Building better supply chains for tomorrow

December 14, 2010
by Robert Robertson

PURCHASINGB2B MAGAZINE, OCTOBER 2010: The Eighth Annual International Symposium on Supply Chain Management was held recently in Toronto. With the theme, “Exploring the Leading Edge in SCM: Innovation, Sustainability and Performance Measure,” the event was organized by the Purchasing Management Association of Canada (PMAC).

The chair of the symposium was Dr. Steven Melnyk, professor of operations management for the department of marketing and supply chain management at Michigan State University’s Eli Broad School of Business. According to Melnyk, the speed of change is impacting the evolution of supply chains.

More specifically, Melnyk said supply chains are organized around a combination of six outcomes. They include cost, responsiveness, security, resilience, sustainability and innovation. These factors then lead to how supply chains are designed and managed.

Melnyk’s findings were based on the 2010 and Beyond Research Initiative completed by Michigan State University’s supply chain management group. The study reviews more than 150 leading-edge supply chains and focuses on identifying the future of supply chain management.

“Today’s supply chain is the result of past decisions. This means the decisions we make today will affect the supply chain of the future because it takes time,” said Melnyk. “Current supply chain models are too simple, too limited and wrong. Price and cost are fundamentally different.

“If a system is strategically coupled and value-driven, it’s inherently dynamic. Value is also customer-driven and not generic. And you have to know your critical customers. This is something we heard over and over again. The firms with the best supply chains were the ones that had almost a laser ability to identify their critical customers. They knew what customers wanted.”

Melnyk explained that a good supply chain isn’t one built around cost, but rather involves outcomes. “Increasingly, we’re finding more examples of C2 supply chains. They recognize cost is important, but it’s secondary,” said Melnyk.

Future supply chains
To maximize supply chain management, a panel delved into possible strategies and answers. One large leap forward takes into account that management in the boardroom fully understands the concept of supply chain operations, as well as their key role in helping to strengthen the corporate bottom line.

“You have to remember that procurement isn’t supply chain management. It’s an important part, but it isn’t the core. Supply chain management is so broad,” said Dr. Garland Chow, director of the Bureau of Intelligent Transportation Systems and Freight Security, and associate professor, operations and logistics division at the Sauder School of Business, University of British Columbia. “At the corporate level, the different parts of supply chain management, including procurement and distribution, have to be recognized.”

According to Jordan Kalpin, client executive, HP Enterprise Services, Hewlett Packard Canada, it’s imperative for supply chain professionals to have an effective working relationship with the company’s information technology (IT) department.
In a sense, one can’t live without the other to achieve overall supply chain performance success.

“We’re in a world where nothing works when IT goes down. And the revenue clock stops for those organizations that depend on their supply chains,” said Kalpin. “If you work in a vacuum and separate from IT, then you’re setting yourself up for trouble.”

David Sinclair, senior manager with Accenture Canada, said people working in supply chain have to get on management’s radar, and demonstrate that procurement is a crucial piece of a company’s organizational structure. He added that procurement has to know the different functions across the entire business.

“Are you ultimately relevant to your organization? If you’re not, then you have to decide what you can do about it. You have to think outside the box, be innovative and ensure creativity isn’t missing,” said Sinclair.

“I would like to see more imagination applied to supply chain and training. Some industries and sectors question whether supply chain or procurement is really core or fundamental to them.

“In your organization, find out what makes the business tick. In some companies, [if] procurement [is] talking the language of cost savings and metrics, [that] fundamentally runs counter to what’s important or governs the business. The impact of revenue generation and profitability also has to be understood. You have to be more holistic when looking across the business. For example, procurement must be a part of the decision-making forum.”