repairs our phones quickly; poor us if it takes days. 

Many impatient PLDT subscribers complain about their out-of-order telephones in social media but their rants hardly attract the attention of public news outlets or the government, specifically the Philippines’ National Telecommunications Commission (NTC), the agency supposedly tasked to tackle the quality of services of telecom companies.  For all the complaints and the losses from once-a-month dying telephones, there is hardly any discussion.  We can only speculate that government and media don’t want to take on PLDT because it is a very big company. 

For ordinary subscribers like me, the school & office supply store, & my neighbours, the options left for us are to wait despairingly for ‘service restoration,’ and spend money on more expensive albeit poor quality smartphone services. 

It’s another fact of life in doing business in the Philippines in which its so-called business-friendly environment is merely a myth. 

About Ellery’s Essays

A Recap of Insights

From all that has been said and written about supply chains, perhaps a recap of insights is in order:

Every enterprise, every organisation, and every firm have some sort of supply chain within it and beyond it.  Enterprises procure ‘input,’ convert them to ‘output,’ and deliver the latter to customers.  Enterprises which trade with one another make up the ‘chain,’ which is manifest in the exchange of merchandise. 

Supply chains are not only about the production of goods but also services.  Hospitals admit patients and cure them.  Trial courts resolve legal cases.  Schools educate students. 

There are processes within and between enterprises which when viewed altogether are the operating models of supply chains. 

No two supply chains are alike.  No matter how similar or identical the processes between two firms, there is no such thing as identical supply chain twins.  There will always be a difference, which whether minute or significant will make one supply chain stand out from the other. 

A supply chain is not one straight line of one link after another.  It’s not a series but an intertwining network of relationships.  An enterprise could be a vendor, customer, service provider, or all three at the same time. 

The reach from input to output is vast for many supply chains.  Many products are the results of many multiple operations, starting from primary beginnings such as the mining of ores and the harvest of crops, through the creation of parts, ingredients, components, & finished items, and finally to the delivery to or servicing of consumers.  It’s true that not all supply chains are complicated, but most operations executives would likely say that any supply chain are already quite a lot as is to manage.   

It can’t be stressed enough that supply chains aren’t limited to within organisations of enterprises.  Still, many firms, especially those who see themselves as large companies, think they are the centres of their supply chains.  They exert influence on vendors and customers as they try to subject them to their standards.  It may seem to work for some organisations (e.g., Walmart) although it can end badly for others (e.g., Boeing).  There will always be some point where enterprises would better off  to negotiate and collaborate. 

Relationships establish the existence of supply chains.  The systems & structures which underlie supply chains are the results of those relationships.  How we set up and perform our operations depend on the terms we set with our vendors, customers, and service providers. 

The ideal relationships are the ones where everyone wins, where everyone gets what they want.  We, however, live in a world where we many of us would rather win by making others lose.   

A win-lose approach seems easier to execute than a win-win one because we don’t have to share; we keep the spoils from the wars where we are the victors.  We don’t realise that in supply chains, there is a likelihood of karma, where those who had lost due to our gains will get back at us in the future.  We win some and lose some is not a constructive mantra in terms of our long-term interests. 

Collaboration remains the best alternative, never mind how exceedingly painstaking and time-consuming it may look compared to an adversarial approach. 

The aim of supply chains is productivity.  We perform to be productive such that the overall objectives of enterprises are met.  Pursuing how much we make per person or striving to be fast in our deliveries should be consistent with achieving what standards and goals we had set, not only from the perspectives of our employers but also with those we had collaborated with. 

We can’t build a house without an image of what we want it to look like.  Similarly, we can’t build our supply chains without an inkling of how we’d like it to operate and perform.

Planning and execution begin with a vision.  But unlike a small group such as a family to draw the blueprints, our supply chains need to enrol a good number of individuals of different experiences and professions to conjure and make into reality our dream operations. 

Envisioning our supply chains is a challenge as it requires a collaborative effort of stakeholders, i.e., participants in the supply chain.  Our supply chains will only be as good as those who own and actively work together for them.   Not only the executives & owners but also the front-line & support personnel should have a say. 

And just like building a house, we need the expertise of engineers to help construct the envisioned systems or structures of our supply chains. 

Supply chains are not the exclusive purviews of managers.  Yet, in the modern age of the 2020s, after supply chains had been identified as key business models, we do not have engineers dedicated to design and build systems & structures for supply chain operations. 

