World Wide Shipping July/August 2003
By THOMAS CRAIG
President LTD Management
Supply chain success just doesn't happen. It takes focus and
effort across the entire company organization and with outside suppliers and
service providers. Logistics touches every part of a company. So supply chain
management must be multidimensional in its approach and scope. And this takes
supply chain process, people and technology. This is true whether you are a wholesaler, retailer
or manufacturer. And it is true if you are lean and need to be agile, flexible
Supply chains can be long and complex, stretching between different countries. A firm may have many customers, each with different order and shipment requirements and destinations. There can be many suppliers, sourced from different cities and many countries. Each supplier may require instructions and planning as to lead times. All this work into developing an effective supply chain process is done to have product available when customers order.
There are internal needs too. These include where warehouses should be located, both in the U.S. and internationally; how inventory is forecast and allocated to each warehouse; how orders are handled and shipments prepared and how production is assigned among plants and suppliers.
Process means a practice, a series of actions, done for a specific
purpose, such as satisfying customers. Customers demand and expect more from
their suppliers; that is a fact regardless your size or industry. And supply
chain management is critical to that customer satisfaction.
Supply chain process is a flow of activities with the goal of meeting the requirements of a customer. It includes all internal functions, logistics, distribution, sourcing, customer service, sales, manufacturing and accounting. It includes external companies. The series flows backward--from delivering each customer order each order as demanded back through the performance of suppliers to provide needed finished products, components, parts and assemblies.
Process has structure. This compares what some companies call "process" which may be a series of repetitive, standalone transactions. Process has standardization with its understanding of what must be done. With that in place, it also has flexibility to handle exceptions and changes that are a reality of doing business.
People make organizations and are important to supply chain success.
They need to have functional expertise and skills. They need to know how to
manage and operate warehouses, inventory, transportation, purchasing. They need
both a tactical view for everyday business and a strategic vision of where and
how their function fits in the supply chain and how to make it better.
People success is a function also of the corporate culture, how the company sees itself, defines itself and operates, both internally and externally. The culture can be a facilitator of processes or an inhibitor. If the company has myopia, then it negatively impacts its ability to respond in all areas required.
Similarly, organizations, with their hierarchical design, create barriers to supply chain process, which is horizontal. Organization silos can short circuit the process. Each silo can have its internal goals that can work cross-functionally to the process. Even though the focus of the supply chain process is the customer, merchandising, logistics, finance and others may work to optimize their role, but which may suboptimize the process.
Supply chain management is sometimes define, or incorrectly
defined, in terms of technology. Process can be defined as technology, with
an overemphasis on hardware and software, and not on the purpose of the process.
Software may be "sold" as the answer, the means, to supply chain nirvana. That can lead to an overexpectation by the user, which in turn can lead to disillusion with what is required to set up and operate the system and with the results actually achieved.
Every company has
a position in Supplier Management. You are dealing with suppliers and/or you
are a supplier. This is a vital part of the total supply chain. And it must
be aligned with the goal of meeting customer requirements.
Supply chain visibility is a desired means to supply chain effectiveness. And that visibility need may be greatest with the inbound part of the supply chain. This part of the total supply chain is very complex and involves a significant financial obligation. Many purchase orders with many supplier shipping diverse products from multiple plants and warehouses, both from the U.S. and various countries and ports or airports can be a significant management challenge. Add in different cultures, time zones and business practices the visibility need with a global supply chain can be daunting. And the pressures in supplier performance are great for all, wholesalers, manufacturers, retailers and suppliers.
Supplier management as part of inbound supply chain requires process, people and technology. It demands a process, not a series of purchase order transactions. It requires people with vision and skills to manage the complexity and to build the collaboration and deal with the flexibility needed as sales and other events change the purchasing demands.
The people need to be linked. It requires technology to gain the needed visibility of purchase orders, suppliers and transportation of what is going on and to use event management and exception management to deal with all the vagaries that can occur.
Supply chain success involves supply chain process, people
and technology. It gives definition to the company purpose. It enables all participants
to know what is required. This in turn provides agility to handle exceptions
and to adapt to changes.
Having those three elements is important to having metrics, ones that are useful across the organization. All three working together in a company provides coordinated, unified effort to use supply chain management as a driving force in customer satisfaction and in having competitive advantage, with service and productivity.