Skip to 0 minutes and 14 seconds Supply chains in practice are important to us because they get us the things we need at the right quality, at the right time, in the right place, and hopefully at the right cost. So let’s take a simple example, a box of cornflakes. The breakfast cereal needs to be made or manufactured. In order to make the cereal the manufacturer has to buy the components. They need to buy the corn, they need to buy the plastic to make the wrapper, and they need to buy cardboard to make the box. Those components come from raw materials.
Skip to 0 minutes and 48 seconds We need to grow the corn and refine it, grow trees to create pulp for the paper, and we need to extract the oil out of the ground to make the plastic. Once we’ve made the products we still need to get the product to somewhere where we can buy it we do that through a range of different distribution routes through a series of warehouses and different transportation modes. In this day and age the end seller can either be a physical shop or an online reseller. Once we’ve eaten our cereal we’re still left with the box and the wrapper at the end of its life. As more responsible consumers we now look to recycle those end materials.
Skip to 1 minute and 27 seconds But a complex network of making things, of buying things, growing and extracting things, and moving things doesn’t happen by chance. It needs to be coordinated or orchestrated, and that’s the role of the supply chain planning function. So the simple example of the box of cereal shows us how the supply chain works in practice. It brings to life the core supply chain processes of planning, purchasing and procurements, manufacturing, logistics, and the all important return or recycling process. Together these processes are how things get to you.
How things get to you: Defining the scope of the supply chain
Have you ever stopped to think about how the products and services you use every day actually get to you? What goes on behind the scenes? What processes are involved?
The definition of value chain by Michael Porter adopted a process orientated perspective. He identified the core value chain activities of inbound logistics, operations, outbound logistics, marketing and sales, and service. Furthermore, he classified procurement, technology development, human resource management and firm infrastructure as support activities. Whatever terminology you favour the idea that a set of interconnecting processes are involved in getting a product from a concept into the hands of the consumer or end user is fundamental.
The Supply Chain Council (SCC) was formed in 1996 as an independent not for profits organisation to create an industry standard for supply chain management. They originally defined the standard around five core supply chain processes – Plan, Source, Make, Deliver and Return which form the backbone of the Supply Chain Operations Reference (SCOR) model. In April 2014 it merged with APICS.
The video you have watched shows how the SCOR model applies to the supply chain for cornflakes. It looks at the processes from the perspective of the central firm, the manufacturer of the cornflakes.
One of the complexities of the supply chain, is that it is a series of repeating links. A supplier from the perspective of one company is the customer from the opposite perspective. This adds to the complexity of trying to manage the supply chain. As you can see the often overlooked planning processes is over-arching in its nature, and can be considered at the ‘glue’ that holds the supply chain together.
We have used this industry standard as a way of structuring the course.
- Week 2 – PLAN or Planning
- Week 3 – SOURCE or BUY or Purchasing and Procurement
- Week 4 – MAKE or Manufacturing
- Week 5 – DELIVER or MOVE or Logistics
- Week 6 – RETURN or Closing the Loop
The nature of my work has meant that I have adopted this broader view of the scope of the supply chain, and try to consider the conversion of demand to supply across at least 5 levels (or echelons) in the supply chain as depicted by the SCOR model. For cornflakes I would study the retailer, logistics provision to the retailer, manufacturer of the cornflakes, logistics provision to the manufacturer and component supplier. Time permitting, I would also study the provision of the raw materials to the component supplier. This is not the way that everyone conceives the scope of the supply chain. It is difficult to start a career in supply chain you are more likely to start in one of the underpinning processes. This could affect your mindset. The two most common mindsets are:
- Supply chain = Logistics (how many trucks have you seen with supply chain solutions on the side?)
- Supply chain = Procurement & Purchasing (this equates supply chain to supplier management)
Once again you could ask does this matter? I would argue that it does as it limits the potential for integration and improvement to one aspect of the supply chain rather than taking an end to end perspective and improving the whole.
It is one of the reasons I was inspired to contribute to an All-Parliamentary Party Manufacturing Group term paper (Britain at the Heart of Global Manufacturing) to try and get the UK Government to take a broader perspective on supply chains.
- What do you think of the scope of the supply chain should be?
- Are there benefits of limiting its focus to one process?
- Should we be taking a broader end to end perspective?
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