Recurrent challenges in supply chains

In media articles written for industry and professionals, there is a stream of ‘good news’ stories about technologies and the positive outcomes from implementation. However, media articles written for financial and investment people have different stories. Three recent articles have highlighted some basic and recurring challenges that affect supply chains:

• Retail apparel company: Issues with implementing a warehouse and distribution application from a new IT software supplier. The company reported that implementation disruptions were greater than anticipated, delaying the delivery of imported inventory for the key Mother’s Day trading period, which caused a major reduction in sales.
• Apparel brand company: Takes more than a year to launch a new product line, even using a modified design from the archives. Design and outsourced production process unable to respond faster.
• Dairy products company: Company states that it aims to maximise internal productivity and improve efficiency to gain ‘economies of scale’. However, they actually need flexibility for ‘economies of scope’, in response to variable supply conditions, with dairy farmers exiting the industry and volatile farmgate milk costs.

These situations are not specific to an industry or country and they have been similar for many years. But to overcome the challenges does not require new technologies – they indicate a lack of management capabilities: project management skills; training in the principles underpinning an IT application and operation of a software application; organisation structure and associated performance measurements and developing supply chain strategies.

Terminology that all will use

To overcome the problems is harder than identifying them. A good place to start is encouraging people in a business speak the same supply chain language – ensure that terminology used throughout the business has the same meaning. Unfortunately, supply chains literature is littered with ‘buzz words’, often generated by consultants wishing to put their slant on a topic.

For example, a term that now has every day use is end to end. But where are the ends in supply chains? When challenged about what the term means, and likely to identify between the Tier 1 customers and Tier 1 suppliers of a business. Why is it to that extent – because only between these points does knowledge and data exists about the supply chains. Past the Tier 1 customers and suppliers (the Core supply chains) is the Extended supply chains from the farms and mines that supply materials and processed items. Of these supply chains, the focal business usually has limited knowledge.

Using the term end to end is impressive, but it sounds as though there is knowledge and control of the total supply chains for a business. But does this provide the wrong perception for senior management? And also for commentators that write and talk about the need for ‘end-to-end’ Visibility (never specified about what that means) through supply chains, aided (of course) by artificial intelligence.

Using the term supply chain to describe the many supply chains of an organisation provides another perception among management. Using the singular term indicates that when planning Operations or responding to an event or disruption, only one approach is required. But this is not so. Using the plural supply chains signals that different techniques and processes are required for each supply chain, dependent on the patterns of data exhibited. Analysing the patterns is called Segmentation.

Segmentation of elements within the Supply Chains, namely: Finished goods SKUs; Customers; Inbound supply items and Suppliers is discussed in the new FREE eBook Essential Information for Planning Supply Chains.

And the term Supply Chain Management frequently occurs in corporate publications, but does it mean that supply chains can be managed? The response is no. The Core supply chains between Tier 1 customers and Tier 1 suppliers is where business relationships and risks should be managed. Beyond that, is the Extended supply chains, with limited opportunities for management of supply Nodes and transport Links. The need is therefore to understand the demand and supply markets, which enables an awareness to foresee and respond to events.

Understand the Supply Chains Network

Understanding demand markets is the responsibility of Marketing, and for supply markets is Procurement. With the assistance of other members of the Supply Chains group – Operations Planning and Logistics, the Supply Chain Network Design Map (or Supply Chains Map) is developed to provide details of the supply locations (Nodes) and transport Links. Incorporated into the Map is data about supply markets, gathered through Supply Markets Intelligence.

As the Map is developed, supply chain risks are identified, with supplier risks linked to risks with supply items, providing a comprehensive view of risks through the supply chains. Although risks in the Extended supply chains are unlikely to be managed, their known existence and analysis allows contingency plans to be developed for when the risks turn to actual events.

The Supply Chains Map is a document that is always open, because it will be under continual update by the Supply Chains group. The preferable organisation structure to do this is an integrated Supply Chains group, but a matrix structure can be used. However, the management of Flows (of items, money, information and data) and associated data accuracy must be recognised as a requirement in the business.

Using the knowledge

The main activity of the Supply Chains group should be the monthly Sales & Operations Planning (S&OP) process, facilitated by Operations Planning. The objective is to balance forward expected demand with the capability to supply – easy to say, but more difficult to implement.

To implement each feature noted in this blogpost – terminology, Supply Chains Map, Supply Markets Intelligence, Flows and S&OP, will take some time, the actual time is dependent on support by senior management and the capability of people in the Supply Chains group to lead a change effort.

But it is important to recognise that new technology is not required to get each process up and running. Spreadsheets will still be used. Initially it is a ‘proof of concept’ for learning about and improving the process, that when required can be a user needs document to inform IT application providers.