A recent survey of logistics professionals finds that although the term has been in common use for nearly a decade, most definitions of "supply chain management" have surprisingly little in common. Some think it's just a new name for logistics, which itself, they say, is just a new name for transportation. Others think it's all about procurement and sourcing. Others say it's about making manufacturing and transportation work together.Well, at least they're getting warm.
For the record, supply chain management is an all-encompassing, companywide business strategy and practice. It's not an industry: It's an approach to business. Since the mid-1990s when several of DC VELOCITY's staff members helped launch the first magazine with "supply chain" in its title, we have endeavored to help the market agree on a simple, straightforward definition of supply chain management. It's been frustrating.
As we view it, the definition should be just as broad as the concept—something like : "Supply chain management encompasses any and all activities that have to do directly or indirectly with the planning, sourcing, making or moving of a company's materials, goods, works in progress or finished product to the end-users." How does logistics fit in here? Your logistics operations, including your distribution center activities, are the engine that drives the process.
It should not be terribly difficult, then, to identify your role in your company's supply chain operations. The first step, though, is to recognize that business professionals today no longer enjoy the luxury of concentrating on a single "core" function. You cannot flourish if you remain in a functional silo, worrying only about the performance of your department. You have to pay very close attention to what the other "silos" are up to, and most important, understand how your department's actions affect the other departments.
If you are reading this journal, logistics operations is likely your specialty and your strongest suit. Not too many years ago, that specialized skill set would have opened doors to a nice career. Today, though, if you limit your skill set to a single function, career doors will be closing rather than opening.
To succeed as a business professional, you've got to expand your horizons beyond a core function. You must take off the blinders.You must tear down the silos. Though you do need to be your company's "top dog" when it comes to logistics, you also need a firm understanding of the other supply chain-related activities and operations within your company, and to an increasing degree, within your customers' and your suppliers' companies.
One of my favorite stories about the perils of the silo mentality dates back to the early 1990s. At an annual gathering of a major food manufacturer's executives, management set up a series of special meetings for leaders from all the divisions: sales, finance, purchasing, manufacturing and transportation.
In one of the meeting rooms, the CFO was giving a special award to the vice president of purchasing. His accomplishment? His team drove transportation costs down by almost 40 percent in a single fiscal year. Great news, it would seem.
Down the hall, in another room, the transportation department was brain storming ways to meet the never-ending challenge of moving freight on time and damage-free. Their biggest concern? A report indicating that on-time performance, in particular, had plummeted in the past year.
In yet another meeting room, the sales honchos were complaining that repeat business was in a tail spin. Brief analys is indicated that the reason was poor performance in delivering goods to customers on time. The team moved down the hall to lodge a complaint with the transportation executives. Once there, they learned that the reason for the freight delays was that the purchasing department was forcing them to use the lowest-bidding carrier on all jobs. After a brief discussion, both groups headed down the hall to the room where the purchasing managers were meeting. As they entered, the applause for the purchasing manager who had so dramatically cut transportation costs was just dying down.