We’re still leaving supply chain improvements up to management, which is a big mistake. 

Supply chains manifest the operating relationships enterprises have with each other.  They apply to just about every merchandise & service and are found virtually in all industries.  They are complicated, vast, and unique. 

Managers cannot improve supply chains without collaboration of stakeholders of linked enterprises.  Collaboration requires vision.  Making visions into realities require not only consensus among stakeholders but also the expertise of engineering, which is badly lacking. 

About Ellery’s Essays

Burning the Midnight Oil & the Work-Life Balance Myth

Not a very long time ago, people avoided working at night because they didn’t have enough light.  But for those who did have to work at night, they had to make do with whatever source of light they had. 

Up to the early 20th century, people had little in the way of light after dusk.  Night was very dark just about everywhere.  Farmers had to be back from the fields and shops closed before dusk.  Travellers raced to the nearest inns as soon as the sun set.

But even without sunlight, people still had jobs to do.  Farmers woke hours before sunrise to prepare their stuff, livestock, and equipment before heading out to the fields.  Shop owners cleaned their stores and wares before they opened.  Accountants recorded the past day’s sales & expenses to keep their clients’ books up to date.     

And because there was work to be done at night, people used candles and oil lamps to get whatever light they could. 

Candles and oil for lamps weren’t simple to source. In ancient times, people milled olive oil from olive trees which were readily available.  By the 19th century, sailing shipping crews harpooned whales to harvest their blubber into lamp oil.  Candle makers made their products also from whale oil, although they later used vegetable oil.  Oil and candles were commodities that therefore depended on supply chains beginning from whales and agricultural crops which then passed through manufacturers and middlemen before reaching town markets.   

The people who worked at night would buy the oil from their local markets and fill their lamps with it.  But the light provided was just so much for people to see their way around or read.    

Candle light and lamps brought limited illumination in the darkness. If people had to work at night, it was because they had to out of necessity of their profession.  People would either admire or scorn those who burned the midnight oil, either praising them for their diligence or criticising them for what they judged as demeaning work.     The people who worked after dark were either seen in a good or bad light (pun intended).  

With the availability of almost unlimited electricity at the onset of the 20th century, our cities and country-sides had become very much brightly lit.  We can work and travel anytime, day or night, with the confidence we’d have more than enough illumination. 

But for those of us who work day jobs, we frown on the prospect of working at night.  We’d rather not work swing or graveyard shifts.  We avoid bringing work home to toil after sunset.  We limit our overtime so we can be home right after sunset. 

So-called time management gurus tell us we should not work beyond our eight-hour day.  We should pursue a work-life balance in which we limit our professional work from sunrise to sunset and spend time with families and ourselves in evenings and weekends.  Burning the midnight oil is a no-no.    

Day jobs, however, do not dominate the realities of present-day industries.    

Many of us burn the midnight oil just as much, if not more so today, than ever. Work does not depend on sunlight but on demand, which has grown exponentially, given  the modern-day complexities of products & services, not to mention the almost countless market niches established.  There are jobs and activities that must go on whether it be day or night.

Farmers still wake up before sunrise to prepare their equipment and livestock before going out to the fields.

Shop owners still clean their wares and store spaces after they close and before they open. Many close long after sunset and some like market stalls open hours before sunrise.  There are e-commerce workers sell and deliver 24 hours a day, 7 days a week. 

Innkeepers & hotel staff work the shifts to welcome guests who arrive around the clock. 

Accountants key in their data into their computers to beat deadlines for their clients. 

There are also the truck drivers, fishermen (and -women), oceangoing vessel crews, power plant personnel, night shift factory workers, business process outsourcing employees (e.g., call centre staff), and many others, who work day and night, weekdays to weekends, holidays included. 

Work-life balance may be a nice pursuit for those whose careers allow them to work in the daytime and rest in the evenings, plus weekends.  It is, however, a myth for those whose jobs require their presence independent of what time or what day it is. 

Burning the midnight oil may have been an exception once thanks to limits of light sources; it is more of a rule for many of us who work in the 21st century with almost unlimited illumination.

Many who preach work-life balance don’t understand what real work-life is. 

About Ellery’s Essays

I Build Supply Chains, So What?

