As the theory and technology of supply chain management has evolved over the last several decades, it has become abundantly clear that it’s a team effort. The very essence of supply chain management is coordinated activity; working together to move the materials and products through the chain from source to manufacturing, from manufacturing through the distribution network, and out to the customer in the right quantities of the right items in the right place at the right time.
Few, if any, companies have ever been able to own and direct an entire supply chain and even then, the individual mines, plants, transportation providers and warehouses operated somewhat autonomously under the direction of local managers with their own priorities and interests. Cooperation is required even when the nodes are all part of a single entity. In fact, in my consulting career, I have worked with many plants that were owned by their biggest or only customer and the level of communication and cooperation within an extended enterprise can be more difficult and less effective than with truly independent entities.
Nevertheless, it is vital that supply chain partners cooperate and coordinate their activities in order to meet customer requirements, minimize inventory, reduce costs, and respond effectively to changing conditions. In the modern world, coordination is accomplished through planning systems that trade off the various choices – production schedules, shipping modes, warehouse balances and activities, inventory levels, and lead times from one facility to the next, and more. The overall plan is developed using optimization that determines how best to achieve the ultimate goals (customer service and meeting demand) while minimizing cost. The key to understanding optimization is to know that an individual resource may not be optimized. That is to say, a specific plant may be underutilized at some point or asked to produce inefficiently (using overtime, for example). Trucks may be sent out with less than a full load. Other compromises might be necessary in order to achieve the best results, overall.
It may be difficult to motivate a partner, most likely a supplier to the manufacturer or whatever entity is taking responsibility for managing the supply chain, to forego some profit or otherwise compromise (give your requests priority over another customer) their normal processes, to serve the greater good. It has to be their greater good as well as yours. Hence the idea of supply chain partners rather than just suppliers.
Once you’ve crossed that boundary – working as partners rather than just buyer/seller – you can initiate real collaboration, truly working together to coordinate activities and help each other maximize performance in pursuit of shared goals. Once again, collaboration is facilitated through today’s supply chain planning and management systems, the best of which allow you to provide a portal for partners to share information and jointly develop plans and coordinate activities.
Editor’s Note:
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Dave is an independent consultant, educator and freelance writer serving both the developers and users of software and systems for manufacturers. He has performed analysis, written hundreds of articles, blogs, white papers and case studies and advised software developers on direction and focus. He is an APICS Chapter President as well as a recurring presenter and instructor and is a certified trainer in The Fresh Connection supply chain simulation. Dave can be seen in print and on-line publications and his website is www.daveturbide.com