In one line: A supply chain is everyone involved in filling a customer’s order, from raw-material suppliers to the end user. Today companies increasingly compete as whole supply chains, not as individual firms.
Core idea
A supply chain includes not just the manufacturer and its suppliers, but also transporters, warehouses, retailers, service providers and the customers themselves [1]. Four flows move through it: materials, services, information and money. Supply chain management (SCM) is the effort to align objectives and share resources across those companies, so that the whole chain delivers more value than its members could separately [2]. As one oft-quoted executive put it, competition is increasingly supply chain versus supply chain.
How it works
Fawcett and Magnan’s ten principles fall into two families [2]:
- Designing the chain:
- start with a shared vision and a map of the chain
- begin with the end customer
- focus on core competencies and outsource the rest
- keep the design simple
- watch for role shifting as members’ capabilities change
- Integrating the chain:
- build bridges and knock down walls between functions and firms
- recognize that some relationships are more strategic than others
- measure what matters, because what gets measured gets done
- remember that people are either the bridge or the barrier
- use technology as an enabler, not a substitute for collaboration
They also describe a maturity path that most companies climb slowly:
- functional focus
- internal integration
- external integration
- true cross-firm collaboration
Key questions for any supply chain:
- What is the strategy: cost, speed, flexibility, resilience, or sustainability?
- Is the chain mapped, with critical paths, bottlenecks, inventory points and hand-offs?
- What scorecard is used to evaluate suppliers and the chain as a whole?
- Where in the chain is cost added, and where is value created?
In practice
The program’s assignment is a networking interview with someone who manages the supply chain in your own company, followed by a short white paper. Answers often reveal strategies built on a handful of pillars:
- diversifying suppliers to reduce geopolitical risk
- strategic partnerships
- digital visibility
- compliance and cybersecurity
- lean continuous improvement
- sustainability and ethical sourcing
Mature organizations map their value streams explicitly (see Value Stream Mapping). The online-retail case readings show the other end of the spectrum: a company whose logistics network became its main competitive weapon.
Questions to ask yourself
- Which supplier on my product could stop production if it failed?
- Is my company’s supply chain designed for cost, speed or resilience, and do we agree on which?
- Where does the most value get added in the chain my work belongs to?
Connections
- Pace of change: Clockspeed. Mapping: Value Stream Mapping. Design side: Design for Manufacturing.
- A toy version: Lemonade Stand Simulation. Global partners: Cross-Cultural Operations.
- Capabilities exercised: Connecting Across Disciplines, Negotiating and Compromise, Vision.
Sources
- Fawcett and Magnan (2004) Ten Guiding Principles for High-Impact SCM [2]
- Chopra and Meindl - Supply Chain Management [1]