Supply chain management: What kind of rose?

Supply chain management: What kind of rose?

As William Shakespeare wrote in his classic, Romeo and Juliet, "What's in a name? That which we call a rose, by any other name, would smell as sweet."

In other words, what matters is what something is, not what it is called. But there is no denying that names, terms and labels carry a lot of weight, even if a lot of it is "baggage".

One such term used in my professional field is Sales & Operations Planning (S&OP). This has evolved very nicely over the past 20 or so years from a pretty simple two- or three-step process conducted by middle managers to a very sophisticated five-step process orchestrated by the most senior executives. Indeed, some new variations on the theme represent a highly dynamic, continuous process rather than discrete steps executed on a monthly cycle.

However, many people infer and project their own experiences and preferences, and this has led to the development of other labels such as Integrated Business Management and, what seems to be the current preference, Integrated Business Planning. The result can be serious misunderstandings among people from different experiences and backgrounds.

Definitions often get in the way. Certainly, as we understand it, this very point led to the establishment of the Supply Chain Council (SCC), originally in the US in the early and mid-1990s.

When trading partners began looking to integrate their processes and systems better, they quickly realised that definitions and specifications of terms, processes and performance measures were very different. The need for a standard led to the SCC and, ultimately, the Supply Chain Operations Reference (SCOR) model.

The SCOR model is the de facto standard definition of the scope and processes of supply chain management (SCM). At the highest level, this is: Plan, Source, Make, Deliver, Return.

What about the term "supply chain management" itself? Similar to S&OP, this has evolved over the years, roughly led by thinking and practices in the military from simple procurement and supply of materiel to a very broad definition of logistics.

In fact, early in my career in private industry, "logistics" was the term used for what is now labelled as supply chain management.

Now, of course, logistics is generally acknowledged to be a subset of SCM _ that is, other than by logistics service providers who think that putting "supply chain management" on the side of their trucks suddenly broadens the scope and depth of their expertise and service offerings.

However, for many years now, there has been a general feeling that SCM is not an adequate term. Having "supply" in the label emphasises the supplier-to-customer physical flow and de-emphasises the two-way flow of information. As well, it does little to recognise the planning component. Also, "chain" is sometimes thought to oversimplify the concept.

There are few supply chains around _ that is, a single strand or chain linking several trading partners.

The notion of a network, web or mesh is more like it in most cases, and this leads us to our preferred definition, as follows: "... seamless fabric of information flow, physical distribution flow, and cash flow for the benefit of the end customer".

The final point in that definition is a key one: for the benefit of the end customer. This has led many folks to look to evolve the SCM term to either "demand-driven supply chain" and/or "demand-driven value network" (DDVN).

In our view, each is technically appropriate but neither slides off the tongue very easily, if you know what we mean.

Now emerging is the term "value chain". Some think is is significantly more descriptive than the term SCM in that it better conveys the intent and value of the chain of value rather than chain of (material) supply. Indeed, it has been asserted that "value chain" is a nice bridge between "supply chain" and DDVN.

However, one must consider the "baggage", as we noted earlier. As we understand it, the name "value chain" was created by a group that split from the Supply Chain Council and devised a technique called "value chain mapping". Even before that there was Harvard competitiveness guru Michael Porter's "value chain" concept in the mid-1980s.

This is, however, not meant to replace the supply chain name in any way. Thus, many who come across a term such as "value chain management", if they had earlier experience with value chain mapping, will underestimate the scope and significance of what is meant. Conversely, if they have experience with Porter's model, they will overestimate the scope.

So where is all of this taking us? Nowhere in particular, at least not any time soon. General usage will inexorably drive the evolution of our language via "crowd sourcing". In the meantime, what is imperative is to recognise that these differences and potential misunderstandings exist.

Therefore, to be clear, when you use any term, you must know what you mean by using it.

Indeed, in our work, especially when we make a formal presentation, we will always begin with defining our use of any "risky" or contentious terms. Similarly, when someone else uses one of these ambiguous terms, it behooves you to ask their intention, for the sake of clarity.

A rose by any other name would smell as sweet _ just make sure you know what kind of rose it is. "Supply Chain Solutions" printed on the side of that truck may not really mean what you were hoping for.


The Link is coordinated by Barry Elliott and Chris Catto-Smith CMC of the Institute of Management Consultants Thailand. It is intended to be an interactive forum for industry professionals. We welcome all input, questions, feedback and news at: Barry.Elliott@inslo.com
cattoc@cmcthailand.org

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