From Supply Chain to Supply Network; minimize fragmentation and maximize integration
According to psychology, ‘the name influences personality’ ~The Dorian Gray effect.
Generally, the name Supply Chain simply suggests; separate entities operating in a linear, chain like formation.
Perhaps this explains the silos, gaps and fragmentations in the global supply chain processes.
When Antonio Guterres, the Secretary General of the United Nations, in his 2020 UN General Assembly speech said; “The pandemic has illustrated beyond dispute the gaps in our multilateral system. As countries go in different directions the virus goes in every direction”.
He was to an extent referring to the gaps in the global supply chain, where most parties operate in silos, ignoring the interlinked processes that should ideally necessitate closer collaboration and systems integration in the supply chain.
Supply chain management can be defined as; management of the flow of goods and services from source to consumption. This flow comprise of ‘upstream, conversion and downstream’ processes along a supply network, all aimed at maximizing efficiency, cost-effectiveness and competitive advantage in fulfilling customer demand.
A demand that a siloed and fragmented Supply Chain can hardly fulfil.
In this piece we look at how change in the name Supply chain to Supply-network could subconsciously shift the mindset and lead supply chain parties towards closer collaboration, systems integration operational transparency and process visibility from source to consumption.
There are several misaligned supply chain processes, siloed and in fact questionable strategies that suggests; a change in the name is perhaps what the industry needs moving forward.
These misalignments are usually picked up in key supply chain areas, including: -
1. Supplier Sourcing:
Through its usual RFx and bidding processes, Supplier sourcing is mainly a box-ticking exercise.
Few buyers really take time to evaluate and ascertain potential supplier’s understanding of what it really means to be part of an upstream or downstream processes of a supply chain, in order to perform and deliver with the required efficiency and cost-effectiveness.
Most companies or businesses in the supply chain are in-ward looking, siloed and in pursuit of individualist goals hence, the need for a name like Supply-network which would emphasize continued collaboration, operational transparency and systems integration throughout the period of a supply contract.
Take the Bangladeshi Rana Plaza disaster for example, the fact that procurement at top global brands like; Benetton, Mango, Gucci, Walmart and many others, were unaware of the appalling labour conditions at their supplier’s — the garment factories — at Rana plaza, is solid indication that continuous, closer and transparent collaborations between buyers and sellers were non existing in this case, which led to many avoidable deaths.
Now, if top global brands like these could be so disjointed on such a basic supply chain requirement, imagine the depth of fragmentation with regards to regular businesses (the majority) on the ground.
2. Procurement-Supply negotiation & Contracting
Ever wondered why terms like caveat emptor finds their way in to some procurement contracts?
Caveat Emptor is a Latin term for; ‘Let the buyer beware’. It is a phrase similar to “Sold as is”.
Which simply means; the buyer assumes the risk, i.e. responsible for repairs,
after the purchase.
Existence of these selfish and inward-looking terms in a way indicates the levels of ignorance on the underlying purpose of supply chain.
Confirming that indeed, most parties operate in silos and are pulling in different directions hence, the fragmentation.
This, perpetuated by the power play and winner takes all mentality which often influence the drafting of Procurement and Supply contracts.
Perhaps a change in the name from supply chain to Supply-network would constantly remind members in the industry that; doing away with current fragmentations would require not only; collaborated effort towards stronger integration, operational transparency and process visibility, but contracts negotiated in good faith, in pursuit of a shared objective of ensuring that the final customer’s demand is fulfilled with competence, efficiency and cost-effectiveness.
3. Payment for Supplies / Remittance:
It is ironic that one of the popular advices in Supply-chain and Procurement in particular is; ‘delay payment or remittance for supplies, for as long as possible’.
Which explains why suppliers often use payment terms like; 2/10 net 30, 2/15 net 30 etcetera. So as to encourage quick payments from buyers.
Why should procurement need motivation to settle its own bills?
Perhaps a change in the name from supply chain to Supply- network would act as a reminder to procurement that supply chain is an ecosystem of interlinked functions, where unnecessary hold on payment compromise supplier’s ability to optimally perform. The consequence of which negatively impacts procurement itself and supply chain as a whole.
4. Product Design and Manufacturing:
In the siloed and inward-looking supply chain, products are mainly designed and made for; consume and discard purposes, with little regard to the environment.
