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Role of Consolidation in Supply Chain Management - An Enterprise Architecture View Part1

 Consolidation in Supply Chain Management: The Focal Point of Chain Effectiveness

I don't wear spectacles, but I do understand the pain my friends and colleagues undergo because of incorrect power, or in physics terms, focal length of spectacle lenses. It not only creates blurred visibility but also impacts effectiveness in responding to external changes. The role of right "level of consolidation" is similar in providing right supply chain visibility and ensuring its effectiveness. Over a few blogs, starting with this one, I plan to cover how level of consolidation defines harmony between supply chain players within its ecosystem.

What is consolidation in supply chain?

Supply chain is a world of complexity and challenges, generated by multi dimensional interactions across enterprises among its agents (as depicted in Figure 1) such as customer, supplier, manufacturer, retailer, distributor, carrier, warehouses and so forth. This world has travelled a long distance in streamlining characteristics and scope of each agent driven by virtue of supply chain consolidation.  Consolidation in supply chain can be defined as a platform which unifies diverse needs and challenges, arising from interaction among people, process and technology (PPT, as depicted in Figure 2) of the Chain, into supply chain building blocks. These blocks are nothing but aggregation of common set of features, which get identified based on nature of responsibility they carry, area of functioning and complexity of work. Historically, this view of the consolidation  has been guiding industry in simplifying interactions between different agents by standardizing its business processes, defining interaction boundaries and identifying responsibilities of each individual player, between planning and execution space of the chain.


scmDT.jpg   Figure 1: Supply Chain Interactions


Role of consolidation in Enterprise Architecture

 To take right decisions in handling supply chain problems, Enterprise Architects need to understand big picture of the architecture and supply chain complexity in simple fashion.  And consolidated assessment of the supply chain system building blocks guide them in right direction to identify root cause of the problems instead of wondering around symptoms. This holistic assessment approach of the consolidated building blocks subsequently results in defining right architecture by streamlining interactions between both functional and technical boundaries to create flexible and simple, but responsive and performing ecosystem.


Dynamicity of consolidation: A barrier to establish harmony between supply chain core elements

Even though the role of consolidation has been vital in bringing discipline in supply chain, consolidation is not a static phenomenon. It reacts positively or negatively with the changes in the supply chain ecosystem. Consequently, harmony between the cores of supply chain gets disturbed, and this requires periodic optimization of consolidation level. This exercise would provide focused re-adjustment of the interactions. The core elements of the enterprise architecture, which control complete dynamics of the supply chain, are: People, Process and Technology (PPT, as depicted in Figure 2).


image004.gif  Figure 2:  People Process and Technology Harmonization


Most of the consolidation optimization exercises are concentrated around behavioral dynamics of these three core elements which are (a) change in people dynamics, (b) process re-engineering and (c) technology changes. Minor changes, generated by these behaviors, can be handled with a small refinement exercise, but major changes require new betterment cycle. New betterment cycle becomes indispensable since existing consolidation decisions either become obsolete or ineffective. That creates the need for further optimization to reestablish the harmony to a next level. The level of harmony between these core elements determines the degree of efficiency in a supply chain.


Going forward, I would like to focus on details about consolidation change management to improve the supply chain execution efficiency in my subsequent blogs on this topic.

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