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Why Supply Chains Need To Morph into Supply Systems

September 17, 2018

Businesses need to exercise prediction and control over their processes.  This applies to the end-to-end product development value chain, from raw materials to market distribution.  Now, given the power of end-users, customers and consumers, this value chain has extended beyond distribution to consumption as well. The outcome, how the product performed, may become the ultimate source of KPI's, making cost of goods and time to market no longer the primary measures of success.

 

The definition of product performance and the drivers have also changed. The more authenticity, social responsibility and sustainability (i.e., brand attributes) are drivers demanded by the market, the more rapidly supply chains must pivot from being project focused to a brand focused enterprise wide "control tower" for the entire business.  In this scenario, achieving "safe landings" are not enough.  The entire experience and the final outcome, that is, sales, good margins, optimized assortments, brand integrity, and perhaps even brand loyalty, will require new KPI's for supply chain officers and their teams! This will require a major shift in hiring, leading, and integrating the product development/sourcing/sales/process.  

 

As part of this, the word "system" is central to the solution and needs to replace "chain" as the operative metaphor.  This isn't merely to modernize language but to liberate thinking.  Words are value buckets which carry perceptions making radical new actions difficult to imagine and implement.  "Chain" implies independent links in an unyielding static form; a break in a link is difficult to repair (read "predict and control").  "Systems" implies interdependent dynamic components, working together to maximize internal operational efficiencies while embracing brand drivers as North Stars and shared values  In systems, three dynamics are at work that are absent in chains:

 

  1. Components are interdependent and naturally work in tandem with each other.                 

  2. A change in one components behavior affects a change in all other components

  3. Systems are closed and self-regulating; they are programmed to self-adjust and re-allocate resources and energy to resolve system breakdowns & achieve system objectives

 

To begin the shift to a systems approach, the following must take place:

 

  1. Suppliers and the “control tower” must be integrated into strategic partnerships and become components in the system; transparency must become the trade off for business predictability.

  2. The system must be totally digitized for transparency and one version of the truth.

  3. Supply systems officers and managers must become savvy in integrative brand storytelling.

 

Complementing the above task, the word "factory" needs to go. Accurately describing progress made in production technology can go a long way in recalibrating negative perceptions held by future workforces.

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