Week 1 summary

STEVEN DAY: Welcome dear learners, to the first week in the Supply Chains in Practice course. My name is Steven Day. I’m your mentor for this week, and I’m here with Professor Janet Godsell, the lead educator. We are doing this round-up video to discuss some of the comments that you’ve made and to go a little bit beyond the discussion. So this week had three large content blocks, which were about defining the supply chain, importance of supply chains for society and business, and this is supply chain and society. So Jan, how are you?

PROFESSOR JAN GODSELL: I’m very well, thank you. And Steven, just to say, I think you’ve done a great job helping to facilitate this week, so thank you very much.

STEVEN DAY: Thank you. OK, so coming to the first point about defining supply chains. We have seen some definitions that are more focused on processes and how their supply chain works– so they emphasise the complexity– and then some simpler definitions by our learners about what a supply chain does. So for instance, simply delivering raw materials into a factory, which then produce a product and delivering this to the consumer. Do you have any thoughts on that?

PROFESSOR JAN GODSELL: Yeah, I was actually really impressed by the breadth of definitions that we got this week. I think, as you say, this idea that it’s a process, that’s quite a common theme that ran across the comments that we had. And many learners then touched upon this complexity. And I think the complexity began to link into whether or not it was a chain, or a network, or an ecosystem. There was one very, very honest learner who commented, that, sort of, pre-MOOC, or pre- online course, they were considering that really just manufacturing, and that this had really helped them to look beyond manufacturing.

And I think that was a fairly common view, because most definitions actually talked about supply chain getting something from the raw materials out the ground to the end consumer. Though, I do wonder– I would challenge, in a way, should we be thinking about supply chain as starting with the consumer and consumer demands, and then that driving that whole chain of events that leads to materials coming out of the ground? Because of course, if we don’t need things, then we don’t actually need to put that chain in motion or create that chain reaction.

It was also a quite interesting debate, which I think you actually contributed to, which was about this idea that thinking about the supply chain in terms of a chain that, within each step, value’s added. So each stage in the chain that you move on, each step adds some value, which I quite like the notion of. It would be interesting to actually think about, do we really add value at every step? And if we don’t add value at every step, does that mean we shouldn’t really have that step in the chain? And then there was a really quite philosophical question that was posed by one learner, which was around, do supply chains have to be linked to profitable growth?

And that really got me thinking, actually, because when I did my teaching, and one of the things I teach is about strategic alignment and this balance between the way that we define customer value and the customer value proposition and the way that we deliver it in the supply chain. And that fundamentally, if you are a stock market listed company, what’s your raison d’etre as defined by this meeting stock market requirements is that you are aiming for profitable growth. Of course, not all companies are listed on the stock markets, and therefore, supply chains are really, really important for a range of different activities.

The last couple of months, we’ve seen some really quite severe natural disasters, be that hurricanes, be that earthquakes. And actually what they require is a very different type of supply chain. They require what’s commonly referred to as response, through a humanitarian logistics supply chain. And those types of supply chains are very, very different. They require quite a degree of preplanning and making sure that we have things in the right place so that we can deploy them very, very quickly should an adverse effect happen. Now of course, their motivation is about responsiveness, it’s about life saving. It’s not about profitable growth.

However, even those supply chains are trying to be as efficient as possible to make sure that the monies that they have can go as far as possible helping the people in distress. And we touch upon it a little bit in week two, as it’s one of our planning activities. There’s another thing that I would encourage all learners to do.

So there’s been a recent article on the BBC website, actually, about the reverse supply chain, which was another important theme from this week. And it actually talked about the reverse supply chain. What do you do with all the waste that’s being produced after these adverse natural effects, and the different ways that countries can respond to dealing with that waste, and how that can either have a positive or negative effect on the economy. So another example that’s not about profitable growth, but actually pulling in that more reverse supply chain trend, and how that is actually equally important in these disaster recovery phases.

