Parts of a supply chain

- So what is supply chain management? Well supply chains make and deliver things. You
might not know it, but most of us make something everyday. To help visualize this, let's
take a simple thing many of us have made before, a sandwich. So what do you need to
make that sandwich? Well I guess it depends, but let's make a really good turkey, bacon,
Swiss, sandwich. We'll need fresh bread, some high quality sliced turkey, a nice slice of
Swiss cheese, and some delicious bacon. All right let's add some lettuce, tomato, and
mayo. So how do we begin? In supply chain management, we start with purchasing, some
people call it procurement. So what's your favorite grocery store? Why do you like
them? Even if you like them, they may not have all the ingredients you want for your
sandwich. Maybe you want the bread from your favorite bakery. Perhaps the best veggies
come from the farmer's market. In any case, you had your preferences, you had a budget,
and for some of you, you just needed to buy your stuff from the most convenient
grocer. In any case, procurement of your materials is now complete. Let's move on to
stage two of supply chain management, manufacturing and operations. This is the part
where you've moved from gathering your materials to actually making something. Time
to put the sandwich together, but it's getting late. You have to hurry to get to work on
time. Still you want to toast that bread. The bacon needs to be cooked. Plus you need to
slice the veggies. Don't forget to put away the leftovers and clean up that mess. Doing
these things the right way, doing them quickly and being able to do this on a day-to-day
basis, that's what the folks in operations are doing everyday. Without them, there is no
sandwich. Not quite done yet though. The third stage of supply chain management is
logistics and transportation. You can't take the sandwich to work like that. How will you
protect it from the outside world? How can you ensure it will be fresh and yummy three
or four hours from now? Where will you store it at the office? And how will you actually
get to the office? Okay, so it's going with you, so transportation is taken care of, but
packaging and containerization need to be considered. Do you have those things
available? Thinking through the transportation and containerization is something you'll
want to think about for the future, when you repeat this process. Congratulations, the
supplies have been turned into a wonderful sandwich, that is where you want it, when you
need it. That's what supply chains do, they buy things, make things, and move things. But
that was one sandwich. How about if you had a restaurant that made hundreds of
sandwiches a day? How about if your restaurant wanted to offer all sorts of sandwiches
and sides? What if someone wants to place a special order? What if the health
inspector requires certain ways to clean and store food? Is your company prepared to
deal with all of those issues? Supply chain managers are ready for all of that, that's what
they think about, that's what they do; procurement, operations, and logistics. These are
the primary parts of a modern supply chain. Every product has a story. It's a supply chain
manager's job to write that story and give it a happy ending. So let's turn you into a
storyteller. Consider one of your favorite purchases; your car, your phone, a shirt, a
meal, or maybe a stay at a nice resort? Who are all the important characters in giving that
story a happy ending? Who purchased the raw materials, parts, or ingredients? Why was
that important in ultimately making you happy? Which characters took those
materials and made them into what you wanted? What were the important elements in
actually getting the item or service right to you? The happy ending to your purchase was
what you expected when you made the purchase. But now as a supply chain manager you
begin to understand the skill, dedication, and collaboration that was required to make
you and all of those customers happy.
