Why do we need to learn how to manage supply chains?
The answer to the question may seem straightforward at first.
We need to learn how to manage supply chains so that we can ensure the availability of products and services at the right quantity, right quality, at the time they’re needed, and at a cost that is within stakeholders’ expectations.
But it’s not really that straightforward.
Supply Chain Management was the idea of Mr. Keith Oliver who sometime in the 1970’s, while working for consultancy firm, Booz Allen Hamilton, developed a vision to break down the functional silos within organizations and integrate operations toward the common purpose of meeting customer requirements.
Keith Oliver proposed I2M or Integrated Inventory Management in a presentation to a steering committee at the multinational corporation, Philips, in the 1970’s. But as Oliver struggled to define I2M as the “management of a chain of supply as though it were a single activity,” one of the Philips managers, Mr. Van t’Hoff, suggested Oliver to call it just that: “total supply chain management.”
Not many of us really remember Keith Oliver or Mr. Van t’Hoff that much these days but most of us know, or at least heard of, supply chains and supply chain management.
Supply Chain Management is a subject that has gained much attention and interest since Messrs Oliver and Vant’Hoff uttered the term. Just about every enterprise that sells a product recognizes the importance of supply chains especially when it comes to deliveries and costs.
I learned supply chain management mostly on my own, in which I was fortunate to experience different assignments representing various stages of supply chain operations.
I managed inbound receipts of raw materials in which I learned how to plan, schedule, store, and handle incoming receipts. I learned to be careful in making sure there neither was too much inventory nor too little.
I managed production operations in which I learned that management is mostly how one works with not only people who are on the factory floor but also with peers from other departments, like purchasing, shipping & transportation, engineering & maintenance, human resources (HR), finance & accounting, and research & development (R&D).
I managed outbound logistics in which I learned that customer service starts not with deliveries but with understanding what customers want.
From these experiences, I’ve distilled six (6) reasons why we need to learn how to manage supply chains.
1. Supply chains are the life-blood of (just about) every enterprise
All enterprises that sell products and services rely on some sort of supply chain for the transformation and flow of resources and merchandise. The operations that underlie them provide the revenues and dictate the costs which determine the wealth and health of enterprises.
2. Supply chains go beyond the enterprise’s borders
Supply chains don’t describe what happens within enterprises. They describe what happens between enterprises. Managers who are adept about their operations are only at most half-way in managing supply chains. The real good ones are those who can make the entire supply chain work favorably for their enterprise’s interests.
3. They’re complicated
No two supply chains are alike, whether one compares enterprises or the operations that run through them. And every supply chain isn’t really just a single flow of stuff from one end to another. They’re really interconnected links where items flow in and flow out at various points of every other enterprise’s operation; some of which are visible and some of which are sometimes not.
4. They’re prone to adversity
Every chain has its weakest links and the more links they are, the more likely they are vulnerable to adversity. Adversities come in all types of risks and degrees of disruption. Some are natural; some are man-made. And they are often unpredictable, which requires some special talent in mitigating, if not avoiding them.
5. Supply chain success relies on the performance of people
Much emphasis has been made on managing resources when it comes to supply chains. But supply chain success can only happen with how well people working in them perform. A lot rides on the workers and operators at different points of the chain and that doesn’t discount stakeholders such as the vendors, customers, information technology professionals, engineers, technicians, executives, and supervisors.
6. They’re changing
Supply chains are evolving. And not necessarily uniformly. Some have hardly changed, such as storage and handling at seaports. Some have dramatically altered the landscape such as e-commerce portals displacing middlemen in the retail industry. And not only are they evolving within industries. Supply chains are coming into play in enterprises one would never think they’d be applicable. These include business process outsourcing (e.g. call centers), labor contract agencies, insurance, and software development.
Supply chain management was born from the “aha” moment of Messrs. Keith Oliver and Van t’Hoff. While the names of both esteemed men have waned from our memories, their brainchild, supply chain management, has become a very popular subject of discussion at enterprises the world over.
But popularity alone is not enough a reason for why we need to learn how to manage supply chains.
Supply chain management has become more important as enterprises recognize that it is the manifestation of actual revenue and cost, that it goes beyond borders of businesses, that it addresses complexity and adversity, that people performance is key to success, and that it is changing, not necessarily smoothly but more often in fits and starts.
I am lucky to have experienced working in various supply chain operations but what it gave me wasn’t credentials but rather, the insights in how supply chains deserve a high place in our management priorities.