This episode is about digital transformation building supply chain capabilities which are underpinned by blockchain technology.
Tony Hines discusses howDigital Transformation has impacted every aspect of supply chains from sourcing, procurement, purchase contracts, supplier contracts, transport, distribution, information systems, payments, tracking and tracing goods through the supply chain creating visibility. Many parts of the system are automated using artificial intelligence and machine learning. Trust can be established in digital systems using Blockchain Technology across the distributed networks. Transformational strategies build capabilities to optimize end to end supply chains.
In this episode Tony Hines describes and explains what is meant by supply chain strategies which is the title of his book on the topic. Supply Chain Strategies demonstrates how organizations must take strategic decisions in order to manage their supply chains to sustain competitiveness in the global economy. Tony Hines defines what the supply chain strategies are, how they work and why firms invest in them as follows: “Supply chain strategies require a total systems view of the linkages in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer. As a consequence, costs must be lowered throughout the chain by driving out unnecessary costs and focusing attention on adding value. Throughput efficiency must be increased, bottlenecks removed and performance measurement must focus on total systems efficiency and equitable reward distribution to those in the supply chain adding value. The supply chain system must be responsive to customer requirements” ( p76).
Supply chains are service systems linking the customer with a network of suppliers who extract, source, design, manufacture, fabricate, co-operate and combine resources to bring customers what they want (Demand), when they want it (Timeliness), complete at a competitive price. Supply Chain Advantage is achieved by lowering cost and adding value to customers providing goods and services on time, complete and better than the competition. Supply networks must be both efficient and effective. Efficiency improves productivity, profit and saves the planets resources. Strategies are about choices which need to be ethical, sustainable as well as satisfy customer demand. Organizations become more profitable by being efficient. However, this alone is not sufficient and it is necessary to be effective of you want to raise income, be more profitable and earn higher returns for supply chain partners, shareholders and other stakeholders. Supply chain strategies learn from the past and improve the future position of the organization.
There has been much discussion about terminology in the literature. Should it be a chain or is it a network? A chain suggests there are interconnected links, which is appropriate. It may suggest a sequence of value creating processes, which is accurate. However, a chain may also imply pure linear relationships, which is less appropriate, and therefore networks might better describe how supply links are spatially related. There are also discussions in the literature related to whether or not a supply chain is a cost chain or value chain. In a normative sense supply chains should be ‘value chains’ but are sometimes in a descriptive sense ‘cost chains’. They only represent value when revenues exceed cost. Therefore, at a point when the customer pays for service, value is created and all activities up to this point incur cost. Mitigating against value are service- product complexity in design, excessive engineering, over specifying quality of inputs and outputs beyond the expected service level, wastage, inventory buffers, increasing warehousing space, lengthy production lead times, lost market opportunities or contract penalties for being late or incomplete, sourcing decisions, choice of markets to enter, distribution networks, and modes of delivery. Lean practices have emerged to address many of these issues. Lean focuses on efficiency but it is worth saying that lean organizations do usually combine such practices with responsiveness and agility to ensure customer focus. These are all strategic choices where potentially costs may exceed revenue making it a cost chain.
In this episode of Chain Reaction Tony Hines discusses sourcing strategies and examines reasons why they are critical for securing supply chain advantage.One of the most important considerations for any organization is where to source product and which…
Two of my 7V’s are volume and volatility. I have examined volume and volatility as part of my research into supply chain performance across a number of firms in different industries and in different geographical settings. I also worked on supply chain…
End to End Supply Chain AnalyticsEnd to end analytics is a term that describes a means of integrating data sources from different supply chain activities and process cycles to understand supply chain performance with the intention of developing…
What does it mean to be Market-Driven?In the industrial age it seemed that building capacity to manufacture at scale and developing capabilities to innovate and build better goods than a competitor would be enough. However, one little detail is…
Chain Reaction is the Supply Chain Advantage Podcast containing regular audio snippets relevant to supply chain professionals, researchers and students.
Over six days in March 2021 a real-world drama unfolded as the MV Ever Given was stranded in a narrow section of the Suez Canal just 6km in from the southern entrance. The disruption to supply chains in Europe with goods coming from Asia was estimated at around $10 billion dollars for each day the canal remained closed. The incident demonstrates the reliance placed on the Suez Canal and indeed other waterways that link continents. The gigantic container ships that sail continuously around the globe bringing essential as well as non-essential goods to businesses and consumers are a vital link between producer, supplier and customers.
Ever Given is one of the longest container ships in service with a gross weight of 220,000 tonnes and a dead weight around 200,000 tonnes, powered by a low speed two-stroke diesel engine. The fully laden draft of the ship is under 15 metres. It has an all Indian crew establishment of twenty-five. In addition to the crew there were two Egyptian Pilots helping guide the ship through the canal from the Suez Canal Company when it ran aground on Tuesday 23rd March 2021 in heavy 40 knot winds and a sandstorm. You can listen to my story about six days that closed the canal and disrupted global supply chains in this edition.
Eight tugs tried to dislodge the ship on Thursday 25th March but without success. The next attempt tried removed 30,000 cubic metres of sand and mud from underneath the grounded ship. On Sunday 28th March with fourteen tugs and dredging taking place a small amount of water was said to be moving under the ship. Consideration was being given to removing some or all of the containers to lighten the load but this is no easy task and there is no handling equipment nearby to achieve that. On Monday 29th the ship was finally freed from its lodged position across the narrow stretch and it was moved to the Great Lake Area of the Suez Canal where at the time of writing it remains undergoing inspection. On Tuesday 30th March ships stuck in the canal began to get underway to their own destinations after a long delay. The repercussions from the disruptive event are likely to last weeks if not months. It is likely ships will be delayed entering the destination port with delays likely to cause congestion. There is also the knock on effect of delays for goods stacking up at Asian ports for future deliveries and a shortage of containers given they will be delayed on their return journeys. Freight costs may well increase adding to prices paid by customers.
President Biden issued a policy statement which put supply chain resilience at the heart of the US Economy. An extract from the policy statement states:
“The United States needs resilient, diverse, and secure supply chains to ensure our economic prosperity and national security. Pandemics and other biological threats, cyber-attacks, climate shocks and extreme weather events, terrorist attacks, geopolitical and economic competition, and other conditions can reduce critical manufacturing capacity and the availability and integrity of critical goods, products, and services. Resilient American supply chains will revitalize and rebuild domestic manufacturing capacity, maintain America’s competitive edge in research and development, and create well-paying jobs. They will also support small businesses, promote prosperity, advance the fight against climate change, and encourage economic growth in communities of color and economically distressed areas.”
So this made me think more about what all organizations can do to make their own supply chains resilient when faced with external threats, disruptions and volatility within their own supply chains. In this episode I discuss some key ideas about supply chain risk and how supply chains can become resilient. Identifying vulnerabilities and assessing the risk is the first step to designing resilient supply chain strategies.
