by Keith Carruthers MBA, SCMP

Welcome to Strategic Sourcing International's blog on Supply Chain Management. It is our intention to provide information on the topic of Supply Chain Management that we hope you enjoy, find useful, or at least find somewhat entertaining. Feel free to provide us with any feedback you may have. For more information on our organization, please visit our website through the link listed on this page. Enjoy!

Monday, July 28, 2008

Does your organization have an import strategy?

In todays global economy of rising fuel costs, fluctuating exchange rates, labour shortages, and rapidly shrinking margins, organizations without an import strategy are finding it near impossible to compete. Global competition, and in particular competition from low cost labour countries, is resulting in lost customers and deteriorating profitability for many domestic manufacturers.

Despite these competitive pressures however, domestic manufacturers need to be careful before jumping head first into sourcing from overseas. Not that I dispute the enormous value that these low cost manufacturers can bring to the bottom line, but these initiatives need to be grounded in the organization's strategy, and not simply a knee-jerk reaction to shrinking product margins, or be undertaken as a "keep up with the Jones' " type of initiative.

What is it that the organization is trying to accomplish? What are the critical to quality issues for your customers? What is it that they value most?

True, you may very well be in a market that is extremely price sensitive, and you may in fact be strategically placing yourself as a "low cost producer". If this is the case, it is clear the critical role that imports can have in your business. But what if you are not in that market, or are not trying to position yourself as the low cost producer? What if you are offering a value-added product offering? What if what your customer values the most is speed and flexibility? In such a situation, sourcing products overseas can be more of a detriment than an opportunity.

That is why it is important to begin with strategy. Where do you see your organization in 5 years, 10 years? What do you want to be when you grow up? Once you are able to answer these questions, you then can work back to develop the short to mid term plan to reach your objectives, and to ensure that you are providing value to your customers in order to build competitive advantage in the marketplace.

Like most things in life, it's all about balance. There is no question that in most organizations, using import sourcing as a strategy can definately play a role in gaining competitive advantage. It is critical, however, that you know what you are trying to accomplish with this strategy, and that it fits the overall organizational strategic plan.

Combining a solid import strategy, with the other areas of strength within your organization, is a sure recipe for success.

Monday, July 14, 2008

What is Supply Chain Management?

As the years go by, buzz words come and buzz words go. Some we tend to ignore in the hopes that they too will be washed away by the tide of time, never to be heard from again. From JIT, to Quality Circles, to MBO..............they come, and they go. Some disappear altogether, while others simply take on new names that refer to the same things.

So then, what exactly is "Supply Chain Management", and is it too just a fad to be washed away by the tide of time?

Well, it sounds like a pretty simple question, which would lead us to believe there would be a simple answer............. but that is not necessarily the case. For starters, nailing down a definition of supply chain management, for some, has seemed to be a daunting task. As a result, it seems that there is still little agreement on how it is defined.

In addition, in a race to "stake claim" on the profession, the various groups involved in components of supply chains (purchasing professionals, manufacturing operations professionals, distribution managers, transportation specialists, etc), are all bent on using the term "Supply Chain Experts", or some such moniker, in their bid to describe their unique and meaningful skill sets that they bring to the table. All of this only adds to the confusion. We are not here, however, to debate who is the rightful owner of such a title, but are here to try to shed some light on exactly what we mean when we talk about "supply chain management".

Manufacturing organizations, over the past few decades, have grown to realize that their traditional view of their environment, dividing tasks into small work units and analyzing them to death for efficiency improvements, may not be an optimal approach to getting results. Over time, they have become more and more focused on "the system", taking a holistic view of the interdependent work centers which they once viewed as independent units. In realigning their approach, they have started to look at processes, mapping the movement of information, product, and people throughout the system. They have begun to talk about value, streams, chains, interdependency, and as a result, the "chain theory" type of thinking was born. This same type of thinking is what has now evolved into the discipline we now refer to as "supply chain management".

In supply chain management approach, we look at the entire chain of activities involved at getting the raw product components through to the end consumer......from the "supplier's supplier", to the "customer's customer". In other words, we are looking at each and every activity and transaction that occurs in the entire chain, not just within the walls of our own organization, in order to identify and eliminate cost. By finding and eliminating the waste or excessive cost, we are creating value, for each and every chain member, up to and including the consumer. As a result, this approach is focused on a collaborative, holistic, view of the system, and by focusing on the entire system and on how it effects each and every member (and ultimately the end consumer), we are able to make the chain operate in a more efficient and optimal manner, to the benefit of all chain members. It is important to note that in this example, we are "assuming" a cost cutting focus, but this is not the case in all situations. Supply chain management is a strategic approach to managing the chain, and as a result, the goals of your actions are grounded in strategy, and therefore may not be focused on cutting costs, but other objectives such as increased flexibility, or reduced lead times, to name a few.

In summary, it is clear that the building and reinforcing of relationships between all members of the supply chain, with a trusting and collaborative approach, is key to establishing effective supply chains. Each of the different factions listed above, represent only a portion of the actual supply chain, and need to shift their focus to a more strategic and more holistic view of how they operate, each and every day, to be worthy of the name "supply chain manager", or some such title. The reality is that Supply Chain Managers will need to be focused on the entire chain, and we will find people who hold this title coming from a variety of the disciplines mentioned above, as opposed to from one or the other.

Keith Carruthers, July 14, 2008