Supply Chains: Broken Beyond Repair?
Never before in our recent memory has so much focus been put on “supply chains.” The popular press has added the term to the language of the everyday person. We hear things like: “I went to the store today and the items I wanted were out of stock. Must be a supply chain problem.” Railroads are part of the supply chain, but few people realize or understand it.
Supply chains are a critical component of life today. I’d argue this is not a new phenomenon. One great piece of advice my dad gave me (possibly the only one I actually listened to) when planning my career was “People will always need stuff!” He worked in army logistics. He’d seen how important it was to keep the front line supplied with munitions, but also with food, coffee and tobacco!
Are today’s supply chains broken? To answer this question, I’ll point out that supply chain people (those in procurement, operations and logistics including transportation) have been studiously working hard behind the scenes fixing supply chains since long before the modern term was invented (c. 1973 at MSU and other collaborating universities globally).
When all goes well, nobody notices. Yet there’s always been fervent activity to get the right stuff to the right place in the right quantity at the right time and for the right cost. Supply chain people rarely were praised publicly because “It’s their job.”
The same is true for railroads the world over. Passengers don’t complain when the train is on time (except when it is overcrowded, too hot or too cold etc.). Shippers and freight customers likewise, unless their product arrived damaged.
Supply chain management developed scientific methods to remove guesswork and elements of chance from the equation. Just-in-time (JIT) became a common descriptor enabling manufacturing to minimize inventory. Safety stocks were reduced to improve top- and bottom-line financial performance. Quality control was improved by adopting Six Sigma principles. Lean manufacturing enabled efficiency improvements and better asset utilization.
So, what has changed and why?
First, the fat has been squeezed out of supply chains. Safety stocks are minimized. JIT evolved to precisely on-time. Early deliveries were as bad as late ones.
Second, data enabled a lot more visibility within an operation and then along the supply chain. But visibility has turned out to be not enough. Data for its own sake is worthless. It must be used for management and improvement. Numbers must have meaning. We are now beginning to recognize that there’s a big difference between ‘visibility’ and ‘transparency’.
Sharing the data between supply chain partners (some of which are internal to your organization) is good, but interpretation of the data can differ if there is no common strategic direction. Interpreting the data in the context of your customer’s and consumers’ strategic value proposition is critical. Making that happen delivers real transparency.
Third, we squeezed the assets until there was little if any, redundancy in operations or equipment, or even infrastructure. That meant we had to seek resilience through risk management. We focused on the ‘likely to happen’ events that we knew would have big impacts. We didn’t focus on the unlikely events that could have even bigger impacts.
And then came COVID-19. The pandemic. An abrupt and massive disruptive change in what people did, where and how they did it, what they purchased and what their priorities were. This amounted to a change in culture and the…
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