Dangerous Supply Chain Myths Revisited (Part 3): Multiple Supply Chain Networks – An Issue of Timing versus Concept Validity?

Posted on August 17, 2011


Each day for the next seven days I will be posting parts 1 through 7 from what is considered to be one of the most popular series in the Procurement Insights Blog’s history.

The Dangerous Supply Chain Myths series was based on my review of the ISM, CAPS and A.T. Kearney Report that was originally released in May 2007.

Considered to be a breakthrough assessment of the purchasing industry at the time, I felt that there were several gaps in the study.  What is important, and within the context of present day realities, what do you think.  Do the key areas highlighted in the study still carry weight in the here and now?  If not, what has superseded them in terms of overall importance?

Missed a previous post?  Use the following link to access the entire 7-Part Series.

Segment 3 – Multiple Supply Chain Networks: An Issue of Timing versus Concept Validity?

  • Multiple Supply Networks
    The tail of the supply chain needs to be tailored to each developing market and this will require domestic partners to help execute fulfillment and delivery.  In addition, good risk mitigation requires flexibility and diversity in your supply chain and supporting networks.

The volume of information available on the subject of multiple supply networks is only rivaled by the diversity of opinion regarding its relevancy and specific application.  While I personally question from a practical perspective, the timeliness of its introduction as one of the seven critical supply strategies it is without a doubt a subject that is worthy of consideration.

The matter of multiple supply networks is not a new concept.  In fact in 1999 in a paper titled Outlining a Future of Supply Chain Management – Coordinated Supply Networks (and yes upon request I would be pleased to provide you with a copy of this as well as the other studies referenced in this segment), which was released through the Massachusetts Institute of Technology in 2001, the view of multiple supply networks was not necessarily favorable.   In an excerpt from the paper under the heading, Participants Belonging to Multiple Supply Networks, the author states “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 participants.”

Conversely in a 2001 article titled Beyond Utopia: The Realist’s Guide to Internet-Enabled Supply Chain Management, the authors champion the “Federated Planning” approach.  And I quote; “for all these reasons, we believe that the Utopian view of centrally extended enterprise management is flawed, and that attempts to optimize the supply chain from the bottom up will ultimately fail.  To extend the political analogy, we endorse a federalist view, which recognizes each supply chain partner as an independent entity working to maximize its own objectives and trade-offs as a “citizen” of multiple supply networks.”

There are of course several other resources that I could reference, and will make them available to you if desired.  However, based upon my extensive interaction with procurement professionals through my Changing Face of Procurement Conference series, the real question that needs to be asked is quite simply, does the subject of multiple supply networks matter now?

Is it relevant to the majority of procurement professionals (especially those on the front lines) given the continuing high rate of e-procurement initiative failures?  Logic (and consensus) would have to say no, it is not – at least not at this present time.

You have to crawl before you can walk – walk before you can run

The debate, if you can call it that, surrounding multiple supply networks is clearly an example of technologically motivated vision rushing ahead of practical real-world applicability.  Specifically, technology (i.e. the Internet, and Internet-based applications) in and of itself will not drive the transition from a sequential supply chain mentality to a synchronous, real-time interaction between diverse supply chain stakeholders.  In short, it will not produce the long sought after savings that have eluded organizations that have made the costly and time consuming investment in an e-procurement initiative.

This is due to the fact that most organizations do not effectively engage and communicate with their own internal stakeholders, let alone external trading partners.  (I will discuss this in greater detail in the next segment – Internal and External Collaboration).

The vast majority of procurement professionals with whom I have spoken indicated that their e-procurement initiatives originated as part of an existing ERP (finance) or IT-centric strategy that did not involve them in any meaningful way until after a course had been set.  As a result, procurement personnel (a key group an initiative is supposedly designed to assist) were reduced to an unenviable role of just “making it work.”

Besides shedding some light on why 75 to 85% of initiatives fail, you can see why the introduction of multiple supply networks at this stage for the majority of organizations is equivalent to placing the proverbial cart before the horse.

Don’t get me wrong I am a proponent of synchronous engagement between diverse stakeholders (although I believe in the Metaprise or private hub structure which to a certain degree addresses potential conflict of interest issues). However I do not believe in a technology-centric strategy being utilized to define an organization’s processes.  This is because the ultimate result is the need to introduce a change management program which for the most part has proven to substantially increase implementation costs while simultaneously limiting potential savings opportunities.

By introducing multiple supply networks as a critical supply strategy now, the authors of the report have either ignored the underlying foundation of e-procurement initiative failure, or are of the opinion that this will fill in the cracks and therefore deliver savings that as of today have not materialized for the majority of organizations.

(Next Installment: Internal and External Collaboration)

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