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Changing nature of supply chain management
- Getting the right thing to the right place at the right time, that's what supply chains are
all about. Perhaps you're saying to yourself, hey, I'm in the supply chain. Or maybe you
thought, we have that in our company, I work with those guys. Wait, that's supply
chain? What's the big deal, hasn't that been around forever? Well, yes and no. Yes,
humans have always done some sort of procurement, operations and logistics. But over
time, as communities developed and populations grew, transportation and storage
options improved. And along the way, the business community developed and then it
expanded around the globe. Look, the basics are still true. Right item, right place, right
time. But in today's global marketplace, where materials come from all over the world and
billions of customers are on every continent, supply chains have become extremely
complex. In the old days, companies had procurement, operations and logistics
departments. But most of the time, those folks were barely talking to each other. Perhaps
they yelled at each other. Collaboration probably wasn't even in their vocabulary. That's
where supply chain management comes in. It's not really supply chain management
without integration. I mean, how can you really manage a global chain of supplies, being
passed from purchasing to operations to logistics, unless they are collectively looking at
data and developing integrated plans? Those integrated plans help companies buy the
right amount of materials, hire the right number of workers. It also helps them develop
production plans. It even helps them develop delivery itineraries, meaning it helps them
build a schedule for when and where items will be picked up and delivered. So, is that
modern supply chain management? Not quite. Modern supply chain management
extends beyond purchasing, operations and logistics. Who else is involved? Well, without
marketing and IT, we can't get the data needed to develop those integrated
plans. Engineers and designers, they tell supply chains how to make the products
customers want. Accounting, accounting could help us discover opportunities to cut
cost. Finance, well, we need the money to buy materials, build plants, hire
workers. Everything in the supply chain costs money. Finance and supply chain must work
together to create a budget that will maximize our return on investment. And as the
global marketplace continues to evolve, supply chain managers will be responsible for
dealing with increased demand as populations grow, the shrinking amount of global
resources, the rapid pace of technology, and supply chain partners that may not share our
customers' values. So which problems could supply chain integration help you
solve? That's up to you. Well, let's think of it this way. Most of us are asked to hit our
number at work every day. The focus is on you or your department. That's not an
integrated mindset. You're part of a chain, a supply chain. So while making your link
strong is important, the whole chain needs to be strong. Instead of thinking only about
your numbers, think about how you can improve the numbers of your customers. Think
about how you can help your supplier improve their numbers. Think about how you can
help marketing improve their numbers. Not only will your office start to become a
brighter place, you'll be taking the first steps in making your supply chain a modern,
integrated supply chain. And very likely, soon you'll find that innovation and problem
solving are just part of your supply chain group team.
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Establishing SCM goals
- Supply chains have many things they try to accomplish. Contribute to profit? Yes. Cut
costs? Perhaps. Make great products? Sure. But let's try and organize the long list of
possible goals. How do we do this? Well first, let's remember a supply chain is only part
of an organization and typically, the primary goal of these organizations is to produce a
profit. Profit. So, profit equals revenue minus cost. Now, most folks will say supply
chains are all about cutting costs but that doesn't really make sense. If you don't buy any
inventory, if you don't make anything, if you don't deliver anything, you're costs are
zero. Do you think you made the company profitable though? Of course not. Supply
chains that are tasked with only cutting costs will hurt your company. Modern companies
understand that the best supply chains help drive up revenues by making great
products. So let's review this first goal. Modern supply chains must be dual contributors
to profit, drive revenue by making great products or services that get to the right place at
the right time but all the while, control costs by eliminating waste. Now, let's get just a bit
more specific. In order to make great products and services, we need to define what the
customer wants and also define how we will differentiate ourselves from our
competitor. We can do this by using four categories, cost, quality, speed, flexibility. Take
any two competing companies, such as WalMart and Target, Toyota and
Mercedes, Domino's Pizza and your favorite pizza restaurant. In each case, they have
different goals in these four categories. Let's try it. Pick any two competing companies. Go
ahead, write them down. From the perspective of the customer, which of these two
companies has lower costs? Which has higher quality? Which provides faster
service? Which provides you more options and greater flexibility? This isn't an
accident. The best companies understand how important this is. When a supply chain
understands its goals in the areas of cost, quality, speed and flexibility, the supply chain
is better able to make the customer happy and thus contribute to revenue. And by
