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Are Multiple Supply Chains Important (Survey Response 7)

Written by: Jon Hansen

Article Overview: A 2006 Report made the following statement: "Designing and operating multiple supply networks to meet the needs of specific market segments--supply chain innovation and the use of multiple supply chains will be important to future revenue and market share growth." Based on your own experience is this an accurate assessment? If yes, why? If no, why?

Are Multiple Supply Chains Important (Survey Response 7)

Srivathsa, Managing Partner Consulting Firm, Bangalore, India

In many cases this is a reality. Many of us manage multiple supply chains without probably realizing it.

One of the questions that we used to ask business managers was - do you want your supply chain to be (a) cost effective (b) responsive (c) support innovation. Their response would be - all three. We would say - not possible - you have to prioritize.

But over discussions we would find certain market segments wanting cheap reliable products - nothing fancy and we would design the supply chain to deliver the lowest cost product starting from product and package design. Other segments in other countries would want innovation. The supply chain design would be geared to that. Similarly for responsiveness.

Engaging with the business team will help uncover this. In some cases it might not be possible to redesign the supply chain immediately. But it is important to know the gaps so that they could be covered in a future redesign.

My Response:

What is interesting is that this "assessment" appeared in a report that was written by the Institute of Supply Management (ISM), CAPS and AT Kearney last year. Much like the other commenters, I shared similar reservations that were outlined in part 3 of of my 7 part series Dangerous Supply Chain Myths. The report's title by the way was Succeeding in a Dynamic World: Supply Management in the Decade Ahead.

My reasoning however was tied to the fact that while the concept of Multiple Supply Chains has some merit, with 85% of all initiatives failing to achieve the expected results to date, most organizations have not been able to progress past the walk (re success within existing environments) before you can run stage. In essence, what is conceptually viable is not necessarily practical in real-world circumstances. At least not to the point where you can offer an absolute such as the one presented in the report.

That said and given your application of the strategy what are yout thoughts regarding an MIT report from June 2001 which stated that the idea of belonging to multiple supply networks complicates and duplicates the targeted efforts by each participant. A shared supplier competing as part of two separate supply networks creates potential conflict of interest among the participants.

Thank you once again for your time and perspective.

Srivathsa Closing Comment:

I could not get into specifics in my public reply. But many global companies do operate in different categories each being fairly different in terms of supply chain characteristics. Beauty Care's requirements are very different from Baby Care and from Fabric Care. The operating strategies would be very different depending on whether the business unit was more global or more regional. We used a process called Strategic Engagement when setting out to design supply networks to understand the business needs from the network.

I see a supply chain not just as a structure of suppliers,plants and DCs but also in terms of processes, operating strategies (long term choices) and organization and hence my answer. I also talk from the perspective of a global company.

Within a country like India or China the distribution channels are varied. The US and Western Europe have a mostly modern retail channel. Here we have a high frequency store channel that needs to be served very differently. It would require s different supply chain

One would have to discount some of these reports as they are written not in the most balanced manner.

I will go through your report in a few days time and let you know what I think.

On the MIT report itself it's hard to counter a generic comment which certainly is true to some extent. There are organizational ways to manage this. E.g. our purchasing was organized along spend pools rather than with individual business units. That ensured that the supplier spoke to only one person/group within the company. It also gave P&G a lot of leverage and built expertise in that industry. E.g. laminates were used in a number of categories - and there was a flexible packaging spend pool for the company. The group of persons managing this were experts in the laminate industry. Likewise for non-wovens and rigid packaging and a host of others. Transportation and physical distribution were spend pools again and managed centrally. I don't know if this shed a lot of light, but I have seen this work quite well.

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Article Tags: business managers, business team, c support, caps, commenters, consulting firm, dynamic world, environments, gaps, institute of supply management, ism, market segments, myths, nothing fancy, real world, reliable products, responsiveness, supply chain design, supply chains, support innovation



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