The profession talks easily about the supply chain as some sort of singular entity, whether using supply chain, demand chain, or value chain as the topic at hand. It's a convenient conversational shorthand that can easily be misapplied and misunderstood over time.
It's one thing to talk about Walmart's supply chain, which is a radical oversimplification in itself. It is quite another to opine in stentorian tones about the effects of port disruptions on THE global supply chain, which misinforms multitudes who are already unclear on what our world is about.
Worse, it is all too easy for us to fall into thinking in those same terms.
So, we were a bit taken aback by a recent headline heralding IBM's establishment of a single supply chain within its internal organization. We cannot comment definitively, not having 1) done the research, and 2) being but simple lads, and from the country.
But we do have some thoughts about the complex nature of our universe of several supply chains.
PEELING BACK THE LAYERS OF THE ONION
To be fair, many large, diverse retailers do operate their own logistics networks. Walmart, certainly, and others, such as Costco, Kroger, Limited Brands, and on and on. But that is a far cry from constituting a singular supply chain.
Any company, retailer, manufacturer, defense contractor, or whatever has numerous individual supply chains to plan and manage. Ohio State's Dr. Martha Cooper aptly characterized the phenomenon a few years ago as being more like a tree, with many roots reaching back into supply sources, a trunk that encased the several pathways involved, and a lush canopy of branches, representing the myriad distribution channels and end delivery points.
Even in relatively simple applications, each category of supplier (often with distinctions for individual suppliers) will mean a vast number of starting points for supply chain execution within an organization. Products and materials may or may not come together in a limited (but seldom singular) number of physical flows. But then they branch out again, with (typically) different flows for different distribution channels, and very often, distinct handling characteristics and flows for specific customers within a given channel.
TRYING TO GET IT ALL IN ONE PLACE
A well-known footwear designer and distributor has gone about as far as it can in integrating multichannel distribution into one supply chain flow. But even in that case, the specific arrangements for offshore manufacturing and incoming shipments have somewhat differing characteristics and physical flows.
To complicate matters, the company serves three major channels of distribution out of its national distribution center. It picks, packs, and ships to 1) its sizable national network of captive branded brick and mortar stores, 2) its wholesale business, with all of the major national apparel retailers as customers, and 3) its hundreds of thousands of B2C Internet and catalog customers.
Even with all product coming out of the same building, storage for each channel is different, pick/pack/ship processes are different, shipment modes are different, and timing is different.
Some apparel merchants have established completely separate facilities, managements, systems, and accountabilities to serve their different channels. The footwear example is merely three separate businesses operated within a single set of four walls.
The footwear case is demanding, in that it presents opportunities for error and confusion that are not faced by a single-purpose operation.
OUT THE DOOR
Given costs, mode relationships, customer preferences, weights, volumes, cube movement, and quality/documentation/timing requirements, even customers within the same channel may be served with different options: truckload, less-than-truckload, parcel, or USPS (and sometimes air). Each requires the establishment and maintenance of different sets of relationships within the supply chain(s).
And it's more than issues of day-to-day execution; the differences go back to supply chain planning—and they are critical. Further, some carrier relationships may be dictated by customers, which introduces added sensitivities into what it takes to make supply chains work effectively.
BACK TO THE BEGINNING
Let's return to the sourcing and supply question that starts the physical flow of supply chain(s). Strategic sourcing and procurement are not things that happen outside of supply chains, despite what some might think. Specific sources and products/materials must be integrated into overall supply chain planning and exquisitely managed in execution.
As on the outbound side, the weight, cube, velocity, and timing requirements of the goods involved can dictate the use of multiple modes from one source, and certainly will, when many, many sources are involved, with a range of items of greater or lesser importance. The options for bringing in goods manufactured offshore (even near-shore) are manifold, with numerous choices in transport modes and ports of entry.
Further complicating the notion of a supply chain is the need to frequently adjust modes and arrival ports, based on demand shifts, labor actions, capacity, or onward transport costs.
Those operational details aside, though, the relative importance of the supplies involved will—or should—force the development of radically different kinds of planning and working relationships with their suppliers, which create fundamentally much different kinds of supply chains. Let's consider some of the potential issues.
THE MARKET IS MORE THAN JUST BUYERS AND SELLERS
Well, in certain categories, maybe it isn't. Take paper clips, ballpoint pens, sticky notes, and other ordinaries that are widely available from several sources at generally competitive prices. Or commodity ingredients with many of the same price/availability qualities. Those supply chains—and supplier relationships—are going to be about as straightforward as things get.
But things begin to get tricky when, even for commodity-level goods, the supply sources are limited. Add to that the possibility for supply interruption, the opportunities for hedging, and the need to maintain the flow of operations. The supplier relationships, and the transport options (as well as storage and distribution considerations), take on greater importance.
Add to those the increasing impact of global demand for parts and materials as the BRIC (Brazil, Russia, India, and China) economies continue to grow. Understanding planetwide issues in supply and demand—and creating relevant supplier relationships and supply chains—is continuing to distinguish procurement from simple buying.
SHOULD WE GIVE UP NOW?
None of this is to say that the supply chain world is too complex to effectively plan and execute. Our professional challenge is to do just that, and it is a large part of what makes our professional lives more rewarding than most.
But it will continue to be vital to understand the richness, diversity, and sheer number of supply chains that each of us must deal with on a daily basis.
Wreaths Across America