But Steven, I’ve actually got question for you, because I know that one of your areas of interest is looking at this shift toward servitisation. And I noticed that a learner got into the debate about, all our examples of supply chains seem to be a bit product-centric. What about service supply chains?

STEVEN DAY: Yeah well, the first comment I want to make in regards to that, is that actually most manufacturing companies do offer some kind of services as part of their product. So for instance, if you buy a car, the company you buy the car from, the OEM, might offer you some services in regards to maintenance and repair. And this drive came from the 1970s, 1980s, where a western manufacturer tried to differentiate their product from competition that could offer the same physical product cheaper. So this is a kind of strategy to differentiate your product. Because services are more difficult to imitate usually than physical goods. Services can’t be stored.

So if I want to get a haircut, and I walk into a hairdresser, they can’t take one haircut off the shelf and give it to me. Instead, the service is intangible. It has to be co-created between the hairdresser and me. So in a service supply chain, theoretically, nothing moves. The most important resource that moves across the supply chain is knowledge about how the services are to be created. That being said, still the same applies as to manufacturing companies. Most manufacturing companies offer some services. And probably all service supply chains need some kind of physical product, as well. So even if you take something like a consultancy, who sell a service, they would still need an office.

They would still need IT infrastructure to facilitate this exchange of information about how their consultancy services are to be delivered to the customer. And the other thing is, even if you have this infrastructure already in place, one of the differences between manufacturing supply chains and service supply chains, is that you, as a company, are incredibly dependant on your customer-facing personnel to actually deliver the service. So you need to have the resources in place for the provider, so the operational employee, to actually recognise what the customer wants from you. And that’s very different. Because usually, in a manufacturing case, the customer comes to you, he already has an idea about your product, usually.

He knows what he wants, and then you negotiate this. And a service supply chain is different. You need to be more effective. Yes, I think these are some of the differences. The key thing here being that services are intangible and cannot be stored like in a regular supply chain.

PROFESSOR JAN GODSELL: I think that’s a great observation.

STEVEN DAY: And then, one other thing is, if you have services supply chains, for instance in medicine, where services are given by a doctor, these type of supply chains, they’re often very closely intertwined with a corresponding normal, or physical, supply chain. So if you have medicine, on the other side you have pharmaceuticals, and these two supply chains, they’re not integrated, but they depend on other very much to work.

PROFESSOR JAN GODSELL: I think that comes back to some of the complexities that our learners were talking about.

STEVEN DAY: Yes.

Then we can move on. One of the things we could also try to talk about, coming back to the definitions, is the difference between supply chains and supply networks. And then later on, actually, one learner referred to supply webs in reference to the art installation that we have in one of our blocks. Which one of those terms would you favour, personally?

PROFESSOR JAN GODSELL: So this is a really interesting question. And I really liked following the debate online this week. I’ve been fascinated by the words that we use to describe supply chains for over 10 years. And when I first started out in academia, I was absolutely determined to try and find a common definition that I could apply to my research project. I think, personally, one of the things I recognised over time, is that I don’t think it actually matters what words we use, as long as– I think this was picked up– I actually teased some learners to comment on this– as long as there is a common understanding within a firm.

So I think, in an ideal world, we’d have a common view on what a supply chain was. I think it’s quite interesting that industry sometimes favours just using the word supply chain, even though it’s not a literal representation of what they actually are, just because it’s taken so long to get to the stage that they understand what that word is. Whereas of course, the word web or ecosystem may actually be more accurate representation, literally, of what it is. We’ve done some research that shows that academics prefer the more literal representation. So perhaps, we could argue the more philosophical or thoughtful are, the more you think a word should be a literal representation.

And the more practical people just want a word that industry can understand so it can get on and do some doing. I don’t have any particularly strong views, except to say that if you want to bring about a change programme around supply chain within an individual firm, then you need a common understanding. And I also think, at a government level, if you’re trying to make supply chain part of your industrial strategy, than the government probably needs to have it a very clear view about what they think that means.

