Supply Chain Confusion – Have you Encountered It?
What is Supply Chain Confusion all about?
I am a very social person and I tend to go and visit my alumni meetings for IMD, for Harvard, for Australian Graduate School of Management, Chartered Financial Analyst and many other institutes that I am a member of.
And, often the question that is asked when I meet someone for the first time is “What do you do?”
When I explain to them that I ran a company called Global Supply Chain Group and I help companies improve their supply chain management, most of the people I meet still do not fully understand what supply chain management is, including those in the alumni of my business schools or Chartered Financial Analyst Institute or Law school.
So much so that occasionally I even get asked questions such as “So what kind of chains do you supply to the businesses?” At a more informed level, many people confuse supply chain management with “supply” or procurement or ‘strategic sourcing’.
The most common misconception is, however, between logistics and supply chains, and frequently I explain the difference between these two.
This confusion is exacerbated by trucking companies who have painted over their old trucks from XYZ Trucking/Transport to XYZ Logistics to XYZ Supply Chain Solutions without any material change in their capabilities or service offerings.
Moreover, many supply chain managers, directors and vice-presidents who come from logistics, 3PL or such companies exacerbate this confusion by not expanding their skill-set. They rely on CEO’s (and other stakeholders’) lack of differentiation capability between logistics and supply chain to narrowly define their role and stay well within their comfort zone.
I answer the question about what we do saying that we help create profitable business transformations using supply chain management as a very effective and balanced tool-kit, contrasting such business transformations against purely soft-skills based transformations (such as culture change) that rarely stick in rough and tumble of real life companies, and against purely hard-skill based transformations (such as process re-engineering) which cause a lot of angst.
I show them a simple diagram such as the figure below to explain the progression of supply chains from a lower level of sophistication to a higher plane of profitability.
This starts a discussion on the various generations of SCM (supply chain management) and how they grow in sophistication over each succeeding generation. Those are the type of questions I can illustrate easily with case examples and real life stories. There will be a lot of these stories in my book UNCHAIN YOUR CORPORATION.
I make it more real to people by explaining to them that we help companies configure business-to-business networks in a much better manner than they have done in the past.
It used to be the case, or even still is now, that business-to-business networks are configured in an ad hoc manner on an as-needed basis.
In most cases, these relationships are never formalized and fine-tuned to an extent where companies would create robust collaborative working environments to help develop new products, or create pipeline of products, to optimize profitability or to help manage the cash-to-cash cycles in the most productive manner.
The difference between a well-functioning business-to-business network and suboptimal one is a nearly 5 times difference in profitability. Now that is something that will easily intrigue most CEOs and business school graduates.
When people hear that a good business-to-business network can increase profitability by up to 5 times by improving the cash-to-cash cycle, by improving the transactional optimization of profitability, by helping create new products faster and better, and by outsourcing better, most people are very interested to clear the confusion about how current generation supply chain management works.
For second part of this article – click here