Chain Reaction Podcast Supply Chain Strategies
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.
You can read more about this topic in Supply Chain Strategies by Tony Hines
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.
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