October 31, 2007

Supply chain at center stage

By DC Velocity Staff

For most of the history of commerce, managing transportation was a primary focus of what we today call supply chains, said Don Bowersox during an education session at the CSCMP conference. It was not until the 1950s that business managers began to develop "total cost awareness." Then came customer service, outsourcing, globalization, customer service, and integrated supply chain management. Bowersox, who is professor of business administration and dean emeritus at Michigan State University as well as one of the profession's pre-eminent thought leaders, offered his views at a session on the evolution of supply chain management.

What's developing now, Bowersox said, is the concept of responsive supply chain management. "The supply chain is not an organization, but a strategy," he said. It provides a framework for organizing the pieces of the supply chain into collaborative relationships. "The supply chain is about leveraging relationships," he said. He added that developing collaborative relationships on a broad scale was not possible until the development of enabling technologies.

Supply chain managers are important to business success, he told his audience. "We don't always recognize how important we are."

But Wall Street may. It's taking a growing interest in how well—or how poorly—businesses manage their supply chains. Why? Charles Poirier, a partner in the consulting firm Computer Sciences Corp., told an educational session later in the conference that investors "see that a supply chain can increase shareholder value."

Poirier reported on a study conducted by CSC jointly with Michigan State University that asked managers to rate their own supply chains in eight categories. Using the results, the researchers divided companies into three categories: leaders, followers, and laggards. One of the key factors differentiating the laggards from the leaders, he said, was that laggards focus primarily on controlling supply chain costs, while leaders have turned their supply chains into a means of generating new revenue. Leaders recognize that looking solely at costs "leads to diminishing returns," he said. But only about 25 to 30 percent of companies have looked at revenue generation through their supply chains, he said.

Supply chain managers can affect revenue through efforts to improve customer service and to get better forecast accuracy with improvements in sales and operations planning as well as through collaborative analysis of data with customers and suppliers. "What separates the leaders is that they are breaking down silos," Poirier said.