Chain Reactions

Plan, Source, Make, Deliver, Return & Blog

At some point next year, the supply chain will celebrate its 25th anniversary. At least, that's the case if you accept that the term "supply chain management" was first coined in 1982 by a Booz Allen consultant named Keith Oliver. In the process of writing my book, Supply Chain Management Best Practices (published by John Wiley & Sons -- end of shameless plug), I couldn't find any reference that predates Oliver's use of the term, so unless somebody can tell me different, I'm going to proceed under the premise that we'll soon be celebrating the supply chain's Silver anniversary.

Okay, so what exactly is supply chain management? The best definition I've ever seen is the five-word description used by the Supply Chain Council: plan, source, make, deliver and return. That pretty much says it all right there, in terms of describing the core functions within SCM. What's more, I've never seen anybody disagree with that definition. Some might argue that it's too basic, but frankly, the field can use all the straightforward succinctness it can get.

One of the questions that I've been asking for years (and when I first started writing about SCM, hardly anybody was using that term so we called it lots of other things), is that if the potential benefits from supply chain management are so significant -- and let's assume for the moment that they ARE significant -- then why is there a perception that just a relative handful of manufacturing and retail companies have really become good at SCM?

I think part of the reason is that expectations are set too high. Dell and Wal-Mart are probably the two most frequently cited supply chain success stories. By that I mean their astonishing growth over the past decade or so can be directly attributed to their supply chain proficiencies. Consider, though, that no other company in the world can possibly hope to catch up to Wal-Mart in total sales... at least, not any time soon. (Kmart made a half-hearted effort to revamp its supply chain back at the turn of the 21st Century, but it ended up being too little, too late as the retailer ended up filing for bankruptcy protection. Since then, the merger of Kmart and Sears has done little if anything to halt Wal-Mart's big-box dominance.)

Wal-Mart has spent millions on supply chain technology -- its RetailLink e-commerce system, for instance, is still considered state of the art 15 years after it was introduced. My observation is that there is a very real fear, buoyed by the numerous flameouts of software and other tech start-ups when the dot-com bubble burst, that the money spent on technology could better be spent elsewhere or in fact not be spent at all. With the price of oil currently hovering near $80 a barrel, figuring out a way to pay for ever-increasing transportation and logistics costs are top of mind decisions for corporate supply chain planners; spending money on, say, a yard management system falls pretty low on the list of priorities. Nobody really wants to spend money if they don't have to -- and yet, that willingness to invest in e-commerce, in bar code technology, in distribution, and currently, in RFID is exactly why Wal-Mart manages to stay ahead of virtually everybody else.

Many, many companies have become good at SCM -- certainly not to the extent that a Wal-Mart or Dell or Procter & Gamble or Boeing or Toyota, etc., have excelled, but if we go back to the Supply Chain Council definition of plan, source, make, deliver, and return, we can find dozens, and in some cases hundreds, of examples of companies that have improved in at least one of those five areas.

For instance, consider this SCM success story about a company you may have never even heard of.

That's part of what this blog is all about -- looking at how companies big and small are tackling their specific supply chain challenges. And I'll also look at whatever news or research is made public that is both:
a) interesting, and
b) worth discussing further.

Feel free to join the discussion at any time.

TAGS: Supply Chain
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