Supply Chain Management

Amit, Well written article on SCM. Even now, most of the industries are treating SCM as a side dish and not the main course.
It may take time to evolve SCM as fully integrated main function.

Thanks for your comment Radha. It makes me think though whether it is truly so the case. Companies whose core competitiveness lies in their respective supply chains cannot afford not to recognize the central role of this function. For instance, it would be unthinkable for Wal-Mart, Dell, Intel or closer home, Maruti, HUL & Asian Paints to consider SCM as a side dish. To generalize, any retailer or manufacturer worth its salt would consider SCM as a side dish only to its peril.

On a different note, I wouldn't absolve even the SCM/Operations head if this function is not taken seriously by the powers that matter in the company. The onus lies with him/her as well. To give an example, the world knows Apple Inc. to be a marketing machine. It would only have been too easy for Apple to succumb to this reputation and to treat its Supply Chain as such i.e. peripheral. But that was not to be. Credit for which goes to Tim Cook, COO and currently in-charge in Steve’s absence. Tim’s operations prowess ensured that Apple delivered the products that were in high demand and that stock-outs were reduced to a minimal. I wouldn’t be surprised if Steve names him as his successor.

Amit,
When I read the heading my answer was VP - Marketing at the first go. This might not be an ideal answer from an Ops & Supply Chain person! The answer to the riddle is there is a drag going on between the Customer and the capability of the supply chain (Suppliers). Customer demands Gold but the supply chain can only deliver Silver at times. There is a lost opportunity which is hitting the organizations top line and bottom-line. On the other hand expecting “Gold” from the customer, building capacities at the supplier end would lead to increased “TCO” across the supply chain if the off take from the suppliers is not as promised. This also hits the relationship with the suppliers.
We will assume that since the Marketing function is closer to the Customer, they knew the customer needs better than a Supply Chain professional. Supply chain professionals are closer to the suppliers and knew the capacity available and the capability of the supply chain to fill the customer demand. As a supply chain person it is difficult to design a supply chain based on varying demands in ideal cases. All boils down to putting back the pressure on Marketing function to provide us with an SOP for the next Quarter, Half year, annual and for the next 2 - 3 years (if possible). This SOP can be a rolling one subject to mutual agreement between both the marketing and supply chain function. Supply chain professionals should also give clear inputs to the Marketing function on the % deviation which is practically possible (On the positive side as well on the negative side). If the demand is more than the positive deviation marketing function have to take ownership as the SOP has not been properly done and if it is going to be low than the allowed negative deviation, as a supply chain person we should go and build the inventories at warehouses and put pressure on the marketing function to go out and sell the stock (as the production has been done on the SOP given by them)! This might sound a little rude but sacrificing the supplier relationship for marketing mistakes would increase the “TCO” of the products delivered to the end customers in a long run.
Tying up costs to each of the decision would help us arrive at a better business strategy! Collaborating internally between Finance, Supply Chain and Marketing functions would help in achieving the end results. Above views would vary a little based on industry verticals but broadly fits all.

Mr. Amit I appreciate and respect your view.

However, you are comparing cream layer of the company in the industry like Apple, Wall-mart, Dell etc who embraced the SCM concepts in true spirits. I am talking about most of the other company which implemented SCM concepts and to my knowledge and observation they are treating SCM as remedy to their critical function.

They are considering critical functions like Purchase and Production as SCM rather than aligning and integrating with other functions.

Even in your posting that you have stated that SCM person were not involved in decision making. This sort of situation happens every where due to lack of knowledge or guidelines, ego issue or treating SCM as side role.

Senthil, Radha – my apologies for this delay in response. Soon after posting my previous reply, I had to pack my bags for Beijing. Even though the broadband penetration in Beijing is worth boasting, I have struggled (and am still struggling) to get internet connectivity at the university here.
Senthil – I am with you on your neat description of customer-marketing and supplier-SCM relationship. I wonder though why SOP is titled as such and not Marketing and Operations Planning to include demand generation as well. Perhaps the acronym MOP would have defeated the suggestion!! I would take this opportunity to promote my other blog which talks about Marketing’s impact on Production scheduling via a game we played in the class (excuse this ‘hard-sell’) http://it.toolbox.com/blogs/everything-anything-supply-chains/mos-game-ideal-way-to-simulate-impact-of-marketing-promotion-on-production-scheduling-33431

Radha – I agree that my view would not be the majority one particularly among the not-so-creamie layer. And yes, departmental fortresses continue to be the biggest barrier to success, even today (so much for automation leading to cross-dept info flow). I am hoping to do some SCM deep-dive into a few Indian companies in the months to come; let see what’s in store.

It ultimately comes down to who can best estimate the tradeoff when making any decision regarding the customer. Sales/Marketing is customer centric while Operations/Supply is Production/Supplier-centric. SCM is the channel in between which cuts across and binds the organization from the point it receives demand signals to shipping the product. Hence I do not agree with Senthil's statement of "Supply chain professionals are closer to the suppliers" Let me know your thoughts. :)