Designing Supply Chains: “Firms Don’t Compete, Supply Chains Do”
When researching supply chain design for this blog post topic, I found an insightful and informative academic paper from the Institute for Supply Management. This paper “Supply Chain Design: A Necessary Core Competency to Build Sustainable Competitive Advantage,” written by Thomas A. Crimi, MBA, MAPA, C.P.M. and Ralph G. Kauffman, Ph.D., C.P.M., goes into detail on the definition of supply chain management, the importance of supply chain design, and the various steps necessary in designing a supply chain.
As we know from class, there are many different definitions for a supply chain, but Crimi and Kauffman define it as “an integrative approach to managing supply and distribution networks.” Further, they define a supply chain in terms of the competitive advantages it seeks to achieve for the company or organization it is associated with. Within the various competitive advantages are what can be considered the supply chain’s core competencies. As defined by Crimi and Kauffman, “core competencies can be defined as those activities that a firm does best and most cost-effectively, and which are central or ‘core’ to success in its business.” These core competencies are achieved through effective supply chain management and, more importantly, the specific design of the supply chain.
This is why Crimi and Kauffman assert that “firms don’t compete, supply chains do . . . how supply chains are designed will affect their ability to compete.” For example, a firm that is attempting to compete in a market where low cost determines who gets the business will have difficulty if it includes high cost suppliers in its supply chain. The characteristics of the end-market in which a firm is competing must be considered when designing supply chains.
So how are supply chains designed? What are the steps taken to design a successful supply chain? The first step is straight forward: “select a chain.” Decide where in the market you want to operate, what you want to sell, or what aspect of the already existing business model you want to improve/re-design. The next step is to “form a design team,” including stakeholders from inside and outside of the organization. Next, “map the chain as a team,” or, in other words, get everyone on the same page and reach a common understanding on what each member’s role is in the supply chain. After organizing and defining, the team must “determine supply chain performance criteria,” which can be cost, quality, time, reliability, flexibility, or other “specific product performance characteristics.” This is the critically important stage in the supply chain design process where the competitive priority is identified. Next, the supply chain management team must “analyze each step of the selected supply chain.” After analysis, the team must “evaluate the impact of changes from existing practice needed to perform each step in the supply chain as a whole.” Finally, the last step of the supply chain design process is to “reiterate the preceding process until the combination of practices that best meets the supply chain performance criteria is determined.” This last step echoes what we have already talked about in class as the importance of continual improvement and constant reevaluation.
What do you all think of Crimi and Kauffman’s paper? What part of the supply chain design process do you think is the most important? Is there anything you would add their design process?
Jake,
I like the way the paper looks at supply chains as the way companies compete with one another. It rings true with me as companies can’t provide their products or services without having them prepared through the supply chain. If the supply chain cannot be competitive with other supply chains, then how can the company be expected to be competitive with other companies? Just like in any competition, you have to be prepared, and in this cause the supply chain can be seen as the preparation. I think the competitive priority selection is the most important part of the supply chain design process. This is what defines your company and is how you compete with those around you. It is near impossible to have every competitive priority covered and still make money at the end of the day (one day someone might prove me wrong on that) so as a company you should make it a must to select one or two competitive priorities to really pursue and refine.
Matthew,
It’s cool to take a look into the future and see what might come to be. HP is being smart here, as you have pointed out, and is already shifting their supply chain to support 3D printing. I started thinking about your last sentence, posing the question of how 3D printing will effect supply chains and companies. I found an article (www.supplychaindigital.com/logistics/dhl-how-3d-printing-disrupting-logistics-industry) talking about the potential ability for 3D printing to be disruptive to certain industries. The logistics industry that the article talks about is “the part of the supply chain that plans, implements, and controls the storage of goods, services, and related information between the point of origin and the point of consumption.”( https://en.wikipedia.org/wiki/Logistics) So inventory and how it is held has the potential to be greatly disrupted if 3D printing fulfills its potential. They specifically note how a company that produces highly complex and customized products has the highest potential to be disputed. Companies might have to switch to a “build-to-order” mentality, which would completely change how their supply chains work. Suddenly, 3D printers would cause warehouses full of inventory to become warehouses full of 3D printers. Now, this is all speculation. There isn’t a lot evidence to say that 3D printing will become a dominant force in the coming future, but most people believe that it will fulfill it’s potential because of what it has already achieved. This speculation, however, is functioning like it does in the stock market. People will hear news that pertains to the future, and react to it according on the current day. Companies are trying to predict the future and are reacting to this news that 3D printing will seriously change supply chains. HP has already jumped on board, and I would not be surprised to see more companies follow their lead.