Supply Chain on the desks of corporate management
In the October issue of the Harvard Business Review, Supply Chain Management is given a uniquely large amount of space. The subject area is discussed in detail on a total of seventeen pages in that venerable publication.
The fact that SCM is given so much attention in a publication that is aimed at the top managers in companies and organizations is proof that the operative “flow issues” have now been established as an obviously prioritized area for top management.
The articles in HBR take up subjects such as global sourcing, comprehensive views on provision of goods as well as the climate issue and social issues that are connected to the supply chain. It is interesting to note that the supply chain issues in all the articles in HBR are primarily connected to the question of sustainability and innovation. This is most likely because sustainability and through that, supply chain, have become brand issues and therefore a fundamental issue for a company’s credibility and its competitiveness.
“Don’t mess with the supply chain”
In a longer article by SCM guru, Hau Lee, professor at Stanford,
A detailed presentation is given of how today’s increasingly longer, more global and complex supply chains place demands on even more comprehensive views than ever before. A small, seemingly reasonable action, which isolated, provides increased sustainability, often leads to higher financial, environmental and social costs.
Lee uses companies that replace a supplier, change the transport method or replace one manufacturing material with another as examples. In brief; “don’t mess with the supply chain”… The fundamental conclusion is that lasting changes to the supply chain must be made in a fundamental way and comprise broad structures: everything from developing a totally new production process to cooperating with competitors, and through that, creating significant change.
Many times, a challenge in the supply chain is too large for one company to manage on its own. In these cases, cooperation is the right path to take. One example is when a retail sales company located in a city coordinates its deliveries to benefit the environment, accessibility and finances. Another example is when competitors in an industry decide to cooperate in regard to joint systems for transports or for the handling of return logistics. When several supply chains use the same materials and resources or are facing the same threats, cooperation is often the right way to go.
“The extended supply chain”
The resolute sustainability work shall initially be focused on the company’s own operation and the direct suppliers and customers. ”In the second step,” says Hau Lee, “the focus shall be expanded and also include the suppliers’ suppliers and the customers’ customers.”
Hau Lee concludes by saying that the right way to manage the sustainability issue is to see it as an integrated part of an operation’s operative processes. In that way, sustainability can be found on the radar together with questions that concern inventory, lead times, quality, materials, production and logistics. Lee points out that Nike is a company that has understood this and therefore has made its supply chain managers responsible for sustainability issues – not some separate unit at the company headquarters.
The sustainable supply chain
In the same issue of HBR, management thinker, Peter Senge, is interviewed about “The Sustainable Supply Chain”. Senge is otherwise most known for his books regarding learning organizations (including the best-seller “The Fifth Discipline” and later “The Necessary Revolution”). In the interview, Senge searches for increased systematic thinking in companies; an awareness that a company, operation, or organization is a part of a larger system. He believes that more innovative leaders are needed that have the ability to see comprehensively, redesign processes and business models, and who basically understand their own business situation.
The challenge is to understand the larger whole, the system that the company is part of and start to cooperate with people that you do not normally work with. A holistic thought process, systematic thinking, is conditional on many people cooperating – both externally and internally with people outside your own company.
The same applies for cooperation in supply chain. Senge believes that 90 percent of all relations in supply chain are still transaction-based. All companies are putting pressure on their suppliers to reduce costs. In the opinion of Peter Senge there is too little trust and joint innovation, and he is looking for leaders who dare to cooperate, improve and develop together with other companies in their supply chain. He thinks that this is the way to create truly efficient and sustainable supply chains.
“Innovation is what good businesses do best. They’re all about creating new sources of value,” says Peter Senge.
BY: STEFAN KARLÖF & KJELL RUNDQVIST
