Page 19 - Linkline Summer 2016

play. Recent years have seen a proliferation of ICT tools, particularly in a logistics and supply chain context. This effective implementation of this technology undoubted- ly has the potential to enable higher levels of integration between supply chain processes and to improve busi- ness performance. However, there is evidence that the potential afforded by ICT is not being fully exploited for a variety of reasons.
Finally, more and more sectors are being faced with the pressures alluded to above. When the SCM concept was introduced in the early 1980s relatively few sec- tors (for example, automotive and consumer electron- ics) were affected by these challenges. It is not a coin- cidence that many of the pioneers of SCM were from these industries and that the development of much of the early body of knowledge in the eld emerged from this experience. In 2016, most rms across most sec- tors are grappling with similar challenges and exploring how lessons can be learned from the early pioneers. A common thread across all of the challenges referred to above is complexity, i.e. businesses and supply chains have become more and more complex in recent years. In many ways, high levels of complexity have become the “new normal”; the big question is how this complex- ity can be handled, particularly in terms of how supply chains are designed, planned and executed.
What is SCM and why is it important?
There are many and varied de nitions of supply chain management (SCM). My de nition is based on the Four Fundamentals as depicted graphically in Figure 1. This recognises that the objectives of SCM are to optimise total supply chain cost and investment, and to meet (if not exceed) customer service requirements in tar- geted market segments. Furthermore, it must be rec- ognised that these traditional objectives need to be achieved in an environmentally responsible manner. SCM philosophy is concerned with replacing tradi- tionally fragmented supply chains with more integrat- ed con gurations. This is true of internal supply chain activities (e.g. procurement and logistics), as well as of activities that span company boundaries upstream and downstream. The operationalisation of this philosophy requires that the key ow systems in a supply chain be managed holistically; the key ows in question are mate- rials (i.e. products), money and information. Finally, SCM requires that rms reappraise their internal and external customer/supplier relationships. In this context, there has been a shift away from “zero-sum game” thinking based on adversarial relationships to more “win-win” approaches based on collaboration and partnerships.
SCM, as de ned by the Four Fundamentals, is impor- tant as it has the potential to signi cantly improve the performance of rms. That improvements in nancial, market and environmental performance are possible with the effective implementation of SCM thinking is well documented in the academic literature. My expe- rience in this regards strongly supports this contention, as does research carried out by the National Institute
Figure 1: The Four Fundamentals of SCM
of Transport and Logistics (NITL) over the last decade or so in an Irish context. However, there is signi cant evidence that a divergence exists between theory and practice, and that many rms are not adopting the SCM practices articulated in the Four Fundamentals. This is a subject that I wrote about in some detail in a previous LinkLine article and a detailed discussion is beyond the scope of this article. However, that SCM remains rela- tively under-implemented in rms does raise questions about the sub-optimal approaches that have been used in past (and, indeed, that continue to be used in some cases!).
Sub-optimal approaches of the past
Developing an exhaustive list of these sub-optimal approaches is probably impossible but a number have been evident to me across a range of sectors. First, rms sometimes copy inappropriate solutions because they have been successful in other contexts. This is the “best practice” trap. Just because something has worked in one rm at a particular point in its develop- ment does not necessarily mean that it will work else- where. Every rm and every supply chain is unique in certain ways – unique products, processes, people and cultures – making it naïve in the extreme to follow so- called “best practice”, thereby copying approaches and solutions that are wholly inappropriate. This problem is compounded by the habit of seeking magic solutions, silver bullets and panaceas. Widely implemented and understood approaches such as just-in-time (JIT), ven- dor-managed inventory (VMI), consignment stocking and enterprise resource planning (ERP), all potentially have a role to play in improving supply chain capability and performance but no single practice or technology can on its own revolutionise a supply chain and magical- ly improve its performance. To borrow an idea from The Hitchhiker’s Guide to the Galaxy by Douglas Adams, we seem intent on nding our equivalent of 42!
There is also evidence that rms have not always been good at identifying and addressing their real de cien- cies and challenges. In this context, failure to identify the root causes of problems and thereby facilitate rad- ical change can be an issue. Furthermore, rms often
THE CHARTERED INSTITUTE OF LOGISTICS & TRANSPORT 17
EDWARD SWEENEY