Does the word “chain” accurately reflect the required communication flow of supply and demand throughout the supply network?
In actuality, the “Supply Chain” reflects a series or sequential set of steps that are required to build and deliver products to customers. Brand owners or manufacturers need to order and receive products or materials from suppliers, who in turn need to receive materials from suppliers and so on through the multiple tiers of a given supply chain. In addition, at each tier in the supply chain, manufacturing operations and/or assembly/test operations need to be accomplished, which in many cases are represented as levels in the respective bills of materials at each tier in the supply chain. This is what has to occur for products to be manufactured and delivered to customers.
In a lot of cases, the communication of supply or demand changes tend to follow this same linear, sequential series of steps up and down the supply chain. Communication of a demand or supply change is initiated by the brand owner or manufacturer and this has to be communicated sequentially through the multiple tiers of suppliers. In addition, the assembly or manufacturing at each tier are represented in multiple bill of material (BOM) levels at each tier. At these BOM levels, there can be production orders, firmed orders or master production schedules that hold the current schedule until a planner changes them and allow these changes to continue flowing through the chain.
Therefore, if this same linear, sequential series of multiple tiers of suppliers as well as multiple BOM levels need to be followed to communicate and collaborate changes required of supply and demand, then weeks and even months can go by before the changes reach the end of the supply chain. Obviously, by this time, another series of changes can be rippling through the links in the chain and the supply chain cannot respond to these changes in a timely manner.
This problem is only magnified when you consider the risk factors associated with increased outsourcing that can result in more supply disruptions/issues. And strikes, political issues, recessions and even natural disasters can all cause minor to significant supply disruptions that will throw off the normal chain of activities. The end result can be excess inventory or lost sales due to not having products available for delivery to the customer.
So while obviously the concept of the supply chain is certainly not obsolete, the information flow and collaboration throughout the supply chain needs to flow seamlessly and not as a linear, sequential series of steps.
So don’t shackle yourself to the notion of a chain.
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Tags: Demand-supply balancing, Supply chain, Supply chain management
Posted in Supply chain management
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The title of this article is certainly provocative and Mr Jeffrey has posed an important question. I always wondered why “supply chain”? and found the term wanting in its descriptive prowess.
Firstly, I don’t think linear link-for-link imagery in the term “chain” describes accurately the concept of a network of businesses: A given business (one link in the chain) probably has many suppliers on each tier and those suppliers each have many customers. The given business then usually has many customers who are supplied by other suppliers. What does it do to the “chain”? There are now so many links up, down and across it’s more like chain-mail, wire-mesh etc. Which does not resemble the graphic in the article. Perhaps “web” is more accurate.
Secondly, why only “supply”? Does demand not play a role? It suggests an exclusive, one-way supplier-centric process that mass-produces and delivers products, but is oblivious to actual consumer demand. Which is not the way industries work these days.
“Supply chain” has subsequently linked to other pretentious and equally deficient terms like “demand chain”, “value chain” etc. Academics and consultants have had a field day and it seems we are chained in jargon!
It is hard work finding an evocative term that sums up such an all-encompassing concept: “enterprise process”, “economic web”, “business network” (or any combination of the aforementioned) etc. all sound so bland and officious. Which is why “supply chain” had its appeal. Next time stick to plain English!
Taking off from Peter’s comments, I still view the “Supply/Demand Chain” as a set of linear processes or links in which an action to one link needs to be taken to affect the following links and the final outcome. I think where we are going with this discussion is that we need to define the difference between the supply chain process and the collaborative information “Web” if you will. Where we get our demand and availability information is definitely a web or network of economic/business information. Being able to decide which piece of information from that collaborative web or network to act on is critical, and then the ability of going into the supply chain and knowing exactly which link to change to effect a favorable out come in the shortest period of time is even more critical. Most often you don’t need to change the whole supply chain in reaction to a piece of information; just one link can make all the difference.
Is the term Supply Chain obsolete? When we established our Certificate and Degree program at Riverside Community College in 2002, there was some debate about calling it a Logistics Management program or a Supply Chain Management program. We chose the term Logistics Management, and I have never regretted the decision.
At the time the term Supply Chain was being used in a very comprehensive manner. Over time, however, it seems the term has been co-opted by Information Technology types within the industry. For practical purposes, the focus of Supply Chain Management has always been the development, implementation and maintenance of the systems, processes and relationships necessary to properly coordinate logistics activities spanning potentially different organizations working together as one virtual enterprise. However exciting this may be from a strategic perspective, this narrow focus seems to exclude the tactical and operational challenges of running a day-to-day logistics operation.