understanding what is not required, the supply chain can eliminate waste and control
cost. So, let's review the second goal. Modern supply chains must be able to define what
the customer desires in terms of cost, quality, speed and flexibility. This helps supply
chains understand what the consumer finds valuable and what might be deemed
wasteful. As supply chain managers, we have two sets of bosses, the boss and the
customer. What do they expect from the supply chain? Well, customers want value, lots
of great stuff at the best price possible. On the other hand, bosses expect
productivity, create lots of great stuff at the lowest possible cost. That's the third set of
goals. Create value for the customer but eliminate waste so you can simultaneously drive
up productivity. Those three sets of goals, help us connect the organization's strategies
and desires to what happens in the supply chain every day. But what if we just wanted to
focus on the supply chain? What should a supply chain manager think about every
day? They need to have three goals. Be effective. This means, they need to give the
customer the cost, quality, speed and flexibility package that they desire. Be
efficient, meaning make the boss happy by doing things without waste, eliminate defects,
wasted time and confusion. Be adaptable. The best supply chain managers anticipate and
plan the change before their competitors. The needs of customers change, technology
changes, new employees and suppliers will be added to your supply chain. Supply chains
are tested under stress so as an exercise, let's think about something we hate waiting
for. Coffee, the grocery checkout, the cable guy. Ask the customer, what do you expect
from them in terms of cost, quality, speed and flexibility? You're the customer. You should
know that one. Surprisingly, most companies don't know what you want though. Second,
why do you think that sometimes things go wrong for a company? Is it the other
customers in front of you? The worker and how they were trained? Low quality
materials? Perhaps it's just a bad plan. In other words, what's causing the problem? Finally,
which changes does a company need to incorporate? Will you want more from them in
the future? Are there new technologies they should consider implementing? Next time
you get poor service, don't get frustrated. Think like a supply chain manager.
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Understanding SCM across industries
- You are a supply chain manager. No, really, you are. If you make something, you are
managing a supply chain whether you're making a car or a plane, a meal or a bed, a
delivery or a cross-country trip, a business report, a computer program or maybe you're
making a movie. We all make something and if you do it right, you'll make some people
happy, your boss, your kids, some friends, a customer, an audience or maybe the
beneficiary of your hard work might just be you but no matter what we make and how
we make it, we'd love to find ways to make it better, make it faster with less effort, with
fewer materials and less money. This, this is what supply chain managers do. Companies
in all sorts of industries have taken notice. At first, it was the most obvious industries, the
ones that actually manufactured tangible stuff, automotive, aerospace, electronics,
clothing and textiles. They started taking supply chain management seriously a long time
ago, long before anyone decided to call it supply chain management. From there, it took
over retail sales. Ever heard of Walmart, Amazon and Home Depot? Whether or not you
like those companies, their development and expansion is an outgrowth of buying,
storing and moving products in the most efficient ways possible. The success of these
companies is largely due to modern supply chain management but these companies not
only brought all sorts of products to people all over the world, they also introduced us to
the power of supply chain management. Now, executives in nearly every industry have
taken notice, hypercompetitive industries such as energy or banking, industries under
pressure to serve more and more people and still provide them great service such as
healthcare, education and food management. They are all interested in having
employees with supply chain savvy. It doesn't end there though. Humanitarian
organizations have realized that acquiring vital life giving materials and getting them to
the victims in need, it's a supply chain problem and let's not forget that a supply chain
without information can't make informed decisions, without money can't buy or make
anything, without a well-designed product and good marketing may not have
customers. We are all supply chain managers and the world needs us now more than
ever. So let's bring this back to you. How can supply chain positively impact your life? We
all have busy lives cluttered with important and not so important things. Well, perhaps
thinking like a supply chain manager can help provide some clarity. Consider your job or
maybe just life at home. What is something important that you do quite often? Now, how
would you define success? What is the desired output? Answering these questions gives
a supply chain manager focus. Second, how much time, effort and materials are typically
required to reach success? In other words, what are your inputs? This helps supply chain
managers look for opportunities to be more efficient. Finally, a supply chain
manager prepares for change and stress. So now you must ask yourself what is likely to
happen in the future? My boss or customer may want more faster. My life and job will
become busier. Now, ask yourself am I prepared for those changes? Supply chain
management gives us the opportunity to make our lives better. Ask yourself these
questions to help discover ways to make things better with less effort today and into the
future.