In this week’s AMR Research First Thing Monday email (February 8, 2010) Kevin O’Mara discussed the term “Supply Chain” versus “Value Chain” and whether the latter may be more appropriate these days. Specific terminology like this is intended to enhance communication and define specific ideas, processes, or programs. This kind of hair-splitting, however, might have the opposite effect. I’m reminded of the transition from MRP to ERP as the suppliers tried to position their products as newer and more modern than traditional MRP which, at the time, was already decades old.
After the release of elaborate definitions by analysts and the expenditure of lots of marketing dollars by suppliers, the new term came into common use. The truth, however, is that ERP was just a new term for what already existed – an evolutionary descendent of the technology approach of combining business applications to include more of the enterprise in a synergistic, collaborative whole. It appeared for a time that “Supply Chain” might replace ERP as the standard term for this kind of system but it doesn’t seem to have gotten the attention and backing of a critical mass of marketers.
In any case, the APICS Dictionary (11th edition, available online for members at www.apics.org) defines the two terms this way:
SUPPLY CHAIN: The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.
VALUE CHAIN: The functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.
Given these definitions, I believe that supply chain is a more appropriate term to describe the systems and processes. I don’t even object to using Supply Chain or Supply Chain Management (SCM) as a replacement for ERP to describe the systems we use to keep all this together and functioning effectively. Personally, I have been using the term “Enterprise Systems” to try to side-step the whole acronym debate.
Nevertheless, Supply Chain professionals are focused on enhancing the value-adding activities within the chain and eliminating those that do not add value. Most people view that as a “Lean” focus because the term Just-In-Time is considered hopelessly passé. Read more articles by Dave Turbide at www.daveturbide.com
Monday, February 8, 2010
Tuesday, February 2, 2010
9 Priorities for 2010
Recently, Chain Link Research held a webinar in which they discussed the results of recent research on goals, challenges, efforts and impediments for the supply chain in the coming year. The results were interesting but not surprising.
1. The top priorities are customer satisfaction and responding to changes in the market (flexibility and agility).
2. The biggest challenge is forecast accuracy. Efforts are (and should be) focused foremost on the forecasting process, which was also cited as the most difficult challenge.
3. The top impediments are all people-related – organizational inertia, a reactive (fire fighting) culture, lack of manpower and corporate politics.
4. Perhaps the biggest surprise, and the best news in these survey results, is that cost reduction is not at the top of the list of goals. Respondents did, however, mention difficulty in meeting cost reduction goals as the number two challenge (presumably they’re already set and ongoing). Cost cutting, while necessary in challenging times and always a high priority for resource managers at any time, is reactive and does nothing, in-and-of itself, to promote the growth and long-term health of the business. An all-encompassing focus on costs often leads to deterioration of skills and capabilities (lack of investment in training, education, process improvement) and short-term actions that end up costing the company far more at a later date to remediate the damage done.
Better forecasts, shorter lead times and greater agility, a more effective planning process, improved customer satisfaction, and all of the other priorities listed in this research all contribute to an improved bottom line either through higher revenues and/or direct and indirect cost reductions. These are permanent, systemic improvements that continue to pay back year after year.
It takes an investment to achieve these kinds of improvements – money, surely - but also an investment in time, effort, and emotional energy. That can be difficult when the challenges of everyday business are overwhelming. But it’s an investment that is absolutely necessary and does deliver an outstanding return on that investment.
Read more articles by Dave Turbide at www.daveturbide.com or click here
NOTE: Dave Turbide is listed on the ChainLink Research Advisory Board but did not participate directly in this study.
1. The top priorities are customer satisfaction and responding to changes in the market (flexibility and agility).
2. The biggest challenge is forecast accuracy. Efforts are (and should be) focused foremost on the forecasting process, which was also cited as the most difficult challenge.
3. The top impediments are all people-related – organizational inertia, a reactive (fire fighting) culture, lack of manpower and corporate politics.
4. Perhaps the biggest surprise, and the best news in these survey results, is that cost reduction is not at the top of the list of goals. Respondents did, however, mention difficulty in meeting cost reduction goals as the number two challenge (presumably they’re already set and ongoing). Cost cutting, while necessary in challenging times and always a high priority for resource managers at any time, is reactive and does nothing, in-and-of itself, to promote the growth and long-term health of the business. An all-encompassing focus on costs often leads to deterioration of skills and capabilities (lack of investment in training, education, process improvement) and short-term actions that end up costing the company far more at a later date to remediate the damage done.
Better forecasts, shorter lead times and greater agility, a more effective planning process, improved customer satisfaction, and all of the other priorities listed in this research all contribute to an improved bottom line either through higher revenues and/or direct and indirect cost reductions. These are permanent, systemic improvements that continue to pay back year after year.
It takes an investment to achieve these kinds of improvements – money, surely - but also an investment in time, effort, and emotional energy. That can be difficult when the challenges of everyday business are overwhelming. But it’s an investment that is absolutely necessary and does deliver an outstanding return on that investment.
Read more articles by Dave Turbide at www.daveturbide.com or click here
NOTE: Dave Turbide is listed on the ChainLink Research Advisory Board but did not participate directly in this study.
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