Logistics Management on the other hand, has always implied a concern for getting the job done (i.e. dealing with tactical and operational challenges). As for the more strategic challenges that “Supply Chain” management would imply, I would prefer think of these as “Integrated Logistics” issues. Instead of concentrating on a single logistics activity such as purchasing or warehousing, a major learning objective for our program at Riverside Community College is the preparation of students to manage from an end-to-end integrated logistics perspective.
Referencing Mr. Beck’s discussion, maybe I am getting tied up in the semantics of the thing but in my mind the supply chain and Logistics are two different things. In reality the practice of logistics, i.e. the flow and distribution of existing material/goods is a part of the Supply Chain which includes the planning, ordering, scheduling, processing, manufacturing, Sale/marketing and as well logistical flow of raw, intermediate and finished materials/goods basically from the point of origin or the mine, through the intermediate processes, into finished goods and then distributed out to the end consumer. The supply chain is allot larger concept including all levels of processing and manufacturing, sales and marketing as well as logistics. As a supply Manager my goal should be to have a span of control that can manage processes and movement from at least second or third tier suppliers through first tier suppliers, into and through my manufacturing organization and my finished goods out to first and second tier customers.
Ron,
Yes, semantics is the issue. For example, I noticed you using the work “supply” independent of the work “chain.” Did you intend to say “supply chain”? I think so.
If we go to the online glossary of the Institute for Supply Management, we find “supply management” defined as: The identification, acquisition, access, positioning, management of resources and related capabilities the organization needs or potentially needs in the attainment of its strategic objectives.
So “supply” is different than “supply chain.” It shouldn’t take operations people a Master’s Degree to keep the vocabulary straight. Maybe sticking with “logistics,” which most people understand is a good idea.
Rex
Years ago Anderson and Morgan offered System Contracting (Purchasing) as a name to approach to this issue. It is indeed a system; very complex like a fractal equation that gets more complex the deeper you probe it. So, what about Fractal Systems Supply as a name
But Systems Supply would be easier to market to the profession.
Bill seems to be an old school Purchasing/supply sort of guy; (excuse me if you are younger than 40) one needed to be professionally active in the 1970s to understand what Bill is talking about. I don’t really care what you call it but I do know that specifying properties and controlling manufacturing processes from the raw iron ore to and through the melt into the slab, into the secondary plate processor and his certification of strength and toughness, into my manufacturing facility, cut, formed welded and assembled with 25,000 other part numbers managed similarly, then into a saleable product marketed and sold to a distributor then sold and move on to a final consumer is a whole lot more that logistics. Yes logistics is a part but logistics has little to do with specifying how that iron ore is melted, by who and to what chemistry and purity and how it is rolled into slab then into finished plate and strength tested and certified how it is designed and exactly what process is used to cut, form weld and assemble into finished goods. Logistics probably does not control the ERP, communications, engineering and quality systems used at each level nor does it pay much attention to the market conditions that are driving the whole process and how one reacts to changes in those market conditions. Supply Chain management and or systems contracting does attempt to control all those intricacies.
Stop the hate. Just joking, but I don’t understand what Bill’s age has to do with the conversation. I doesn’t take much experience to understand some basics of organizational culture.
If “controlling manufacturing processes” to include “specifying how that iron ore is melted, by who and to what chemistry and purity and how it is rolled into slab then into finished plate and strength tested and certified how it is designed and exactly what process is used to cut, form weld and assemble into finished goods” is required of a supply chain manager, then it is easy to understand why someone from a logistics background would hesitate to take this on. Depending on the corporate culture, challenging production/manufacturing for control of these activities could be unhealthy for one’s career.
I agree that Logistics is part of Supply Chain but it is not an optional component. In absence of Logistics Supply chain is like a car with no fuel. They need to exist side by side for an organization to perform smoothly. As the institute of Logistics and Transportation (ILOT) describes Supply Chain is a sequence of events intended to satisfy a customer whereas Logistics is the time related positioning of resources, or the strategic management of the total supply chain.
I would say, Supply Chain defines a set of processes in a static environment and Logistics deals with the dynamics of those processes for efficient and effective flow of goods and services.
A very interesting discussion. Chain or network? Or both? A chained network? A networked chain? Whichever way you look at it, I doubt that we will ever reach consensus as to what SCM really entails, simply because SCM works differently in different industries. What is true, though, is that there needs to be a coordinated flow from one end to the other, not steps, not links, not tiers, just one entity. Can we get there?