Supply Chain Management: The Next Great Profession

Well it's finally here...........I think we have officially entered the Supply Chain Management era.

As with most shifts in thinking in the business world, our profession started out as a new "buzz word" that people began to throw around, not really understanding what is was or what it meant. What is Supply Chain Management any way?

Well, like most new concepts, it meant different things to different people. When it became apparent that this terminology might be just the thing to differentiate a group of professionals in the marketplace, the race was on. The purchasing people used Supply Chain Management as a term to replace old titles such as Purchasing, or Procurement. The logistics folks talked about Supply Chain Management really being all about logistics, and so the story goes.

In fact, it has only been recently that the term Supply Chain Management is getting regular use in publications, and even then there was still mass confusion as to what the term actually meant.

Our profession, of course, refers to all of the activities required to bring a product from one end of the value chain to the other......from the supplier's supplier to the customer's customer. It is about looking at the overall strategic relationship between the individual pieces, and not just within the individual pieces themselves.

Although until recently, I have often seen this terminology used in the wrong context, I am starting to see a shift in awareness, and there is a definate momentum building towards what Supply Chain Management is, and why it is so critical to an organizaiton's effectiveness.

For many years, the Purchasing and Logistics people have had a difficult time being heard, and getting their rightful place in the boardroom. They were often seen as a tactical contributor, who reported into Finance, or Operations, and the strategic value of their contribution was not recognized. My sense is that this is starting to change, and our profession is picking up rapid momentum.

Organizations are starting to realize, similar to the manufacturing revolution that has happened in the Lean/Continuous Improvement world, that there is more to be gained by analyzing and maximizing how the interdependent parts work with each other, as opposed to looking at point improvements within each interdependent part. They are simultaneously starting to understand the major impact that these activities have on the bottom line.

It seems likley that the Supply Chain Management profession will get increased attention over the coming months and years, and that we may in fact have finally arrived at an era where we will gain access to our rightful place around the boardroom table. As more and more companies begin to realize what they have to gain, and start to share SCM success stories, Supply Chain Management Professionals will become more and more highly sought in the marketplace.

Lean Thinking vs. Supply Chain Management

Supply Chain Management is becoming talked about more and more, and has become the common language of our profession. We once talked more with terminology such as Purchasing or Logistics, but the shift to Supply Chain terminology is becoming more apparent with the passage of time. I have even heard it referred to as "the next great Profession" by some colleagues. It would certainly seem that today's Supply Chain professionals are in the "right place at the right time", so to speak.

When I look back on my career, I describe it to people as "very unorthodox". Like many in the Supply Chain profession, I did not dream at a younger age of becoming a Purchasing, Logistics, or Operations expert. After all, the Mick Jaggers, Paul McCartneys, and Bobby Orrs of the world didn't know much about such topics, and then seemed to be making out OK.

Like many others, I went through the academic ranks, and afterwards found myself in the manufacturing world. I spent about 15 years or so in various operational positions in the manufacturing sector, and then one day I was asked to move into the world of materials management, then purchasing, then distribution, and on and on. When the profession of Supply Chain Management began to gain steam, it looked like this "unorthodox" career path had actually put me in an enviable position to succeed in this "next great Profession".

During my years in Operations, I spend a significant amount of time in the pursuit of productivity, efficiency, effectiveness, continuous improvement, and Lean manufacturing. Since that time, I have often seen people present on the topic of Lean Purchasing, Lean Supply Chain, and other similarly branded topics of expertise. This has made me reflect on these two seemingly different worlds, and why I was seeing more and more discussion of how the two could be somehow combined to leverage opportunities for the organization.

So what really is the difference between these two professions, and how can they be combined in some meaningful way to take advantage of opportunities for the organization?

In the Lean world, we are on a constant journey/war against waste. We talk about taking a "systems view", or "holistic approach" to this war on waste, looking at all processes, both inside and outside of our organizations, that do not add value for the end consumer. The key points being the "systems view" and "value for the end consumer". Once we have made major gains within the organization, we often look towards our supplier base, or to delivery to the customer, to try to help them reduce their costs (or increase service, flexibility, etc) so that the entire value stream benefits. It is all about increasing the value for the end consumer.

So what is it that the Supply Chain profession does? Is it not that we take a "systems view", a "holistic approach" to the Supply Chain? When we talk supply chain, we talk about looking both inside and outside of our organizations, looking both upstream and downstream, and looking at how the entire system interacts with one another. We are, in fact, looking through the same lens at the Lean practitioner, and attempting to find opportunities to eliminate cost, or improve service that adds value for the end consumer. In other words, we are looking to find the expenditure of resources that are wasteful, in an effort to try to eliminate them. Sound familiar?

The conclusion that I have come to is that the goals and objectives, as well as the approach taken by these two professions, is very much the same thing. We are all on the same team, trying to accomplish the same thing. Just as the Lean practitioner often looks outside of the "operations group", what many would consider to be their main area of focus, downstream to the distribution side of the business, or upstream to the supply side, we in the Supply Chain Management profession look outside of what many would believe to be our normal areas of focus, to either upstream or downstream to find opportunity for the end consumer.

