Supply chain optimization is one of the most neglected aspects of management. Advanced management offers opportunities to generate substantial and sustainable performance improvements. Prevailing understandings of supply chains have evolved from simple distribution logistics to include earlier and later stages of product and service life cycles. However, supply chain performance and its optimization offer significant additional improvement opportunities.
Advanced supply chain performance measures not only include the supply chain infrastructure, but also the costs that it affects and the opportunities that it enables. However, isolated activity and accountability significantly limit performance improvement efforts. They produce unproductive channel conflict, needless complexity, and significant gaps. In the case of supply chain management, this is magnified (and encouraged) by supply market divisions and oligopolies. Real optimization and continuous improvement remain elusive.
Therefore, it is pertinent to elucidate the principal shortcomings of current management models, and why do they often degrade over time? The first and foremost issue is that companies predominantly focus on products as compared to services whereas the best practice is to create business models which incorporate both of them. Similarly, Current management models are single dimensional. They are isolated, fragmented and self-referential in which supplier is facilitated and not held responsible for the supply of suboptimal material.
On the other hand, organizations need to have integrated management models incorporating financial, operational and commercial dimensions of their business. They must have extended supply chain systems which depend upon product and service lifecycles. Another problem with supply chain management models is that they are rigid, static and unsustainable. What companies need is to have dynamic and flexible models for everything ranging from strategic sourcing through marketing including a robust range of alternatives.
Supply chains also fail to produce desired results because management models are transaction focused whereas they should be linked across strategy, tactics and logistics which combine to create great product for the customers. Finally, organizations use weak, fizzy and unclear metrics to analyze the performance of their supply chains. They need to have clear and definite metrics, KPIs and an accountability system in place in order to accurately optimize and analyze the performance of their supply chains.
The context or organizational culture also plays a significant role in establishing an optimization criteria. The organization’s objective should be to have a dynamic, scalable, accountable, transparent and sustainable supply chain. However, factors like transportation and storage infrastructure, health and safety, security, enterprise environmental factors, regulations as well as language and cultural differences make things more complicated than they seem to be.
A holistic approach to the integration of strategy, sourcing and teamwork commonly produces creative and robust solutionsas explained by the following illustration.
In summary, the best approach to optimizing and continuously improving supply chain performance is a comprehensive model that accounts for contributions to enterprise success. Supply chain management is a critical part of enterprise performance but it quickly degrades due to fragmented, static and obsolete management techniques. Furthermore, users consider supply chains only in terms of their shortcomings.
Organizations need to realize the value of their capacity, the range of their future needs, the economic dynamics and cross opportunity of the supply and demand market. Only then they will be able to formulate a dynamic and sustainable supply management strategy which has the potential to earn profits.