Supply chain management faces tough scrutiny
James P. Morgan -- Purchasing, 8/17/2004 2:00:00 AM
Like materials management strategies of an earlier day, supply chain strategies seem to be running into serious challenges of their own. What's more, many of the challenges appear to be coming from the strata of supply professionals who would seem to have the most to gain from the successful implementation of a supply chain management strategy.
Particularly galling to many purchasing/supply professionals is the fact that this questioning is not new. In fact, this questioning of the efficacy of supply chain strategies has been dogging purchasing, supply and sourcing managers almost from their initial introduction in the mid-1990s. In recent years, moreover, opposition to the use of supply chain management principles appears to have grown.
The latest occasion of supply chain backlash seems to have shown itself in a recent sampling of opinion by Purchasing magazine. In a survey, readers expressed serious reservations, disappointments, and downright annoyance with the application of supply chain strategies to procurement. Their objections loosely sort themselves out into seven broad categories (see table).
SCM's seven serious weaknesses
| Poor financial preparation |
| Value structures not working |
| Technology too slow in moving up |
| Slow movement of information |
| Lack of skilled help |
| Questionable research |
| Overall lack of speed |
Financial preparation
Topping survey participants' objections were a number of corporate financial objectives. According to many buyers polled, corporate financial objectives often get glossed over in setting up supply chain strategies. In fact, more than one quarter of all those surveyed claimed that they ran into serious supply chain implementation problems caused by poor financial preparation.
Often, suggests one buyer from a major appliance maker, this lack of solid preparation early in financial planning can lead to more difficult problems in later planning. Many procurement professionals also stress the need for tact and good person-to-person skills in dealing with the financial aspects of supply chain management. For instance, meeting corporate financial objectives may involve more than simply winning the approval of the very top corporate decision makers.
Another major financial preparation problem, says Tommy Jacks, senior procurement specialist at Albermarle Corp., Magnolia, Ark., is that "too many corporate executives make decisions for short-term gains." Every time they do that, warns Jacks, it comes at the expense of long-term stability.
Many of those trying to follow supply chain strategies say one area of malfunction is the value structures. As the director of purchasing at a Maine materials producer notes, "There are really very few value structures that actually work. Some of the value structures have been installed too early, many more too late. And in a surprising number of companies, purchasing/supply managers complain that while their firms talk a good game about strategic supply chain management, they often are only paying lip service to their "new" supply chain sourcing strategies.
As seen by Frans Barends, director of procurement for the M.A. Mortenson Co. of Minneapolis, supply chain management requires organizations to consider measurable integrated processes. But in many cases, he suggests, measurement and execution are only short term. Over time, he stresses, this concentration on short term undermines the general strategy. For the long term, he emphasizes the need to measure execution and look for short sightedness that might undermine the supply chain management (SCM) general strategy. "How deeply this is done, of course, varies by industry and company," says Barends.
Technology woes
One major source of friction in applying supply chain strategies involves the application of technologies. Survey participants, for instance, were adamant that most new technologies, products and services aren't coming into play fast enough. As a result, most of the competitive advantage of applying supply chain strategies are often lost in application. In general, survey participants feel that the introduction of new technology is too slow in moving out of the lab and that in many cases supply chain functions are not clearly defined.
There are not enough skilled workers in most organizations or available from other departments or companies to implement supply strategies developed by companies. That seems to be the near unanimous opinion of purchasing/supply managers.
Steve Daniels, director of demand management at Sears Roebuck, looks at it this way: Most companies, he feels, do not have enough proper skill sets and are much too focused on shipments for their own good. What's really needed, he feels, are skill sets that are more operational in all areas—and how to link these events.
Alexis Sommers, professor of industrial engineering at the University of New Haven in Connecticut, emphasizes that the help shortage problems cited by supply chain managers is more than a few skilled labor shortages scattered around the country. In especially short supply, he says, are graduates with advanced degrees.
Where's the research?
Many supply/purchasing/sourcing managers complain that too few of the supply chains they have experience with are organized around research. Much of what passes for new research, says the senior vice president at an Ohio automotive supplier, "is nothing more than ancient history—reprocessed."
Perhaps the most critical remarks in the survey center around what constitutes research and history. A substantial minority of participants feels there is a blurring of the lines between the two.
For many purchasing/supply executives, information (especially cross-functional information) is not arriving in its place in the value chain fast enough. Again, the net result is worry about loss of promised competitive advantage. Of the buyers questioned in this area, slightly less than 70% were disappointed with the speed at which needed cross-functional information reaches their desks. Many of those taking part in the survey were especially displeased with their firms' handling of cross-functional information and feel that information continues to get slowed down in the system
Speed of innovation is targeted in many companies as the major culprit in blunting the effectiveness of supply chain strategies in delivering improved competitiveness. For many of those purchasing professionals polled, supply chain management is too slow to be competitive.
And, while it is difficult to get purchasing/supply professionals to go on the record, it appears to be fairly clear that much of the current frustration is part of the learning curve. Applying supply chain thinking to established business is eminently difficult.
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