So, when I sit and listen to people talking about "Lean Supply Chain", "Lean Purchasing", or "Lean Logistics", I wonder how new or special the topic actually is. Maybe it is simply putting more of a "marketing slant" on the topic, branding this new "concept", when in reality, it may be nothing more than leveraging opportunities in the day-to-day world of Strategic Supply Chain Management.

Definately something to think about....................

Is China Losing Ground?

Over the past couple of decades, China has been extremely successful in becoming a major economic force globally, and has in effect long since established themselves as the "world's manufacturers". In fact, it often seems difficult to find products in retail stores throughout North America and the rest of the world that is not Made In China.

For those of you who may have had the pleasure of travelling to China over the past decade or so, you can't help but notice the overwhelming changes in the country. These changes are obvious when looking at the vast infrastructure improvements, the number of cars, and the increase in the standard of living of many of the China's residents.

Are these changes a cause for concern for the business community in China?

History has shown many examples of countries who have eventually lost their global competitiveness through increased labour costs related to increased standard of living for the country's workforce.

In my time travelling to China, I have seen hotel costs escalate from the $70 - $80 USD level, to well in excess of $200 per night for the 5 star North America branded hotels. Similar price escalation can be seen in many other products. Is this a sign that China is pricing themselves out of the global manufacturing marketplace?

I have been posing these questions to my network of vendors throughout China for some time now, and they all feel that China will never price themselves out of the market. I can't help but think, however, that other countries that were once much more competitive thought the same thing.

Whether or not China is on the path to playing a less significant role in the world's supply chain remains to be seen. One thing is clear, however. Like other areas of business such as research and development, product innovation, and consumer purchasing trends, those who have the foresight or "vision" of where the global sourcing community will end up, will be the "first in" to new sourcing markets, and will be the big winners from a competitive advantage in the marketplace point of view.

The question is, "Is it time for companies to change their strategic sourcing focus", and if so, "Who will be the next China"?

Happy days are here again

The summer has come to an abrupt end as the fall weather turns a little to the cold side here in Atlantic Canada. In fact, I saw a few snow flakes yesterday, which makes me feel that the summer weather that we are all to quick to criticize maybe wasn't that bad after all. If nothing else, it makes it easier to get our heads back into work, and away from wanting to spend more time enjoying the summer weather.

So back to business it is. On the economic front, things certainly seem to be heating up again, especially in Canada. The glut of houses "for sale" on the market vanished before our eyes, and prices that had softened in the Spring quickly rebounded to their pre-meltdown price levels.

As Supply Chain specialists, there is a real danger in settling back into "the norm", and not being quite as eager to have some immediate impact on the organization's bottom line. Don't get me wrong, its not that we are not always trying to do a great job and bring real savings to the organization, but nothing focuses a person as much as being forced into "crisis mode". And not only that, but the normal struggle to take our rightful place at the boardroom table, and to be able to speak with some volume and actually be heard, is in danger of passing us by as the business leaders back off from hitting the panic button and start refocusing on longer term strategic issues for the business.

It is my hope that all of you were able to have some immediate impact during the troubling times earlier in the year, and that you have gained some well deserved credibility with the business leaders that will have a lasting impact.

As they say, sometimes dark clouds have a silver lining, and we need to take away some positives from the challenges of 2009. With any luck, it has provided us all with an opportunity to rethink our current business practices, and has afforded us the chance to become a little leaner, more agile, and more responsive to our customers.

Best of Luck for the remainder of the year.

Economic Meltdown

Well, it's been a while now since panic first set in with our current economic crisis. Although the panic has somewhat subsided in favour of some more rational thought, we are far from the end of this slowdown, although we do seem to have bottomed out.
Although these downturns are indeed somewhat nerve-wracking, it certainly does impact the supply chain management field in a bit of a different way...........usually we are in a profession where we have to fight to obtain our rightful place at the boardroom table, but not these days.
Quite often in times of economic trouble, we are suddenly "a hot commodity", the people who may be able to play a large role in "righting the ship".
It's not that I am enjoying these challenges, especially with my investments in the market, but it is times like these where our role on cost reduction, strategic sourcing, and our impact on the bottom line becomes much more apparent.
There is no question that not only does our role contribute on a day to day basis for business, but in times like these, it is definately a buyer's market. As a result, it becomes easier to lead a successful negotiation and add to our company's bottom line.
It is important to remember that we have to be careful not to take advantage of our suppliers. If we operate in a truly strategic nature, we have carefully selected our supply chain to work as "partners" with us for the long-term, and have realized the value they add with their individual brand of expertise. We also need to remember that they, and their organizations, are also facing challenges, and we need to be cautious that we do not add to their load.
After all, they won't add much value for us if they are in Chapter 11.
Food for thought