STEVEN DAY: Yeah, I can see the advantage of both in the end. Because supply chain is a more established term to most people. But then, OK, if you have one common understanding within the firm, and you look at this firm’s supply chain, you look at the customer and the supplier, what if they have different understandings?

PROFESSOR JAN GODSELL: This comes back to the practical side of trying to implement supply chain change. And what our own research has found is, that most companies need to– if you were to try to bring about change end to end, it’s just too big. So many organisations have to sort themselves out first. So that’s probably why I’d say, start with a definition that you can rally your own company around, and get some full supply chain integration within your own company, and then you look beyond that. But of course, it would always be driven by the demands of your customers, hopefully.

STEVEN DAY: Yeah, OK. Then, once you have this definition, what about the scope of the supply chain? How far can you actually look beyond your own organisation?

PROFESSOR JAN GODSELL: And again, it was really interesting looking at the learners’ comments. I think just about everyone talked about this end-to-end nature, which was absolutely fantastic. But more encouragingly, and actually perhaps we have been enlightened on our online course, was the number of people that actually talked about the link to the return process, or the circular economy. And this is definitely a more recent trend, something that we’re only seeing, I’d say, with any form of vigour, in the last couple of years.

And this is the third edition of this MOOC, and it’s the first time, I think, we’ve actually seen learners really picking up on it from the beginning, which I think is a really, really positive sign that we may be on the cusp of a change.

STEVEN DAY: Yeah, previously, we had more understandings of pushing product to the consumer, and then it’s basically out of sight. And now we have more comments about, actually, we need to bring that back. We need to get the value out of these products. We need to recycle this, not only for our business to drive profits, but also for the more ethical considerations about social and environmental values. Yeah, coming back to that, ensuring a fair return to all. Ensuring profitability, but also social and environment considerations, do you have something to add to that, in general?

PROFESSOR JAN GODSELL: So thinking about supply chain in society, I actually think, again, that there was a theme that ran, not just through that particular block, but actually throughout the entire discussion this week. And again, I was very heartened to see that there seems to be increasing awareness of the ethical considerations across the supply chains, that we are perhaps beginning to recognise that we need to have a better balance between the economic, the environmental, and the social. Now, it’s quite interesting, from a technology perspective, in week four, you’ll see that we have a block on the future of manufacturing and it talks about a trend called industry 4.0, or the fourth Industrial Revolution.

And essentially, that’s almost saying that the first Industrial Revolution was driven by water, then the second electricity, the third by computers. And now, connectivity is going to enable us to do great, new things. I’d actually say, take a step back. To me, this new age of our industrial age is perhaps one that may start to challenge the current flavour of capitalism, really, and this idea that we are going to drive profitable growth through greater and greater consumption. Our comments began to show that consumers are beginning to recognise that we need to get this balance better, and I think that’s very heartening.

I think this, and so for me, the next age of our, perhaps, Industrial Revolution is about getting this balance better. This linked into another discussion, which I think was quite interesting, which was about the role of individual countries in global supply chains. And I suppose, there’s two perspectives here. There’s both the country perspective and the company perspective. So at a country level, we live in a world of over 200 different countries. And ideally, we would want every country to be able to play a part in the global value network, and play a part that enabled some form of prosperity to that country, whilst accepting that some countries are at different stages of their development.

However, we then have large, global multinational organisations that, I suppose, are at the heads of supply chains that span the globe. And they, essentially, make decisions about where they position their supply chain assets in which countries, and also under what sorts of terms. So I think there’s a duty for countries to think more about supply chain as part of their industrial strategy, and think about the role that their country could play as part of this network of global value chains.

But I think, there’s perhaps something more for companies, particularly, perhaps the ones that have today had a profit motive, to actually think about that global value network design that they have, and to ensure that they design their supply chains across the globe in a way that ensures a fair return to all. And that’s linked in to a second dimension, which is perhaps about the difference between developing and developed countries. So I think here, one of the learners asked a question about developing countries’ role in technology. Sometimes, I think technology can actually help developing countries to be at the forefront of supply chain leading practise.

