Supply Chain Management: A Wicked Problem?
I am often quizzed by my prospects and clients about supply chain management (SCM). Rather than rambling off facts, I start by asking them the question: “How do you define supply chain management?”
As one would imagine, the responses vary dramatically. One person might suggest it means “just in time” inventory management. One may suggest SCM demands that purchasing processes need to be highly tuned in order to take full advantage of supplier’s offers and bids. Another response from my clients might be SCM means maximizing inventory turns and throughput in the operation. These answers are all correct, but only to the extent that they are merely pieces to a much broader puzzle.
I’ll start by giving you my broad definition of SCM. Supply chain management is managing the entire process stream from when components and ingredients are captured from the earth to when these compounds are re-introduced into the environment. The trick is to optimize how far upstream and how far downstream you can reasonably influence, manage and optimize the process.
According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.
Dr. H. Christian Peterson wrote an insightful article titled Transformational Supply Chains and the “Wicked Problem” of Sustainability: Aligning Knowledge, Innovation, Entrepreneurship, and Leadership. He characterizes basic supply chain performance as having two fundamental dimensions. “One dimension is responsiveness – the ability to deliver product or service benefits of value to targeted final consumers. The other dimension is efficiency – the ability to deliver any given set of benefits at the best possible price or cost.” His paper explores “wicked problems.”
Dr. Peterson’s focuses on supply chain management becoming a “wicked problem” when other dimensions are considered, such as sustainability. Wicked problems can’t be solved, but must be managed due to the dynamic characteristics of these elusive dimensions. Note his use of “manage” rather than “solve.” You can find his article here.
Here’s my point: there are many dimensions of supply chain management that you can solve. These are not “wicked problems.” In my experience, many businesses think SCM is a “wicked problem” and do not invest the resources (money, time, or attention) to fully realize what is achievable. The tools are there: today’s ERP systems have the capabilities to solve controllable supply chain challenges. Contemporary approaches provide proven methods to embrace and optimize supply chain opportunities.
When you can do it better, faster or cheaper, you should be interested. When you can do it better and faster and cheaper, then it’s a home run: an obvious conclusion.
Here’s a great example. I was involved in a project with a well known manufacturer of laptops, desktops and server hardware. They recognized the obvious: by better collaborating with their suppliers in new product development and supply chain optimization, they could reduce costs and improve margins for themselves and their suppliers. They launched and implemented a rigorous product lifecycle management automation project using an extension of ERP software that they already owned. The results spoke for themselves:
- Improved speed to market by 13%
- Reduced cycle touch points by 8/10 of a cycle
- Virtually eliminated defects
- Reduced WIP and finished goods inventory by 7%
- Improved internal margins and margins of suppliers
- Project investment recaptured in 4 months
Faster, Better, Cheaper.
Are you missing the obvious? Do you drive your upstream supply chain effort into product life cycle management? Do you drive it downstream through your distribution and logistics operations? Is continuous improvement a way of life, or are you settling for a “good enough” state?
We’ll explore this topic further. My next blog posting will be feedback from an interview with a mid-size business supply chain executive. She has evaluated her company’s supply chain and has identified many “chunks” of process that can be optimized or “solved”. Let’s find out what they are doing!
Meanwhile, try reading an excellent article from Aberdeen Research about Sales and Operations Planning (the “guts” of supply chain management) by clicking here.