Are Multiple Supply Chain Networks Important? (A PI Q and A) Track No. 2

The following is the second track from the still growing number of responses I have received from readers around the world regarding the question, “Are Multiple Supply Chain Networks Important?

PI Question:

A 2006 Report made the following statement:

“Designing and operating multiple supply networks to meet the needs of specific market segments–supply chain innovation and the use of multiple supply chains will be important to future revenue and market share growth.

“Based on your own experience is this an accurate assessment? If yes, why? If no, why?

Network Member Profile:

Senior Supply Chain Manager (Distribution and Warehousing) U.S.A.

Reader Response:

My issue was that no definition of multiple supply chain networks was given. After reading the article, it’s still not given, but we can deduce from the discussion in the article what the authors are talking about. You can see in the answers that you have that everyone is looking at it from what I would call a “my supply chain” point of view. There are diverse industries and networks involved – and everyone thinks theirs is the best. However, they are all looking backward and not from beginning to the end.

I think the authors were talking about a firm’s ability to meet a particular segment’s demand so they could grow the business. I worked for a furniture manufacturer that sold product in specialty store, through retailers and to big box retailers. Each segment had a different supply chain. They all start at the factory – the big box goes direct to DC from the factory. The specialty stores may go direct store from the factory or may go to a domestic DC and then to the store. There are there different supply networks for one manufacturer.

In order to grow revenue, the firm had to segregate products by channel – Lowe’s didn’t like us selling the same items to them that we sold to another customer. Then the firm had to deliver the products properly to the channel – some were faxed orders, some EDI, some L/C payment and some prepay credit cards. Each channel had the same basic requirements but we had to specialize by customer in the channel. So the equation gets even more and more complicated.

The firm could get smaller retailers to work within the required framework with minor exceptions. However, with larger customers, the network and its requirements are more complex.

The only way to manage this type of “multiple network” is to ensure that technology is driving the channel and supporting processes. One other point is that the entire chain – from planner to sales – needs to understand how each channel works in order to ensure that customer needs are met and expectations managed.

PI Follow-up Question:

Thank you for providing your perspective on what is certainly an interesting topic.

Now there are two distinct tracks in terms of the subsequent questions I would ask you based upon your comments.

Pertaining to your reference to the furniture manufacturer’s use of multiple supply chain networks, and in particular the comment regarding Loews, a 2001 MIT report which reviewed Coordinated Supply Networks made the following observation regarding multiple supply chains:

“Participants belonging to multiple supply chains complicate the formation of disjoint supply networks. A shared supplier competing as part of two separate supply networks creates potential conflict of interest among the participants.”

Would your reference to “complexity” be linked to an incremental increase in the potential for channel conflicts?  Being the manufacturer and therefore the point of origin, how do you view the MIT paper’s assertion that a shared supplier relationship increases this potential?  For example, to what degree did Loews interests and influence shape your other customer relationships?

The second track focuses on your statement that it is imperative to ensure that “technology is driving the channel and supporting processes.”

Accepting this principle on its face value, what are your views relative to the role that Service Oriented Architectures or Web 2.0 can and will play in the successful management of multiple supply chains?