Supply chain smile ... or ... Supply chain dangerous
It's always important to know your odds when dealing with new business partners, ventures or trading relationships. In fact there are many parallels with the story lines of many famous Bangkok "noir" novels that can make the supply chain business environment quite exciting _ if not one of constant intrigue and challenge.
The connection with fiction: I have the pleasure to be involved in hosting a forthcoming fiction writers' night, and on meeting some of Bangkok's master thriller authors I have often been led to make comparisons between my own profession and the "reality" of their novels.
Noir fiction is very popular in Bangkok where I live. It is popularly described as a literary genre in which the protagonist is not a detective, but instead is either a victim, a suspect, or a perpetrator. A typical protagonist is dealing with legal, political or other relationships that are no less corrupt than the perpetrator's own standards. As in real-life supply chain scenarios, the protagonist is either victimised and/or finds himself having to bully or muscle others on a daily basis, leading to lose-lose outcomes. (Many retail buyers and logistics contract managers will identify with this.)
Double-sided coins: Too often, the dominant partner in a new venture or relationship creates a position of unfair advantage in regard to trading terms, control of information, or dictating payment terms through strong-arm tactics. No matter which way a new business develops, the dominant partner can protect itself or benefit at the expense of weaker or smaller partners.
In what should be a fair game of chance (no matter how you spin the coin), one side will always win and the other will always lose. In the world of fiction, many find themselves facing double-sided coins. Disappointingly, many supply trading relationships that fail are built along the same principles _ one partner will always lose and principles of fairness are forgotten.
Improving the plot: To improve the story line, many fiction writers develop plots that allow the central characters to overcome their competition by fair and less fair methods. Likewise, companies must develop their own plans based on strategic advantage and leverage them via their supply chains, and not to drive adversarial practices with partners and service providers.
The lead characters in some of the more famous Bangkok novels often focus on classic themes of weighing up the forces of luck and chance against sometimes insurmountable odds of success versus failure. The key in SCM is to determine the mix that best optimises a company's strengths for competitive advantage, rather than squeezing suppliers or compromising customer service.
Fiction writer's toolbox: Leading companies have always recognised the classic drivers of business as being their key to highly effective operations and sustained advantage. In terms of character, plot and world view, fiction writers also follow many of the following principles:
- Back to the basics: liquidity, profitability, growth. Cash is king.
- Speed is important in creative design, to production and finished goods order fulfilment to customers.
- Watch the cash: administration and overhead costs must be cut to the minimum, then cut again.
- End-to-end visibility _ of orders, parts, and shipments (and their status) is critical to successful execution, delivery precision, and supply and demand response.
- Watch the total cost: You need cost-to-serve information for managing operations and achieving customer-centricity.
- Risk and variability are a vital management responsibility.
- Get home safely: Reverse logistics, returns, and spares management, yet another major component of customer satisfaction and cost.
- Have a bottle of Crystal Head Vodka close by _ if any or all of the above fail, at least you can spend your last moments in style.
Managing and taking risks: Many companies grapple with how to minimise risk, be it from inventory or business interruption, ensuring effective utilisation and optimisation of fixed assets, by tightly matching demand with supply, while contracting for key material supply. The risks here are those of supply price variance and demand changes under fixed supply contracts, as well as supply capacity and inventory levels (excess and obsolete) given demand variability. You need to manage your demand and supply variability to ensure customer product availability and lower the total purchase price, while maintaining low inventory levels and capacity utilisation.
The parallel in fiction: Noir fiction deals with risk through a range of plots: the central figure may be a private eye, a quick-talking con man, an ageing boxer, a hapless drifter, even a law-abiding citizen lured into a life of complexity or simply a victim of circumstance (not much different from some of my work colleagues).
No matter how well a company prepares for business, it is quite dependent on the interactions of the same mix of central figures who can bring success or failure. In much the same way a crime novelist focuses on the central plot, meticulously researched background into the criminal world counts for nothing without these characters (read: supply chain partners) finding balance and their own benefits.
In summary: Given the complexity of today's global supply chain, effective management relies on the perfection of the underlying basics _ visibility, integration and risk management. Great novels also consider the dynamics and interrelationships of characters where execution is all important.
With personal relationships, power and trust affecting virtually every major trading activity, forcibly removing the weak and inefficient ones, those organisations that have survived are now well placed for a new growth era within a larger global supply environment. Supply chain management is not about one-sided relationships _ it is about operating in a fair environment where all partners can balance risks and share rewards. But in fiction, the good guys don't always win.
(For more details on the forthcoming literary event, Google "Bangkok Fiction a Night of Noir".)
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