Supply Chains in Transition
This paper talks about supply chain management and how, increasingly in contemporary times it is gaining a lot of importance. It talks about the differences in management that have erupted recently in supply chain management. The paper starts off with a brief introduction to supply chain management, moving on to answering three separate issues in two modules of the paper each.
Introduction – Module One
Supply chain management refers to a field in management that is the management of storage of materials, space related decisions, inventory control and management and the transfer and delivery etc of raw- materials, work- in- process as well as finished goods. (Christopher, M., 2005) It has become evident today that maintaining large inventories can be costly and inefficient resulting in supply chains that are vulnerable, wasteful, costly, and lack responsiveness.
Compounding this issue are traditional hierarchical, linear systems that fail to recognize and adapt to the dynamic networked world of today. The paper examines the transformation that is taking place in supply chain design and its implications and limitations to both the military and to the private sector.
What is wrong with the `Iron Mountain` philosophy for supply chain management used by the military in the past?
Logistics, in the field of management in real has been existential in both the commercial, as well as the world of military. It was much later, rather that the study and practice entered the commercial zone, under the area of management of business functions’ logistics. ‘Iron Mountain’ refers to provision of strategic support to military resources. It is now said that this philosophy of ‘Iron Mountain’ was actually not fit for the military in the past. Logistics activities ran together and side by side with war and war related activities for hundreds of years.
There were basically two main things that deemed this once so - called ‘efficient’ way of handling logistics in the military as flawed. These were the two Hoover Commissions, and the Korean War, during the latter that, a lot of wasteful resources were found due to inefficiencies in handling resources that included obtaining and using military related resources and handling logistics, in general. Therefore, separate management styles and philosophies were invented and worked upon to make use of efficiency and get rid of inefficiencies in the previous Iron Mountain system. These philosophies are now called ‘reparables’ and consumables that introduce the ‘item manager concept’ now. (Russell, S., n.d.)
Therefore, basically owing to inefficiencies in the system related to wasted resources, ill planned and very poorly executed military logistics and delivery, was the system considered to be flawed and very inefficient.
Can a supply chain be too ‘lean’?
Lean manufacturing refers to an environment wherein things are functional in real-time and there is a lot of signaling activity that is used. This is however in a reverse order, since for instance if the finished good is sent off as delivery, it sends a signal to the dispatch department, which whereby sends a signal to the packaging department, which informs the finishing department, all the way back to the raw material storage and procurement side. Henceforth, there is a lot of efficiency that is involved.
When a supply chain program is involved in a company which for instance is involved in production of a good, sometimes it is said that the company or factory could suffer from a condition of being ‘too lean’. It is said that generally, things need to be adopt the middle way and a balance should always be worked around. Many a times, there are hence certain other systems in place that help a factory employ this type of a management style. This includes systems like Just in Time, Kaizen and Kanban (the pull and push system).
Companies often add those tools to their systems that help in up gradation of the supply chain management itself. It can be here said that yes, employing a push - pull production style could be more appropriate than only running one’s factory schedules and machinery keeping in mind supply forecasts and estimates etc. Keeping demand in mind could definitely be a fruitful option, henceforth. I believe, there is no such thing as being ‘too lean’, since there is no such thing as being too efficient also. If a system like lean production is employed and implemented effectively in one’s supply chain management and practice, then I believe it should result into efficiency and higher productivity in schedules and production batches, quality and least wastage of resources. (Bacheldor, B., 2004)
What does a `sense and respond` supply chain approach offer over more traditional approaches to supply chain management?
There are two words that are first of all used for a sense and respond supply chain approach. These are ‘predictive’ and ‘optimized’. There have been a lot many differences in the way businesses are being run today. When it comes to supply chain management, slowly by slowly many companies and factories are adopting the sense and respond supply chain management approach. Business transformations regarding areas like these are said to have better and more coordinated systems that help in making decisions and carrying out production related takes more ease and uses cost and time efficiently. (Huang, P.; Shubir Kapoor; Buckley, S., 2004)
A sense and respond system henceforth always seems lucrative to the overall efficiency and value addition to the processes involved in catering to the consumer or the end party. This is because it integrates multiple applications that give momentum to the systems involved, thereby monitoring takes place intelligently and operational performance remains high, quality wise. Also, it is said that ‘smart’ decision making is the core of a sense and respond supply chain management approach. This is because in sense and respond there are three stages – sensing, analyzing and decision making and then finally execution. (Huang, P.; Shubir Kapoor; Buckley, S., 2004)
The key advantages of using a sense and respond system over traditional supply chain methods include – better margins and margin percentages, increased manufacturing throughput, better ROA and ROI, lower inventories and therefore lower wastage, reduced costs related to supply chain and thereby more efficiency. (Lapide, L., n.d.)
A few of the limitations involved in shifting from a linear hierarchical supply chain configuration to a networked based supply chain include - the growing optimization technology market and reasons for its growth, the increasing importance of data and models, optimization technology issues, issues in usage of optimization, when to manufacture, how much, and how to ship or deliver the produced goods, which applications to use, and how to make optimal use of a production line.
Bacheldor, B. (2004) Never too Lean. Retrieved August 1rst, 2009, from InformationWeek, from http://www.informationweek.com/story/showArticle.jhtml?articleID=18901848
Huang, P.; Shubir Kapoor; Buckley, S. (2004) A sense-and-respond approach to business transformation. E-Commerce Technology for Dynamic E-Business. IEEE International Conference on Volume , Issue , 15-15 Sept. 2004 Page(s):337 – 340
Jongebloed, Kenneth (2007 Jul-Sep) Focused Logistics – Sense and Respond Logistics: A Transformative Autonomic Supply Chain Management System, Logistics Spectrum, Huntsville: Vol. 41, Iss. 3, pg. 21, 7 pgs.
Lapide, L. (n.d.) Supply chain planning optimization. Retrieved August 2nd, 2009, from http://www.e-optimization.com/resources/amr/9805scsreport/9805scsstory1.htm
Russell, S. (n.d.) Supply Chain management. Retrieved August 1rst, 2009, from Air Force Journal of Logistics, Volume XXXI, Number 2, from http://www.aflma.hq.af.mil/lgj/002_Russel_Article.pdf.