So what if your supply chain organization doesn't include everything that some others do? Is that such a big deal? Haven't your intrepid authors often said that the supply chain organizational structure is a flexible concept, dependent on many variables?
Guilty as charged, with an explanation. When it comes to traditional lines and boxes on an org chart, much does depend on culture, global footprint, divisional P&L accountability, and other non-trivial factors. When it comes to functional inclusion, that's a different story—particularly as our vision of scope, scale, and inclusion in the supply chain continues to evolve.
THOSE WHO CANNOT REMEMBER HISTORY ...
Back in the day (when so many of our respected pioneers started), traffic management and transportation were everything. Warehousing (in today's parlance, distribution) was something different, involving somnolent managers and associates with strong backs and weak minds. If traffic managers were nobility, purchasing agents were princes, neither to be trifled with nor disrespected in any way. They received far more swag at holiday time than anyone in the evolving logistics universe.
Logistics elevated traffic and transportation into a comprehensive view of how boxes would get from Point A to Point B, and the burgeoning field deigned to encompass storage (warehousing) and some level of filling orders as part of the new world order. Meanwhile, the purchasing agents were evolving from Four Roses to Jack Daniel's as a minimum expectation.
The emerging supply chain point of view began to integrate the independent functions we had traditionally dealt with, and introduced disciplines and internal relationships that developed holistic plans and collaborative accountabilities for continually improving execution in storage, movement, and customer satisfaction.
So far, so good. But a handful of freaks wanted to go further. They, correctly as it turned out, thought that manufacturing ought to learn how to dance to the same beat as everyone else involved in the process of getting goods to customers. Guess what? Wherever the goofy notion was seriously tested, it worked.
The really aggressive pioneers began to insert, include, and integrate purchasing functions into the end-to-end supply chain. That was an enlightened first step. But there were complications.While all this was going on, and actually earlier, the buyers and purchasing agents had been elevating their game. They had seen the strategic implications of changing models. The idea that the "finding" of materials and sources, and of building relationships with suppliers was even more important than the "getting" of goods at whatever price a supplier was grudgingly willing to sell for, gained traction. The profession became significantly more professional.
But, regrettably, they also began to see themselves as the drivers of the supply chain, value chain, demand chain—whatever you want to call it—bus. Their world view had the supply chain beginning with them. They offered certification and spoke of supply management.
In our view, sourcing and procurement are vital—and integrated—components of a real supply chain, and the chain begins with customers and demand. And we see no benefit to having procurement as another oar in the water that needs independent communications and collaboration, when it ought to be part and parcel of one corporate entity that already speaks with one voice.
This thinking was mysterious in days of old. But a few brave souls tried to put procurement and the supply chain together, too often by making supply chain functions report to the procurement vice president. This move baffled nearly everyone, most seriously the VP who suddenly owned the distribution network. We remember with great fondness the $25 billion client that decided to fold a supply chain project into its strategic sourcing initiative. There were consultants hanging from every tree until the program's champion realized that they had, in his words, put the horse behind the cart and then expected the horse to do all the pushing.
As time passed, though, more and more procurement structures got, correctly, folded into supply chain groups. So much so that we were recently taken aback by an article in one of the other trade publications that suggested that supply chain and procurement needed to really work on improved communications and elevated collaboration, as if they lived in separate regions of Middle Earth.
So, for those who have not yet put a tentative toe in the waters of the 21st century, let's simplify. It borders on lunacy to keep these natural colleagues separated. Face it. You can't hope to manage inventories effectively without daily interaction with procurement. You'll never have what you need when and where you need it (and not before) without teaming up with procurement. Independent planning and execution will nearly guarantee dissatisfied internal customers and disappointed external customers. You won't be able to please sales and marketing, and meet marketplace demands unless you are all together in the bass boat.
NEARING THE END OF THE TRAIL
As much as we favor full inclusion and integration of sourcing and procurement activities in the holistic supply chain organization, we're beginning to wonder if there is more here than simply getting all the right players into the tent. Once everyone has found the secret of meshing product and materials acquisition into end-to-end planning and execution, what will be left?
Is this merely a matter of fulfilling an advanced vision of the role of supply chain management in the enterprise? Or do we stand before the open door of a new structural paradigm to carry us through this century? Is supply chain management slowly and certainly replacing operations management in the corporate pantheon?
HOW CAN YOU BE SERIOUS?!?!
We might be premature in advancing this concept. We could be wrong. But the trend is difficult to ignore, the logic is straightforward, and positive evidence is emerging. Not to mention that the manufacturing and operations-dominated model: 1) has served well, but for a very long time, and 2) tends to contain concepts and philosophies that don't square well with new century practices, especially in employee and business relationships.
We have seen the concept in operation—and succeeding—as early as 20 years ago. And there seems to be overwhelming consensus that supply chain management is the natural facilitator of corporate sales and operations planning efforts, with enormous impacts on manufacturing, sourcing and procurement, financial performance, and all of the traditional supply chain, logistics, and distribution functions.
Some might see this as a power grab by a newly energized and empowered supply chain community. It would not be the first such accusation.
But the argument is compelling. Last-generation operations management was a command-and-control structure (or derived from one). It was a collection of functions, each with challenging performance targets and function-centric metrics. From an integrated supply chain perspective, the individual functions could each be successful by their own lights, with performance bonuses all 'round, while overall enterprise performance was sub-par.
In an advanced supply chain organization, the leader is a coach, facilitator, and talent developer. Metrics are aligned around corporatewide objectives. Functions collaborate, and diverse teams work on projects with sustainable continuous improvement. Activities throughout the supply chain are: 1) planned, 2) integrated, 3) synchronized, and 4) externally focused. It doesn't seem to us that the new model leaves any room for internal strife or disconnected initiatives. Nor can it tolerate extensive interfacing among disparate functions; the pieces must be components of a seamless operating structure.
Maybe, just maybe, the time for widespread adoption of the holistic supply chain model for all operational functions, including manufacturing, has come.