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DNA Therapy for Strategic Cost Reduction in Supply Chains

My recent hunt for stem cell banking information in South India got me excited on a subject of high interest in the biomedical world. Stem cell therapy is the latest medical wonder discovery and supposed to be a cure for 70 odd complex maladies of humans, especially interesting because till late these ill’s were supposed be hard to win over with the conventional medical treatment methods - treatments which were more focused on treatment of the symptom or providing a patch solution for the life threatening diseases, not usually a permanent cure.

DNA is the building block of all life and living on this planet. They are the smallest finite elements which determine the characteristic and personality of any individual. DNA or gene therapy gets to the root cause of the problem. They provided the paradigm shift in medical treatment from the symptomatic treatment of the yesteryears to treating or correcting the diseases cells at source.

What has DNA therapy got to do with Supply Chain Management?

The market conditions are really harsh and organizations having to work really hard to stay fit and survive. Just coming out of a good market situation not so long age, never having anticipated a sudden exposure to such conditions and caught off guard, most organizations are working to shed of the extra flab of complacency in terms of supply chain inefficiencies, inventories and costs. Most resorting to crash diets by tactically cutting on costs heads like head count reduction, process improvements, asset rationalization etc. Often some of the tactical decisions are in conflict with the overall objectives like reducing people while needing to increase overall competencies, reducing inventory while needing to improve service levels. The KPI is to reduce cost (at whatever cost) for every individual, there is no one view to how this is impacting the entire supply chain and the organization for the future.(At 40 pounds overweight myself and having been through crash programs, I have personally felt how hard it is for a successful long term solution to trimming)

So the question is - Is there a one view holistic approach which gets to the fundamental building blocks of the organization’s supply chain and works of those elements to shed the extra fats “at source”. Can organization supply chains have a DNA which is very characteristic to the individual company's personality and the industry which determine how the supply chain operates? We are looking for a “Strategic Cost Reduction” approach to supply chain to treat the root cause of supply chain obesity. I have come across various models of cost reduction and personally feel a one axis view would always by tactical and for a strategic approach one needs to look at a multitude of factors

Sample illustration of a possible supply chain DNA model for cost reduction
Figure 1: Sample illustration of a possible supply chain DNA model for cost reduction

(Cannot profess to have a good understanding of DNA structures (not yet), the above diagram is not possibly a technical representation of the actual DNA helix but an attempt to explain the complexities & the solution approach conceptually).

As with human DNA’s (AGCT for Adenine, Guanine, Cytosine & Thymine), the supply chain DNA have 4 building blocks as indicated in the table below. Call this the MOCI framework, Model, Operations, Costs and Integration.

Building blocks of supply chain DNA 

Figure 2 : Building blocks of supply chain DNA

These building blocks can be visualized across the functional components of supply chain, namely – Design, Plan, Source, Make, Deliver, and Service. While the first 3 (MOC) could be viewed as independent blocks, that last (I) – Integration visualizes on how the others effective synchronize to work in unison. The gaps in integration, if any, are pores where cost losses could be avoided, distances reduced between decisions and results and enhance accuracy.

The target is to get to a lean and mean supply chain machine which runs through the extended ecosystem to build and deliver value at the “Optimal Total Lifecycle Cost”. One size does not fit all, Meyer Briggs type indicator tells us that there are broadly 16 types of personalities who react differently to situations and stimulus. A holistic approach to strategic cost reduction can be built once we are able to perceive the pulse and personality of the supply chain.

The important question then is – How do we create a scan imprint (w/o the microscope’s, CT’s and MRI’s) of the organizational supply chain DNA??
Will be glad to hear experiences on Supply Chain DNA and your thoughts on its relevance to current challenges & cost reduction approaches.


Nice article Pradeep - it will be interesting to see if it's possible to map out large multinational supply chains in this fashion. Or, rather, whether it's practical to do so...

Nice work Pradeep, will be adding the information as we build the SCM tool kit.

A good read. It would be interesting to model this on a simple supply chain with a view to adding in greater complexity.

The process of mapping SC DNA is very practical and can help show an organization the grand outline of their supply chain. A visionary leadership group can take this add their "stem cells" and develop plans to improve internal and external services at lower costs with better understanding of cost levers and markets than they ever had before. An organization can develop improved information and Master Data Management to control revenue and cost leakage. Then you can improve all of the supply chain with organizational, supplier, and customer trust of your data. Knowing your SC DNA and taking action where appropriate is a winning formula for your supply chain.

I really think that perhaps a "Theory of Constraints" approach to the supply chain could be a more beneficial and more holistic approach. The key question is "What is keeping us from faster throughput?" The goal of the supply chain is to take materials and turn them into sales as quickly as possible. It is the velocity that will drive efficiency. From the time raw materials are procured to the moment the finished product is in the customers hands, we can call that material "inventory" and establish a carrying cost. Pushing that number down while maintaining good CRM is where we will find economies to carry the company through this recession and beyond.

David, Amit, Ian, Jim, Stuart

I think we have a great start on this discussion, with an agreement that there is a SCM DNA that exists, which is pretty complex and it would help organizations to understand this complexity for important strategic decisions.

And a common concern - is this concept a feasible approach or just a utopian dream. Stuart has possibly made an important point subtly, should we really get into this “analysis paralysis” mode for every initiative and can we not manage faster by working on the obvious bottlenecks.

My submission would be that we need to “understand the complexity to operate with simplicity”. We can improve only what we see and as the proverbial iceberg , 8/9th is always hidden... Let us together try to unravel this SC DNA. To start with recognizing the existence of the SC DNA in the structure (or similar, we can thrash this out on the building blocks) and leveraging this in the decision process and results would be a good start. Conventional intelligence has always constrained us to 3 degrees of freedom, the 3 Cartesian coordinates. I recently read about 4D (analogy could be the 4th (Space) – to our (Integration)). (Actually saw this in an Advt – See 4D scans of your child’s smile even before they are born). Talking of 4th dimensions is very much a possibility.

As Jim suggested, let us experiment by picking up a simple scenario and try out options of getting this on a map. Importantly, remember to share the experience on this forum to us to build on. This recession should be creating some of the best SC innovations somewhere, just that it will take time for most of us to come to know of these developments.

Let me also loop in a very important comment from Steve Wilson on LinkedIn on the same topic

He comments: "the article is interesting in that it rightly demonstrates the inter-connectedness of the various elements. You can't make changes in one without affecting another. But environment has as much to do with personal health, if not more so, than DNA. It is the same with supply chains - yes, internal structure and processes have a lot to do with why there is "extra fat" in a supply chain, but if you don't consider the environment, namely downstream customers and upstream supplier dynamics, you won't fully understand the issues and problems."

I definitely agree and thanks for pointing this out. While I did make a mention of this in the reference of "the extended enterprise", it definitely has to be incorporated in the model -- The DNA, the environment, the evolution and the survival of the fittest...

Steve discusses this with good examples. Read:

This is great, Pradeep and bloggers. True root causes of any phenomena including supply chain ills are rather difficult to find. Thus frameworks/ approaches are helpful in making some hypotheses about root causes and testing their validity through practical observations. When we look at a problem using multiple such lenses, it is possible that we converge on a few root causes for which we can administer some medicine. I would encourage the bloggers to volunteer to study a few supply chain situations using multiple approaches and then see if we can converge to a few root causes.

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