Most manufacturers forget that their carbon footprint if kept unchecked, has devastating effect on the health of their own employees, customers and families.
Perhaps a change in the name from supply chain to Supply-network would subconsciously and regularly remind companies and manufacturers in particular that they are part of an interconnected supply network, where carelessness by one affects the entire eco-system.
Hence, the need for designing and producing with reverse logistics strategies in mind.
Ensuring that eco-friendly approaches and sustainability strategies like; closed loop, Circular Supply Chain are dutifully embedded in the designs for easy recycling, refurbishing and reuse.
5. Logistics hubs.
Few months ago, at the height of COVID-19 pandemic, leading global economies — Canada and United States in particular — were literally at each other’s throat fighting for personal protective gear and other medical equipment, when these were in short supply.
This was clear indication of the misalignment in the global sources of essential supplies.
Perhaps given its emphasis on the interconnection and integration of global supply processes and systems, a change in the name from supply chain to Supply-network, would remind global economies on the need for strategic locationing of global manufacturing and logistics hubs, which would ensure availability of supplies in the right quantity, at the right places and at the right time.
The term network, given its broader view, would probably be a constant reminder to the locators of global logistics and distribution hubs, on the need for applying special techniques and technology in determining geographic positions for these strategic sites.
Techniques like Center of Gravity which provide precision by computing geographical ‘X and Y’ coordinates to in this case determine conducive locations for an integrated logistics hubs, while considering available infrastructure and related cost factors including labour and skills.
6. Shipping and Transportation:
Supply chain given its common preference to siloed operation, strictly limits buyers and sellers shipping responsibilities, to the strict dictates of the International Commercial Terms.
Where for instance seller’s shipping responsibility ends immediately as dictated in the terms, often with less concern with what happens beyond.
Perhaps a change in the name from supply chain to Supply-network would remind suppliers and buyers that they essentially operate in an intertwined ecosystem. Where delay or failure for a consignment to arrive at its destination on time, and in good order and condition, directly compromise sellers’ future business.
Hence, the need for joint effort, systems integration and collaboration to ensure speed, efficiency and cost-effectiveness across the board and for the benefit of all.
7. Fleet Management:
In supply chain and distribution in particular, cost-effective fleet management techniques are largely non existing.
The level of carelessness in the use of company vehicles, wanton consumption of fuel and aimless deployment of business resources is mind blowing.
Unfortunately, all cost incurred in this carelessness is passed on to the final buyer or consumer.
Making the whole supply chain process less competitive and expensive.
Lest we forget, the established belief in the industry, that; it is Supply chains that compete, not businesses.
Perhaps a change in the name from supply chain to Supply-network, would constantly remind supply network members that they operate in an integrated system where carelessness by one affects the entire network.
Hence, the need for standard, collaborated and well coordinated fleet management techniques based on tried and tested operational equations and Fleet Management Operational Formulas which include: -
● Number of Possible Trips per Vehicle.
● Number of Vehicles Needed.
● Safe Truckfill by Weight.
● Safe Truckfill by Volume.
● Distance Travelled.
● Running Cost per Kilometers Travelled.
● Fuel Consumption.
● Actual Vehicle Usage
● Need Satisfaction
All in pursuit of; maximizing competitive advantage, consumer satisfaction, customer loyalty and return on investment.
Conclusion
Supply Chain was meant to be the efficient and cost-effective management of coordinated processes and functions (upstream, conversion and downstream), from source to consumption.
But clearly, fragmentations in the supply chain proves this is not actually being achieved on the ground yet in full.
Perhaps applying the Dorian Gray effect and changing the name to Supply-network, would emphasize the need for closer collaboration, systems integration, and therefore enhance operational transparency, process visibility, efficiency and effectiveness, from source to consumption.
There is no doubt that global Supply Chain needs transformation, and COVID-19 was loud enough in this regard.
Nothing remains static as new developments constantly emerge, so should Supply Chain.
It is not too late to update the name Supply Chain to Supply-network.
The Chartered Institute of Procurement and Supply (CIPS), updated the word Purchasing to Procurement — in its name.
This was aimed at aligning itself with expanded responsibilities (realities) on the ground.
The same should be done with Supply Chain.
