Skip to 0 minutes and 8 secondsWell, supply chains is a word, a phrase that's used quite widely now. But I mean, essentially, what we're really looking at is that sort of flow of activities from where it all begins. It could be in the ground. We dig up minerals, materials. We transform them into other things. We've assembled it into products. We distribute it through channels. We go out into the marketplace, maybe through retailers, dealers. It's a pretty elongated... well, it's not a chain. It's a network. If we were to try to map this, it would be pretty complex. And increasingly, of course, it's global. So our supply chain can extend literally from one end of the planet to the other.
Skip to 0 minutes and 53 secondsBut essentially, it's all those activities that are involved in bringing stuff to market. I think that's really the best way to think of supply chain management. Well, Boeing's a global company, a massive global company. And so the supply chain for us is vitally important. You're probably surprised to hear that actually in the modern airplane about 65% on average is outsourced to our suppliers. And they are all around the world. And an airplane is quite a complex piece of machinery. So in a typical plane there are two million parts, let's say. So 65% of that, well over a million parts in every airplane you're flying in.
Skip to 1 minute and 31 secondsBecause you've got that global supply chain, we are moving a billion pieces around the world all the time every year. So it's an extraordinary supply chain. Which is integral to the success of the company and of the airplane. They are vital. They're partners for this throughout the entire process. So let's look at what is supply chain. So before we start defining, I would first look at the output of the supply chain. We consume the output of supply chains, whether it's a car, whether that's a jacket which I'm wearing. So it's really, really interesting space, I think we are all consumers of the supply chain.
Skip to 2 minutes and 11 secondsAnd supply chain, to us, is the complete infrastructure that is involved in designing the product, and making the product or service, and then in delivering the product or service. So for example, all the innovation centres, the R&D centres, the manufacturing facilities, the suppliers that you partner with, the logistics service providers, your fleet, and then all your service centres. So that is a complete infrastructure. That is what is supply chain to us.
Perspectives of supply chain
What was the year when the UK chart hits included Come on Eileen (Dexy’s Midnight Runners with Emerald Express), Eye of the Tiger (Survivor) and Fame (Irene Cara)?
It was 1982, a year not just famous for its iconic chart hits but also as the year that the term supply chain was first used. Consultants from Booz Allen Hamilton, Oliver & Weber viewed the supply chain as:
‘…a single entity rather that relegating fragmented responsibility for various segments in the supply chain to functional areas such as purchasing, manufacturing, distribution and sales’
Since then academics, consultants and practitioners have all sought to define the supply chain. As the video illustrates there is commonality to the different definitions but they are also differences. A study we completed in 2013 compared the definitions used by academics (33 top articles) to practitioners (120 managers who worked in the supply chain).
The definitions tend to follow one of 3 perspectives:
- Network – organisation of customers (downstream) and suppliers (upstream) who are part of the supply chain; this also includes the suppliers of the raw materials needed for production and final consumer of the products and services
- Flow – movement of the materials, products and information between suppliers, manufacturers, logistics providers and customers
- Process – Articulation of the core processes involved in the supply chain – planning, purchasing, manufacturing and logistics. More recently this has included the reverse flow of materials at end of life.
But they don’t agree on the detail. As you can see the core terms that are used in the definitions vary.
Academics tend to use terms that they believe are closer to the reality of what a supply chain actually is. In reality it is not a linear chain and could be considered to be more of a network. More recently the term ecosystem has been adopted. Practitioners tend to be more practical. They favour the use of the word chain even though it is less of a literal representation
The confusion around terminology isn’t only limited to the synonyms to ‘chain’, alternatives have also been considered for the word ‘supply’. There is an argument that given that the chain starts with consumer demand, that the word demand chain is more appropriate. This was first proposed by Gordon Brace of WMG in 1989 who observed:
‘… the whole manufacturing and distribution process may be seen as a sequence of events with but one end in view: it exists to serve the ultimate consumer’
In 1985 Michael Porter introduced the term ‘value chain’ to represent a firm as a:
‘Collection of activities that are performed to design, market, deliver and support its product’
He was describing the process by which businesses receive raw materials, add value to the raw materials through various processes to create a finished product, and then sell that end product to customers.
It has been argued that this lack of consensual definition has hindered the adoption of supply chain thinking in practice.
- Does it matter that different words are used?
- Should we try and move to a common definition?
- What term would you use and why?
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