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What “Supply Chain Management”?

Posted by annekohler on March 8, 2010

Here are two definitions which I found on Wikipedia that I would like you to consider:

Supply Chain – A supply chain is a set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer.  (Mentzer et al., 2001).

Supply Chain Management – Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer et al, 2001).

We like to talk about this thing called “Supply Chain Management” but few companies are actually doing it.  Most companies have a CEO, a COO (responsible for operations), a CFO (responsible for finance), a CIO (responsible for information technology), CE (responsible for engineering /quality) but how many companies have a Chief Supply Chain Officer who is responsible for the end to end Supply Chain.  By the way, if you reread the definition of a Supply Chain, the “C” level executives noted above all have a role to play in the end to end Supply Chain whether they know it or not (mostly not).  So some might say that it is the CEO’s responsibility but does he/she really have time to provide the necessary level of oversight? 

Many companies that have designated a Supply Chain leader or have a Supply Chain organization have adopted a very narrow definition of a Supply Chain which may include purchasing, logistics, warehousing transportation, etc. but almost never includes finance, operations or engineering.  How can you have “systemic, strategic coordination” of all the business functions in an end to end Supply Chain when each functional organization operates in its own organizational silo under a set of metrics that are usually not aligned with the one another?  So, in other words, true “Supply Chain Management” isn’t happening.  I chuckle when I read the myriad of articles that have been published regarding, the “integrated supply chain”, the “optimized supply chain”, the “flexible supply chain” and the latest thinking which is defined as “value chain management”.  These are all great models but few of them address the biggest issues – resistance to change and lack of collaboration.

I spend quite a bit of time training Strategic Sourcing and Supply Chain (narrow definition) organizations.  The number one frustration they experience is that most of the issues that occur in the end to end Supply Chain are blamed on Procurement (Purchasing / Sourcing) or the suppliers when in fact many of the issues are caused by other functional organizations within the Supply Chain.  I believe one of the key reasons is the lack of understanding of the true definition of Supply Chain and the roles within it for all functional areas.  Of course siloed organizations and misaligned metrics don’t help either.

I have actually tested my assumption around the “lack of understanding”.  When presented with the opportunity, I have asked the CFO, CIO or CE what their definition is of a Supply Chain and their role in it.  I most often hear the narrow definition AND that their organization has no role – very telling indeed.

Watch for future blogs as I explore some of the potential solutions . . . . . . .

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