Supply Chain Management in the 21st Century

Supply chain management (SCM) is not a new system, it started out as field logistics in the military all the way back to ancient Macedonia, most probably before that too in Egypt and Mesopotamia. However, it was always known as Logistics, which is the science of assuring the constant flow of materials. The importance of logistics is evident in many wars, perhaps the two most important examples are of a similar nature, Napoleon’s march to Russia that died out in the famous Russian winter, and could not be maintained due to a lack of resources due to a lack of logistical foresight, and again in WWII when Hitler decided against his Generals wishes to push forward the attack on Moscow since he wanted to open a direct route to their oil reserves. This too met with the Russian winter and the bad logistical infrastructure that left the German soldiers without resources to survive.
In the early 20th Century, Henry Ford started the world’s first mass production system and in doing so implemented the world’s first waste reduction and production fluidity process, which was the forerunner of modern industrial and production engineering. After his success, production personnel around the globe started to seek ways to improve the fluidity of the production process and in doing so started to develop methods for managing inventory, factory layout, downtime management and maintenance models. Japan joined the USA and UK to became a fore-runner in this through their automotive industry. Modern methodologies such as JIT (Just in Time), TQM (Total Quality Management), Lean, Agile and Six Sigma are the more well known systems, these are supported by knowledge management software such as ERP (Enterprise Resource Planning) and MRP (Materials Requirements Planning) and are further backed up by TOC (Theory of Constraints), ATV (Available to promise) and RBV (Resource based View), although there are many more models and sub-modalities found in decision making systems.
So when we start to review the role of the Supply Chain Manager in 21st Century systems, we are faced with an intriguing evolution or development of the Supply Chain Role as perceived by different sectors of industry and commerce.
There are two basic sectors; Manufacturing and Service; for instance, a Bank is a service provider the same as an Insurance company and a financial trading office, Logistics centers, couriers and supermarkets are service providers. Whilst a car manufacturer or a car parts producer, food processing companies, farms and pharmaceuticals, medical devices manufacturers and building contractors are in the manufacturing sector. Hospitals are a hybrid of both, they perform surgical procedures that are similar to manufacturing processes whilst they offer hospitality and laboratory diagnostic services. So too are software developers, which will be explained now.
What is the difference between the two sectors; Manufacturing is usually a man or machine based process that takes a material or resource and changes it into a product whilst a service provider offers to perform certain tasks to provide a “service”. The hybrid’s use both materials and a resource and “manufacture” a new product or resource. For instance; Software companies take code platforms and write new software applications (Manufacturing), whilst a trader uses a platform to increase investors’ money (Service), a restaurant will take natural ingredients and create culinary delights(Hybrid).
These two main categories are then broken down into subgroups, such as retail, construction, healthcare, financial sector, manufacturing etc., and these are broken down yet further into different units of commerce and manufacturing such as an insurance company, a stock broker, a barber, a clothes store, a hotel, a casino, an aerospace manufacturer, a spare part for heaters producer, a condiments manufacturer, a restaurant and a hospital.
Now you might ask, what has all this got to do with supply chain? The answer is “Everything”.
Supply chain methodology is a hybrid of manufacturing, procurement, logistics and inventory management. It is an umbrella process that comes to oversee the entire flow of resources and finished products services and flow of assets that encompasses the entire corporate structure. Modern Supply chain takes into account every sector of the company’s process, starting from the end (the sales forecast of the final product) the supply chain then builds up a model for assuring a fluid, efficient, waste free and economically viable process to maximize profits by reducing operational costs.
This means that a company seeking to truly reduce its overheads will either restructure their organization or add an SCM position at a level of VP, or directly under the CEO. Why is this so important, because an SCM that is effective will make changes in every department and as such will need the full co-operation of every departmental head. This is a major issue in companies that don’t employ SCM’s and since most departmental heads will feel invaded by this new comer, they will try to defend their territory through every possible means, the first being; “change is bad” and “SCM doesn’t know what we are doing” which is a big no-no.
This brings us to what is an SCM, or what should an SCM be. An SCM first and foremost should be a visionary, a person that sees how the future should look. They must be able to envision improvement through change, utilizing every model and theory available. A truly great SCM will know more than three or four models, and will have actually worked hands on in the sector they are a working in. For instance, an SCM in finance (services) will use different tools than an SCM in hospitality or in Manufacturing. A Hybrid SCM (Hospitals, restaurants) will use many different models for building a matrix process. Whilst the common concept was that base of the SCM is either industrial engineering, Logistics or supply chain engineering, it is important to understand the vast difference in the sectors and be able to develop different models for dealing with each system.
To conclude, a truly magnificent SCM will develop his/her own tools, creating new models specifically designed to attack any issue within their specific organization and share these developments with the rest of the world. Evolution of science comes from academic collaboration and we can only continue to advance through cross the board collaboration. It is important that an SCM be a visionary diplomat, a strategic commander, a versatile teacher and a hard laborer.
• A visionary diplomat to be able to envision change and successfully persuade others to accept it.
• A strategic commander to be able to coordinate and control to integrate change into every unit of the organization.
• A versatile teacher to be able to educate every employee on how to understand and utilize the new system for the benefit of all.
• A hard laborer to be able to show hands on understanding and a high work ethic for others to appreciate and admire.
Combining the different levels of inter-organizational communications and understanding that the flow of work is dependent on the human interface is key to success. Different cultures, different approaches, different methods of understanding all combine and mix together in every workspace. It is all part of Supply Chain factoring and creating a cohesive methodology for success.