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Psychology of the supply chain - limitations

Psychology of the supply chain - limitations In addition to dealing with the above issues, those developing integrated supply chain s... thumbnail 1 summary

Psychology of the supply chain - limitations

In addition to dealing with the above issues, those developing integrated supply chain strategies will need to overcome or accommodate these limiting factors:
  • Who is responsible and at what authority level.
  • The place of common suppliers.
  • Work with customers.
  • Intellectual properties.
  • Getting different firms working together.
  • Assuring equity throughout the system.
  • Lack of information flow across organizations
  • Challenges in relationship development, such as
  • “Sacred Cows”
  • Breaking existing relationships
  • Relationship of customer as supplier
  • Relationship of competitor as a customer and/or supplier
 


Who is responsible and at what authority level.

These involve who wins organizationally and who gets the higher organization position. They also involve who moves down the ladder. For example, if there is a procurement vice president, a chief procurement officer, a chief technology officer, a manufacturing officer, and a head of operations, how does the development of common measurements get resolved? Developing a “win-win” situation for all players will be challenging and in most instances, difficult to achieve. There may need to be an office of supply chain management to resolve disputes between members. Senior management should maintain a close focus on resolving potential problem areas inside their own organization and between implementing parties. There also will be a need for value measures that are driven from the office of supply chain management related to success of the product or service in the marketplace. Integration through measurement will require that the right measure be put into the office and that people in the office have the ability to drive performance in the supply chain. If, for example, marketing owns inventory, the behavior is going to be different than if manufacturing owns inventory.

Therefore, from the supply chain perspective, there will need to be some measures aimed at improving its functional performance.

Common suppliers
How is it possible for the same supplier to be part of two competing supply chains? In many supply strategies, provisions will need to be made for such organizations. Can they be differentiators? And if they can, how will they operate? Complex business decisions will need to be thought through concerning such things as providing a common supplier with resources, improved processes, or with intellectual property or intellectual capital to make needed products. To enter into such arrangements it's necessary to become very specific--to understand that the common supplier has other customers in the same industry. Your company is a channel leader and wants to use a common supplier as a source of competitive advantage, how will it shape its strategy and organization? The challenge is to recognize that there are differences, that there are common suppliers. What's their role and how are you going to differentiate yourself while your competitors using that supplier's capability? The answer may be you're not and the answer may be "yes," and this is the strategy that will be used.

Dealing with customers
In many companies a very limiting factor in development of a supply chain strategy is simply the lack of experience between customers and suppliers working together. A customer usually gives a supplier a specification to be used to produce a product or tells the supplier to make a product with a certain kind of material. In a designed part, such requirements tend to be handed down as matter of course. To achieve the best results in a supply/value chain, it is very important to determine what is the real customer requirement. Review and define the “second order of consequence” for the customer needs. If any outsourcing is used by a supply chain member, it is important that all parties understand the role and functions to be done. A clear understanding of the  expectations provides a firm foundation for long term success.

Intellectual property
The handling of intellectual property and shared rights also can have a major limiting effect on the development of a supply chain strategy. It's a matter dealing with the "crown jewels," of the organization. What can't be divulged? Companies become more interdependent with certain customers, certain suppliers in the supply chain need to make some conscious reviews of what can't be divulge versus "what is going to be in our interest" over time to divulge. Again, the dominant objective is to achieve some synergies between organizations.  In some limited instances confidentiality agreements are already influencing technologies and the resources that are being put into technologies in terms their development. Decisions are being made to put resources into certain technologies by two or three players in the supply chain based on whether it looks like they will
contribute to increasing sales in the final customer marketplace.

Bringing together different companies
Another limiting factor is the historical lack of experience in getting different companies to work together to share resources. Typically that's because there has been too many problems in dealing with who gets what out of a deal in terms of equity, profitability, or return on investment. The reality is that little work has been done on this issue. There is evidence of companies that are sharing equipment, resources, and facilities, and co-locating people in product development as well as order fulfillment. There also are evidences of resource sharing in some of the alliances created between single buyers and sellers.

Is there equity?

The difficulties in sharing by different companies sometimes revolves around equity--what are we getting out of it? These questions are resolved by making decisions about what is needed in terms of performance, return on investment, and profit margin. Companies will need to examine whether they can achieve targets more effective by banding together with somebody than they can achieve independently. The issue in the future is going to be how broadly executives in supply chain

management and the product and business units can see themselves competing by bringing together intellectual capabilities and other resources up and down the supply chain. In the future, competing using only a single firms own capability is going to be difficult, limiting and hazardous to the financial health of the firm.
  
Information flow

A major limiting factor in developing good supply chain strategy has been the lack of information flow across organizations. There now are technologies and more advanced information systems , that enable cross-enterprise communication to a much greater degree than ever before was possible.

In the end, it is important for firms to recognize that supply chains compete, not that individual firms compete. How well your organization can tap the potential of integrating product or service supply/value chains will greatly influence your success in the future


Information is the lifeblood
of an excellent
Supply Chain Management System
 

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