“We do not share a common definition of supply chain management across the industry. Just take a look at the various professional associations to which you belong. Procurement organizations and logistics associations alike claim supply chain management as their expertise. And to be fair, APICS, which defines supply chain management from end to end, has its roots in planning and production.”

-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. 

About Ellery’s Essays

Working What We Have vs. Changing What We Work With

We who are supply chain managers have their hands full doing their jobs.  The problem is we work with what we only have.   Executives of enterprises determine our scopes; executives also decide what resources & assets we will have at our disposal or have authority over. 

Supply chains extend beyond the borders of enterprises, and this is one key reason why our supply chains are dysfunctional.  We are limited to working within our scopes and in what we have.  Executive strategic policies govern the relationships we have with those outside the jurisdiction of the enterprise, i.e., vendors, customers, & service providers. 

To build or improve supply chains, we need engineering, not management.  We who are engineers are tasked to solve problems without working with we have.  We determine what we need to work with and what resources & assets enterprises need to procure and invest in.  

Engineers build new structures & systems.  Managers work within existing structures & systems. 

When it comes to tasks, supply chain managers look at what’s happening in their operations and plan, organise, direct, and control the people, resources, and assets they oversee. 

Supply chain engineers, on the other hand, don’t oversee or supervise.  They assess the conditions of people, assets, and resources and figure out how to boost the productivities of each and all.  Engineers don’t limit themselves to what’s there but instead, study what can be added or changed. 

Supply chain engineers become more worthy when they tackle issues.  Whereas supply chain managers quick-fix or implement short-term remedies, supply chain engineers define problems and design long-term productive solutions. 

Improving supply chains is about changing what we work with. 

About Ellery’s Essays

Shifting the Supply Chain Management Paradigm

Supply chains consist of interdependent relationships within and between enterprises.  No one enterprise dominates an entire supply chain, though many have tried.  And because we who work in supply chains participate in these relationships, we need to learn to work with each other, if not together. 

We, therefore, require a paradigm shift. 

Most of us have the idea that managing supply chains means managing the operations within the walls of our enterprises.  We call vendors and customers ‘partners,’ but they are outsiders to us.  We treat vendors as sources we negotiate with so we can procure needed materials, ingredients, parts, or components.  Customers are parties we aim to win over so that they will buy our products & services at profitable prices.  Other than that, they are nothing more. 

The paradigm of supply chain management is to improve the productivity of the enterprises we work in.  Negotiation and collaboration are means to benefiting the ends of our enterprises. Good, if we get win-win results, but we wouldn’t care that much, if we ended up as winners and our partners did not.  What’s important is we meet our targets, not so much theirs. 

And this is why supply chains are far from perfect, which is an understatement. 

Our supply chains are not optimal; they are far from productive.  We can dare say they are dysfunctional.  Or to put it more succinctly, they are all one downright mess.   

Apple has been the model of supply chain management excellence.  The company develops and rolls out iPhones, iPads, and Macs in seamless fashion from its vendors & contract manufacturers to its retail stores and direct buyers.  Yet, Apple products are never 100% available.  Buyers in some countries need to wait, sometimes for weeks.

Amazon, another supply chain ‘star,’ serves orders completely as fast as one day.  Amazon’s order portal doesn’t allow us to order an item which is out of stock, so any demand for an unavailable item remains unfulfilled.  We praise Amazon’s e-commerce excellence, but its supply chain doesn’t necessarily deliver what we want when we want it.  It never fulfils demand. 

We don’t get what we clamour for.  We have either too much inventory somewhere or none someplace else.  Products take too long from manufacturing to distribution.  Customers complain about quality, and we do too to our vendors.  High prices are constant headaches for everyone along the supply chain. 

We blame our suppliers, logistics service providers, and freight transporters for delays and our customers finger-point us as well.  On top of all these, we are at the mercy of government red-tape, seaport congestions, and all kinds of disruptions (e.g., calamities, labour strikes, wars, new competing products). 

The paradigm of supply chain management is we work from within our enterprise’s operations.  And as a result, we have impaired and unproductive supply chains. 

The new paradigm is to work from without. 

Ideally, that would mean we who are the links in our supply chains should work together starting with common goals; goals that would be shared from the sources to the final buyers. 

In our real world, where we are under pressure to deliver for the enterprises we work for, such a paradigm shift would be a tall order. 

But I believe it can be done. 

We just have to start thinking from a different perspective. 

About Ellery’s Essays