Supply Chain Management For Dummies. Daniel Stanton

T. Mentzer (Harvard Business Review Press, 2010). It’s a business book — the kind that you’d find in an airport bookstore — that breaks down the challenge of supply chain management in a way that focuses on senior executives. The authors talk about working capital and liquidity, strategy, and alignment, and they lay out a five-step system for making a company better at supply chain management. The five steps of the New Supply Chain Agenda are shown in Figure 1-4.

      FIGURE 1-4: The New Supply Chain Agenda.

      Placing the right people in the right jobs

      Implementing supply chain management requires understanding how your job affects other people inside your company, as well as the people up and down the supply chain. If people don’t understand the true effect of the jobs that they do, they need to learn so that they can do their jobs better. If someone is unable to learn or doesn’t want to learn, he or she isn’t the right person for that job. Getting the right people in the right jobs is the first step in implementing an effective supply chain strategy.

      Putting the right technology in place

      Supply chains depend on technology. The technology may be something simple, such as a whiteboard with sticky notes that gets updated daily, or it may be something as complicated as an enterprise resource planning system. Each business, and each function within each business, has different technology needs. Figuring out how technology can enable your supply chain to create and capture value and then implementing the right technologies at the right time is the second step in the New Supply Chain Agenda.

      Focusing on internal collaboration

      When you look at a company’s organization chart, it’s easy to see how traditional business structures create silos within a company, with divisions competing for limited resources and often working toward conflicting goals. Managing from a supply chain perspective helps you break down the silos that keep people from collaborating effectively. By changing the focus from the performance of the separate groups to the performance of the company’s supply chain as a whole, each division becomes more dependent on the others for its own success. Sales teams need to collaborate with operations teams. Logistics teams need to collaborate with procurement teams. Everyone needs to understand the company’s strategy and work toward common goals.

      Directing external collaboration

      Traditional business relationships are transactional and often self-centered. Buyers and suppliers approach each deal as a win-lose game: The suppliers are trying to inflate their profits, and the buyers are trying to squeeze them on price. Over the long run, this approach can damage both parties because it destroys value rather than creates it. To build sustainable supply chain relationships, each partner needs to look for opportunities to contribute more value. The goal is for each to identify ways to share value, maximize total value, and be successful over the long term. This approach is very different from a transactional approach, in which each party is trying to squeeze every penny from each deal even if it means causing harm in the long run.

      Applying project management

      Supply chains are dynamic. Companies respond to changes with projects, so the last step in the New Supply Chain Agenda is implementing strong project management capabilities. Teaching people how to manage projects well and having professional project managers involved are the keys to ensuring that your supply chain evolves as your customers, suppliers, and company change.

      

I provide a whole section about leading supply chain projects in Chapter 4.

Chapter 2

      Understanding Supply Chains from Different Perspectives

      IN THIS CHAPTER

      

Looking at the three flows in every supply chain

      

Aligning key supply chain functions and groups

      

Designing and monitoring supply chain performance

      There are several ways to analyze what’s happening in a supply chain. Each of these perspectives can help you understand how your supply chain really works and reveal opportunities for improvement. Because there are so many ways to look at the same issue, supply chain managers can encounter confusion and miscommunication about which options are the best. In this chapter, you see several of these approaches and examples that illustrate how useful they can be for managing your own supply chain.

Managing Supply Chain Flows

One great way to explain a supply chain is to think of it as three rivers that flow from a customer all the way back to the source of raw materials. These rivers, or flows, are materials, money, and information, as shown in Figure 2-1. Materials flow downstream in the supply chain, starting with raw materials and flowing through value-added steps until a product finally ends up in the hands of a customer. Money flows upstream from the customer through all the supply chain partners that provide goods and services along the way. Information flows both upstream and downstream as customers place orders and suppliers provide information about the products and when they will be delivered.

      FIGURE 2-1: Three supply chain flows.

      Managing a supply chain effectively involves synchronizing these three flows. You have to determine, for example, how long you can wait between the time when you send a physical product to your customer and when the customer pays you for the product. You also have to determine what information needs to be sent each way — and when — to keep the supply chain working the way you want it to.

      

Every dollar that flows into a supply chain comes from a customer and then moves upstream. The companies in the supply chain have to work together to capture that dollar, but they’re also competing to see how much of that dollar they get to keep as their own profit.

Synchronizing Supply Chain Functions

Supply chain management can also be described as integrating three of the functions inside an organization: purchasing, logistics, and operations. Each function is critical in any company, and each has its own metrics. Because these functions are interdependent (see Figure 2-2), making good decisions in any of these areas requires coordination with the other two.

      

The purchasing, logistics, and operations teams often have conflicting goals —often without realizing it. Managing these functions independently leads