Aaaargh! Expletive. They are a tangled and knotted mass. For many of us, they appear to be very complex. The move to global has made it worse.
Is it one? Or is it many? Over the past seven years for 90% of companies that I work with deal with this tangled mess as one; yet, supply chain professionals know intuitively that they do not have just one supply chain. They also know that if they could unravel them, that they could drive higher levels of supply chain performance. The question for most is HOW? If your response to “How many supply chains do you have?” is “I don’t know.”, this blog post is written for you.
The best supply chain designs start outside-in (from the channel to supply), recognizes the drivers of the supply chain, and applies the design holistically to the value network from customer’s customer to supplier’s supplier. As companies navigate this journey, I find that they shift. They mature to look at supply chains through a different lens. It is a journey of looking at supply chains by:
- Supply-centric view: Products or assets
- Buy-side characteristics: Inputs
- Sell-side characteristics: Channels
- Holistic: Rhythms, cycles and drivers (from channel to supply)
Yes, based on my work with over 250 companies, I feel deeply that it matters. Clear identification and typing of supply chains enables you to do five important things in your journey for supply chain excellence:
- What is the goal? Most companies inherit their supply chains, and they are unclear on the goal. The traditional goal of right product at the right time at the right place is insufficient. Companies struggle with questions like what is the role of lean? Of cycle times? What is the role of the supply chain to enable growth? How do companies balance asset strategies and innovation?I find it ironic that the same companies that spend years designing manufacturing plants do not apply the same discipline to the design of the supply chain. By untangling supply chains, it becomes clear that certain supply chains have different goals making alignment easier.
- Alignment of Metrics to bring Strategy to Action. Each of the supply chains entangled in the amorphous mass has different potential. Companies driving higher levels of excellence, use the same metrics for each supply chain, but base the target of the metric on the supply chain potential.
- Driving Information Technology (IT) Strategies: The characteristics of the supply chain should drive IT investments. Most companies find that they need very different technologies by supply chain to drive competitive advantage. The typing of supply chains accelerates the ROI on technology investment.
- Design of Relationships. The nature of the supply chain will drive different types of relationships. Strategic relationships are needed when the supply chain needs specialized services or needs to recognize the ownership of intellectual property.
- Building of Push/Pull Boundaries. The most mature supply chain designs make conscious choices about when they push and when the supply chain aligns for pull, and how they design push/pull boundaries. Teams new at design will usually say, “huh?”
How you get Started?
Often the supply chain group knows the answers intuitively. Look beyond items or assets. Close your eyes. Think about two factors:
- What are your supply chain drivers?
- Where do you experience variability?
The goal is to identify 4-5 distinct differences to better align your supply chain efforts. Let me give you some examples:
Apparel. The design of apparel supply chains typically boils down to three types: fashion, basic items and personalized items. Each of the supply chains has a different rhythm and cycle. The supply chain for basics can be long and efficient. The supply chain for fashion items needs to be short and responsive. The supply chain for personalized items needs to be agile.
Food. The food supply chain is usually defined by an expensive ingredient, or type of storage, or shelf life. In these supply chains, companies speak of frozen, refrigerated or dry supply chains. Or shelf-stable and short-shelf life supply chains. These supply chains are heavily driven by commodity markets and product handling considerations.
Consumer Products. The most common typing of consumer products supply chains is based on flows: turn volume, promoted volume and new products. These supply chains tend to be very global and the regional profiles of these drivers are very different. Turn volume supply chains are designed to drive an efficient response. Heavily promoted items require a very responsive supply chain and new products need an agile supply chain. Products will move within supply chains based on market response. The key is the design of the supply chain to plan globally to enable a regional response.
Consumer Electronics. These supply chains are often typed by the combination of variability (demand and supply) and lifecycle. The teams will type products by demand and supply variability by life cycle. Products with short life cycles and high demand/supply variability need to be designed for agility. Products with long life cycles with low variability can be designed for efficiency.
Discrete Manufacturers. These supply chains are often characterized by platforms (sometimes termed programs) and warranty/service. For make-to-order discrete companies, the supply chains can also be defined by degree of configuration and labor input. WARNING! In this industry, most companies forget about the design of their service supply chains.
Over-the-Counter Drugs. These supply chains are driven by usage. These companies will often have a very efficient supply chain: products that have low variability and stable demand. They also have products with high demand variability based on either weather or disease, and new products. The products that have high demand variability and high volumes need a responsive supply chain with very short cycles. Why? We just cannot predict when the sun will shine for the sale of suntan crème or when there will be a flu epidemic.
Specialty Chemicals. These supply chains are often typed by active ingredients or molecules. Demand is usually predictable, and the focus is on the management of the supply chain by supply.
Agrosciences. These supply chains are driven by the dynamics of planting—the undeniable moments of truth of planting, harvest and packaging—and weather. These supply chains need to be designed for agility.
These are designed to get you started in your thinking. Please do not use them as prescriptive.
What it is Not….
While typing supply chains can drive significant improvements, try to avoid these pitfalls:
An excuse: It should be used to guide a discussion on supply chain potential, but should never be an excuse for poor performance.
Too many to manage: If you come up with more than five, you probably have too many to manage. Try to keep it simple.
A panacea: It is not the answer for everything, but it is an important differentiator. It is a way to improve supply chain planning and execution, but should not be thought of as a driver of a major reorganization. Don’t take it to an extreme.
A one-time activity: The use of supply chain categorization will take time to master, but should not be seen as a panacea. It is a starting point for supply chain design, but will need to be updated frequently (quarterly or semi-annually) to be useful.
For those of you out there struggling with this question, I hope this helps. What do you think? Have you used any techniques in this area that have helped?
I am in Vegas this week writing on Big Data Supply Chains. I look forward to hearing from you.