This article is a summary from a larger piece of work; "Quick Guide to A
Systems View of the Supply Chain" (Emmett 2012)
1.The supply chain is a process that has a purpose.
2.The process is either, the transformations (inputs-process-outputs)into
products/services; and/or, the positive and negative feedback from the
output transactions that may change the inputs, outputs and/ or processes
3.All of the supply chain processes have dependency, variability and
interfaces (e.g. an interplay of relationships) as
4.Supply chains will change in response to feedback (e.g. the Forrester
effect on inventory amplification as shown in the "Beer Game")
5.Besides feedback, supply chains also function with the interactions in and
between its parts. Tinkering only with the parts will sub optimise the whole,
as the whole is formed by the sum of the parts. Additionally when focussing
only on the parts, the whole is not being fully considered, (consequently, the
purpose and meaning for the whole is now lost and is possibly, unachievable;
effectively, the original purpose has been changed).
6.As the parts, have to be arranged in specific known ways to make the
required wholes that will achieve a specific purpose; we must therefore
fully understand the connections and interactions of the parts.
7.Looking at such wholes will involve a consideration of not only our own, but
also of the others and their purpose, processes, structures, power and
people aspects.
The above link usefully into my earlier Supply Chain Rules 1-3 from Emmett 2005; "The Supply Chain in 90 minutes")
Supply Chain Rule number 1: "Win the home games first"
Many companies start into Supply Chain Management, by working "only," with the
closest suppliers and customers. They should however, first ensure, that all of
their internal operations and activities are "integrated, co-ordinated and
controlled."
Supply Chain Rule number 2: The format of inventory and where it is held
is of common interest to all supply chain players and must be jointly
investigated and examined
The format of inventory being raw material, sub assemblies/work in progress or
finished goods. This is often held at multiple places in the supply chain and, is
controlled (in theory), by many different players who are usually, working
independently of each other. This results in too much inventory being held throughout the supply chain.
Supply Chain rule number three is: The optimum and the "ideal" cost/service balance will only ever be found by working and collaborating fully with players in the Supply Chain
Full benefits of supply chain management will only come when there is an examination of all costs/service levels together with all the players. This will result in reduced lead times and improved total costs/service for all parties in the network. This means therefore, going beyond the first tier of supplier looking also at the supplier’s supplier and so on. It represents more than data and process, it includes mutual interest, open relationships and sharing.
As a result of the above, we therefore find in Supply Chains:
8.There is delayed feedback and unexpected variability, as feedback from
processes can give amplified changes, or oppose a change, or can be time
lagged or delayed with balance and reinforcing feedback patterns, (e.g. this
is because in supply chains "what happens here, affects there" ) , (e.g.
variable supplier lead times that impact on inventory levels, customer
service, cost etc)
9.To manage such wider effects, that are usually "away from and out of our
own box", we need to have visibility of, and information on, the processes.
Information is needed for decisions (this involves making a choice from
alternatives), where, decisions then create action (this involves doing
something with the resources in a process). Visibility will also enable better
management of the feedback patterns, where the uncontrolled/unknown
feedback creates supply chain volatility, variability and velocity; managing
this correctly will then give better value.
The above link into Supply Chain Rules 4 to 8:
Supply chain rule number four: Time is cash, cash flow is critical and so are
the goods and information flows; fixed reliable lead times are more
important than the length of the lead time
The importance of lead time in inventory is seen in the expression, "uncertainty
is the mother of inventory." The length of lead time is of secondary importance
to the variability and uncertainness in the lead time. Again, an examination of
lead time throughout the supply chain, involving different players and interests,
is critically needed.
Supply Chain Rule number five: The Customer is the business; it is their
demand that drives the whole supply chain; finding out what Customers
value and then delivering it, is critical
The customer is the reason for the business – so – continually working to serve
the customer better is critical. The customer is the business, after all. But who
is the customer? The traditional view is perhaps the one that has placed the
order/pays the suppliers invoice, but by seeing the next
person/process/operation in the chain as the customer, then, this way of
thinking means that there are many supplier/customer relationships in a single
supply chain. If all of these "single" relationships were being viewed as supplier/
customer relationships, then the "whole" would be very different.
Supply Chain rule number six: It is only the movement to the customer that
adds the ultimate value; smooth continuous flow movements are preferable.
The movement to the customer, undertaken as quickly as possible whilst
accounting for the associated cost levels, is really all that counts in adding
value.
Supply Chain rule number seven: Trade Off by looking, holistically, with all,
the supply chain players.
There are many possibilities and opportunities available to Integrate / Coordinate/ Control
across the supply chain(s) networks, starting by "winning the
home games first" in and between the internal functions; followed by, all of the
external connections to the supply chain networks.
Supply Chain Rule number eight: Information flows lubricate the supply
chain; using appropriate ICT is critical
Information is required at every stage of the supply chain and for all of the
levels of supply chain planning. All parts of the supply chain rely on ICT in the
planning, operational, administrative and management processes.
Having now established the important and strategic requirements for an
organisations supply chain management, we will now look at some required
organisational responses. The aim here is to enable effective and efficient
supply chain management. We will start by looking at structure.
10.We need a conscious redesign of the organisational structure and culture.
It is common to find here, that the current structure has evolved and is
actually now in effect, an unconscious design. Managing the interplay between
structure and process is critical because the structure will influence the
people and the overall behaviour. The reality here is that all of the
system/supply chain output results from all of the connected processes. This
means:
11.Recognising that Structures are stable and fixed, support and contain, yet
also, constrain and limit. Here structures are seen as independent, certain
and self sufficient, giving stability and certainty.
12.Recognising that structure does interact with Processes and that these are
transient and variable, they can build up and/or break down outputs and do
also involve dependency, variability and have joining interfaces/connections.
13.The structure and culture redesign must ensure there is internal and
external cooperation with all of the players and with a "fluid interdependent
cross functionality" that creates trade off decisions, a need for collaboration etc. Effective and efficient supply chains are the ultimate team game.
14.Ensure the chosen structure promotes the peak performance of all of the
people and the processes. A known solution here is for with a cross
functional structure organised around processes not tasks, with as few levels
as possible, that has correct manager/worker ratios, and is bottom / up with
a team focus.
15.Designing a gaining culture which needs agreed clear and expected goals,
abundant information, uses mistakes as learning lessons and a source of new
innovation, where control is delegated, involving collaboration with managers
who will sponsor change and have self confidence.
16.Allowing people to take initiatives, allowing team work to flourish where
people understand their part in the whole, providing clear direction with good
communications and even workloads in a conducive and enabling work
environment.
17.In designing both the structure and the culture, it is necessary to avoid an over recognition of the hard values as it is the soft values that count and make the real difference, (e.g. as shown by examining the differences between left and right brain thinking/organisations). Soft values are shown by how an organisation is valued as this is not just from the financial assets (that are hard and tangible), but also from the goodwill (that is soft and intangible). Soft values are essentially those coming directly out of people,(e.g. as shown when giving guidance, encouragement, support etc).
Besides joining up the processes with the structures, resulting in a joined up supply chain, we also must have joined up thinking; so another organisational response must also include some new thinking:
18.Recognising that our thinking continuously needs both a self examination and a team examination to give conscious learning and very likely, changing ourselves, and also, what is done.
19.Ensuring there is joined up thinking from all of the people involved who can then make the correct appropriate changes to the supply chain structures and supply chain processes
20.Having regular thought updates to ensure continuous improvements e.g use best practice, continue to challenge how we do things etc .
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