Are Multiple Supply Chain Networks Important? (A PI Q and A) Track No. 3

The following is the third track in the Q&A series which posed the question, “Are Multiple Supply Chain Networks Important?”  Given the continuing strong reader response, the series will be extended for the balance of this week.

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:

Associate Manager (Major Software Vendor) India

Reader Response:

It is very difficult to simply judge the statement in a yes on no assessment. I have seen many people frowning at the complexity of managing supply chain. It does not have to be that complex and there are a few rules that should be kept in mind:

1) It is better not to extend your supply chain with 2 levels up and down your organization. What I mean is that if you are a manufacturing company then the supply chain collaboration and integration would be best done to your supplier and your supplier’s supplier. A Similar track will also apply to your immediate customer and one level up with your customer’s customer.

2) You do not have to include each and every company in your supply chain ecosystem. There are some companies (irrespective of there level) which are required to be kept at distance and no collaboration and integration is really required with them. There has to be a careful analysis of all the entities that define your supply chain.

Having said that the statement has it applicability and many organizations are working having different supply chains. The main principle of supply chain is to have a common objective of multiple partners of that supply chain which serve a customer. You can design (or at least try) supply chain to be responsive (cater to dynamic demand) or efficient (cater to a stable demand with less cost). But sometimes in a business environment one supply chain has two identifiable customer segments with different demand patterns. In that case it would be best to have multiple supply chains with different objectives in line with the customer requirements.

The companies who have been successful in attaining some level of supply chain integration can think of having multiple supply chains for the others it is better to just concentrate on one.

PI Follow-up Question:

Thank you. It appears that you are describing a Metaprise platform reflecting a synchronized supply practice versus a sequential supply chain.

What is interesting is that this “assessment” appeared in a report that was written by the Institute of Supply Management (ISM), CAPS and AT Kearney last year. Much like the other commenters, I shared similar reservations that were outlined in part 3 of my 7 part series Dangerous Supply Chain Myths (here is the URL Link to the article: https://procureinsights.wordpress.com/2007/06/02/dangerous-supply-chain-myths-part-3/). The report’s title by the way was Succeeding in a Dynamic World: Supply Management in the Decade Ahead.

My reasoning however was tied to the fact that while the concept of Multiple Supply Chains has some merit, with 85% of all initiatives failing to achieve the expected results to date, most organizations have not been able to progress past the walk (re success within existing environments) before you can run stage.  In essence, what is conceptually viable is not necessarily practical in real-world circumstances. At least not to the point where you can offer an absolute such as the one presented in the report.

That said and given your application of the strategy what are your thoughts regarding an MIT report from June 2001 which stated that the idea of belonging to multiple supply networks complicates and duplicates the targeted efforts by each participant. A shared supplier competing as part of two separate supply networks creates potential conflict of interest among the participants.

Thank you once again for your time and perspective.

Reader Response:

Thanks for sharing your thoughts Jon.

Let me take an example here. I have worked with an automobile for 7 years and faced a peculiar problem. We had suppliers who are supposed to supply to a stable demand from an Automobile company at the same time the same company has dealerships at different locations in the country. Now there was demand of the parts from supplier which originated as spare parts from the dealerships resulting from damages, accidents etc. This demand could not really be forecasted and the supplier has to supply as and when the order was placed from any dealership. There is commitment to supply the parts within a frame of time and you simply can not put an order on hold for, say, a week. Ideally a customer would want the parts replaced immediately.

So here are the conflicts, you have the single supplier who has to meet a stable demand from automobile company at the cost that has been squeezed to limits, so the supplier needs to have the most efficient productions. At the same time the supplier also has to serve dealerships (because he has an agreement) as fast as he can and of course the prices can be premium as customers are willing to pay.

The point here is that the supplier is serving two clients of the same supply chain with different needs and I have seen him struggling to meet both the demands. I think this where managing the multiple supply chain becomes important. I am not saying that it is easy and should be pursued by organizations where they can identify merits of the concepts.

PS: I am keen to add you to my network but to that I need to have your mail id. Can you please give me the same?

PI Follow-up Question:

Thank you for your feedback.

Your example provides another perspective on the diverse application of the Multiple Supply Chain concept. One in which multiple demands can be placed upon the same set of suppliers.

Given your input, two questions come to mind:

1. Is it reasonable to expect that a supply network that focuses on Direct Material distribution can also be relied upon as an effective channel for the sale of Indirect Materials such as spare parts?

2. Along the lines of my earlier question relative to the MIT report, does a “shared supplier” competing as part of two networks create a potential conflict?

NOTE: To provide your input on this exciting topic visit the following link:

http://www.linkedin.com/answers?extendQuestion=&askerID=15318179&questionID=170664