So for instance, developing countries aren’t held back, in a sense, by having to go through all the stages of industrial development. So for instance, they’ve not had to put physical telephone lines in. They’ve been able to go straight to the mobile phones. And mobile phones have enabled things, like the SMS For Life scheme to work, which is a totally different way of trying to ensure that things like antimalarials and HIV medicine can get out to the most distributed parts of Sub-Saharan Africa.

But equally, I think we, in developed countries and also those multinationals that are housed in more developed countries, have a responsibility to make sure that they make their supply chains end-to-end visible, and that they try to ensure that they support activities, both in developed and developing countries. And where they do that in a good way, they make that visible to consumers so the consumers can start to make a choice about actually purchasing products from supply chains that perhaps are ensuring that buyer returns are fair to every one.

STEVEN DAY: Yeah, the visibility is a big challenge for a lot of supply chains. We see that with all kind of scandals, where the consumer faces an organisation, the OEM, doesn’t even know where it’s product comes from. They know who their suppliers are, but they don’t really know where the suppliers get their raw materials.

PROFESSOR JAN GODSELL: Well, if you look at companies like BodyShop, they actually made it a fundamental founding principle of that organisation was, in a way, to know where everything comes from. So that is an issue for big companies because of their complexity, but there are potential solutions out there should they wish to pursue them. And of course, in the UK, the Human Slavery Act will, actually, drive organisations to take that type of thing much more seriously. And also, companies like Marks and Spencers, if you go online, you can actually find the M&S supply map.

It’s in its very early days, but what that enables you to see is all of M&S’s factories around the world, whether or not they make a parallel of food. And at the moment the only dimensions they’re giving are gender diversity. But you could see that that’s a good base in the future, but to actually make far more information available.

STEVEN DAY: OK, yeah. Then one last point about this analogy about that supply chains are the lifeblood of an organisation, and possibly of consumerism, in general, because they deliver the things that we consume. What do you think about that, before the background of social and environmental friendliness?

PROFESSOR JAN GODSELL: So I think for me, obviously, in our video with Chuka Umunna, he made this reference to lifeblood. But very interestingly, we were seeing comments from learners about lifeblood before they’d seen the video from Chuka Umunna. I think it is the lifeblood. I think we were looking at– he was looking at, in terms of industrial strategy. But I think for me, what this raised in terms of lifeblood, was, essentially, this idea that we are so dependent on supply chains, that they are extremely diverse in their nature. But that, for a number of things, such as medicines– I think one of the learners raised the issue around radionuclides– we are actually dependent on a relatively small number of sources.

And if something goes wrong, it could have potentially life-threatening consequences. And I don’t think they should overly panic, but I think it’s very, very interesting. And maybe it’s one of the ways that we can help to raise the visibility of supply chains, is by making people aware of this diverse nature of supply chains, but also the very, very important role that they play in our lives, and some of the resilience issues that may be associated with them.

STEVEN DAY: Yeah, well, one of the points that was discussed there, is that some certain raw materials that are very important for some supply chains are actually sourced from very few suppliers. So in some cases, globally, there are just one of two factories that produce these supplies. And if they become inaccessible– for instance, due to natural disasters– then we, globally, have a big problem suddenly, that we before didn’t think about it. So yeah, that might be a problem, because then the lifeblood isn’t flowing anymore. Yes, I think that’s all. Do you have any other questions or comments on this week?

PROFESSOR JAN GODSELL: Just to say that– to thank the learners for their excellent engagement this week. And to encourage them, if they haven’t already done so, to share their supply chain stories through the My Chain Reaction website. And to also, through Padlets, contribute to the Cohort Challenge, building up pictorially those pictures of different supply chains. And it’ll be great to see how full a picture we can get of those supply chains by the end of the course. So thanks to you, Steven, and thanks to the learners.

STEVEN DAY: Thank you, too. Then, that’s it for this week. Thank you very much.