In our current business world when we refer to the processes that encompass the planning, sourcing, manufacturing, storing and delivering of goods we call this
supply chain management.
For a chain to be effective each link intertwines with the next. Each link needs to be as strong as the other links.
So when we think of supply why do we think of this as a chain? If the chain is a loop that moves around a circuit there is no beginning or end. If the chain is laid out in a line it serves the purpose of pulling something along or tethering between two points. Neither the loop or the tether really represent the physical supply so this leaves us to consider information, the other fact of supply management.
Information sharing between each process - plan, source, manufacture, deliver, sell can be thought of as a loop with plan being the first link and sell the last. When sales information is received the plan is reviewed and, if necessary adjusted. Sourcing receives adjusted plan information, reviews inventory on hand and executes new purchases. Manufacturing receives the new purchase information, reviews finished goods and plans resources for production. So, maybe supply chain refers relates more as information.
In reality, for many businesses, the information does not flow between entities. Maybe the information does not exist, or it is considered unreliable or simply their is no good process for sharing information. So now we have a set of chain links tied together with string. The physical product does not flow, instead each process almost acts as a silo, building inventory to deal with uncertainty.
When businesses began to globalize their sourcing activities they often added more days to the physical process cycle and any inadequacies in information became magnified. As a result huge investments have been made in improving visibility through each process. Where these investments were not made there have been huge investments in inventory. In short most supply management processes have become
disintegrated and a huge amount of $ have been spent on attempting to fix problems or simply adding more inventory.
The challenge that faces supply managers is how to redesign the processes to become a pipe. The volume of the pipe represents inventory capacity, the amount of consumed capacity equals the inventory and flow through the pipe is determined by demand. Clearly, in this model, the trick is to manage input into the pipe. Input can be determined by understanding the rate of flow (consumption) and the relative level of pipeline supply (inventory, in all forms). Supply Pipe Management becomes infinitely easier than all the attempts to create a Supply Chain.
