Managing supply chain information: Consider how you can make sure that information is shared with others in the supply chain in ways that create value for everyone. When retailers share sales data with their upstream partners, the manufacturers and distributors do a better job of scheduling production and managing inventory. When manufacturers share data about commodity prices and capacity constraints with their downstream supply chain partners, the retailers do a better job of managing pricing and promotions. Sharing the right information up and down the supply chain helps everyone create more value.
Making money from the supply chain: Consider how you can use your supply chain design, relationships, partnerships, and information to capture value for your company. At the end of the day, businesses are sustainable only if they’re able to generate a profit. In supply chains, a process change for one part often creates value for someone else. Find ways to share this value so that everyone has an incentive to work toward optimizing the value of the entire supply chain and ensuring that all the participants make a profit along the way.
Implementing the New Supply Chain Agenda
One of my favorite books about supply chain management is The New Supply Chain Agenda, by Reuben E. Slone, J. Paul Dittmann, and John T. Mentzer (Harvard Business Review Press, 2010). It’s a business book — the kind that you’d find in an airport bookstore — that breaks down the challenge of supply chain management in a way that focuses on senior executives. The authors talk about working capital and liquidity, strategy, and alignment, and they lay out a five-step system for making a company better at supply chain management. The five steps of the New Supply Chain Agenda are shown in Figure 1-4.
FIGURE 1-4: The New Supply Chain Agenda.
Placing the right people in the right jobs
Implementing supply chain management requires understanding how your job affects other people inside your company, as well as the people up and down the supply chain. If people don’t understand the true effect of the jobs that they do, they need to learn so that they can do their jobs better. If someone is unable to learn or doesn’t want to learn, he or she isn’t the right person for that job. Getting the right people in the right jobs is the first step in implementing an effective supply chain strategy.
Putting the right technology in place
Supply chains depend on technology. The technology may be something simple, such as a whiteboard with sticky notes that gets updated daily, or it may be something as complicated as an enterprise resource planning system. Each business, and each function within each business, has different technology needs. Figuring out how technology can enable your supply chain to create and capture value and then implementing the right technologies at the right time is the second step in the New Supply Chain Agenda.
Focusing on internal collaboration
When you look at a company’s organization chart, it’s easy to see how traditional business structures create silos within a company, with divisions competing for limited resources and often working toward conflicting goals. Managing from a supply chain perspective helps you break down the silos that keep people from collaborating effectively. By changing the focus from the performance of the separate groups to the performance of the company’s supply chain as a whole, each division becomes more dependent on the others for its own success. Sales teams need to collaborate with operations teams. Logistics teams need to collaborate with procurement teams. Everyone needs to understand the company’s strategy and work toward common goals.
Directing external collaboration
Traditional business relationships are transactional and often self-centered. Buyers and suppliers approach each deal as a win-lose game: The suppliers are trying to inflate their profits, and the buyers are trying to squeeze them on price. Over the long run, this approach can damage both parties because it destroys value rather than creates it. To build sustainable supply chain relationships, each partner needs to look for opportunities to contribute more value. The goal is for each to identify ways to share value, maximize total value, and be successful over the long term. This approach is very different from a transactional approach, in which each party is trying to squeeze every penny from each deal even if it means causing harm in the long run.
Applying project management
Supply chains are dynamic. Companies respond to changes with projects, so the last step in the New Supply Chain Agenda is implementing strong project management capabilities. Teaching people how to manage projects well and having professional project managers involved are the keys to ensuring that your supply chain evolves as your customers, suppliers, and company change.
Chapter 2
Understanding Supply Chains from Different Perspectives
IN THIS CHAPTER
There are several ways to analyze what’s happening in a supply chain. Each of these perspectives can help you understand how your supply chain really works and reveal opportunities for improvement. Because there are so many ways to look at the same issue, supply chain managers can encounter confusion and miscommunication about which options are the best. In this chapter, you see several of these approaches and examples that illustrate how useful they can be for managing your own supply chain.
Managing Supply Chain Flows
One great way to explain a supply chain is to think of it as three rivers that flow from a customer all the way back to the source of raw materials. These rivers, or flows, are materials, money, and information, as shown in Figure 2-1. Materials flow downstream in the supply chain, starting with raw materials and flowing through value-added steps until a product finally ends up in the hands of a customer. Money flows upstream from the customer through all the supply chain partners that provide goods and services along the way. Information flows both upstream and downstream as customers place orders and suppliers provide information about the products and when they will be delivered.
