- Key Terminology and Concepts
- Supply Chain Concepts
- Key Participants
- Purpose and Goals
- Evaluation of Supply Chain Management
- Value Proposition
- Structure of the Book
- Chapter Summary
- References
This chapter is from the book
This chapter is from the book
This chapter is from the book
Evaluation of Supply Chain Management
Supply chain management does not have a long history relative to other business disciplines such as accounting or economics. The term supply chain management was first introduced by Keith Oliver of Booz Allen Hamilton in 1982, but did not gain significant traction until the turn of the 21st century (Heckmann, Dermot, & Engel, 2003). However, concepts that underpin supply chain management have been in existence for many decades. For example, today’s supply chain strategies continue to draw upon the customer focus of early 20th century catalog retailers and the military’s logistics goal of “getting the right people and the appropriate supplies to the right place at the right time and in the proper condition” (U.S. Department of the Army, 1949).
From a business perspective, the origins of supply chain management lie in a wide variety of related but initially fragmented activities. As Figure 1-3 indicates, purchasing, inventory management, warehousing, order processing, transportation, and related functions were conducted independently. Each one had its own budget, processes, priorities, and key performance indicators, but this disaggregated approach was suboptimal and did not lead to lowest total costs.
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Figure 1-3 The genesis of supply chain management
Eventually, company leaders came to realize the problems of fragmentation and began to integrate related activities. Inbound transportation, purchasing, and production related activities were coordinated in support of manufacturing. Inventory management, order processing, outbound transportation, and related activities comprised the physical distribution function.
Later, these two areas evolved into the logistics function or process that coordinates and integrates the inbound and outbound flows of the organization.
A true supply chain emerges when multiple organizations synchronize their respective processes and adopt a more holistic supply chain management philosophy that includes strategic consideration of related areas. This includes finance, marketing, planning, and technology.
Although the field of supply chain management has rapidly evolved over the last 30 years, many organizations are in the early stages of their supply chain development, and few have fully achieved their desired state of supply chain maturity. This developmental journey is highlighted in Figure 1-4.
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Figure 1-4 The journey to supply chain management
Late adopters of supply chain management must deliberately replace functional silos and cost goals with aligned internal processes. This is often the most challenging aspect of evolving to supply chain management. LaLonde (1999) noted: “The obstacles to supply chain integration encountered within the organization are far more difficult to overcome than the external challenges.”
After an organization integrates its internal processes and adopts unified cost and service performance targets, focus shifts toward building external relationships and extending the enterprise. Collaboration with key suppliers and customers, robust capabilities, and advanced technologies help the organization drive cross-channel value.
The final step in the maturation process is the development of true network capabilities. A truly dynamic supply chain is needed to support the organizational responsiveness and network resiliency goals discussed earlier. Table 1-2 summarizes the strategic fit and executional capabilities of an organization at each stage of its supply chain development.
Table 1-2 Evolutionary Capabilities
|
Functional Excellence |
Integrated SCM |
Extended Enterprise |
Dynamic SCM |
|
← 1980s → |
← 1990s → |
← 2000s → |
Onward→ |
||
Fit with business strategy |
Role of supply chain |
Meet internal commitments |
Meet a customer commitment |
Design and fulfill |
Design, fulfill, and drive profit |
Extent of influence |
Departmental boundaries |
Company boundaries |
Selected partners |
“Ecosystem”/networks |
|
Financial focus |
Cost |
Cost and service |
Drive value |
Dynamically optimize trade-offs |
|
Operational focus |
Compliance |
Interdependence |
Collaboration |
Agility |
|
Order management philosophy |
First come, first served |
Available to promise |
Capable to promise |
Profitable to promise |
|
Partner integration |
Arm’s length |
Tight integration |
Rationalization (less is more) |
Interchangeable |
|
Ability to execute |
Supply/demand balancing approach |
Produce to a schedule |
Fulfill aggregate demand |
Forecasting and differentiated fulfillment |
Sense, shape, and respond |
Decisioning |
Siloed |
Team-based |
Rapidly address the urgent |
Rapidly address the important |
|
Risk factoring |
Afterthought |
Buffers in the system |
Contingencies and redundancies |
Predictive and responsive |
|
Event horizons |
Months |
Weeks |
Days |
Near real-time |
|
Technology |
Standalone applications |
MRP/DRP |
ERP and bolt-ons (“can plan”) |
Adaptive layer |
|
Talent |
Job functional specialists |
Multitasking: Expert in several areas |
Career: SCM as a broad profession |
Leadership: SCM as a business to be run |
|
Source: Cudahy, G. C., George, M. O., Godfrey, G. R., & Rollman, M. J. 2012. Preparing for the unpredictable. Outlook: The Online Journal of High-Performance Business. Retrieved August 8, 2013, from http://www.accenture.com/us-en/outlook/Pages/outlook-journal-2012-preparing-for-unpredictable.aspx. |
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