Supply chains: oversimplify them at your peril

“Conventional ideas of supply chains are a gross oversimplification and do more harm than good,” says Professor Richard Lamming, director of the Centre for Research in Strategic Purchasing and Supply (CRiSPS) at Bath University. “Rather than linear chains, companies actually operate in - at best - supply networks or systems, or - at worst - a mess.” And he adds, “In seven years’ time, we won’t even be using the terms ‘customer’ and ‘supplier’.” Lamming is a tall, imposing figure, with a very clear set of opinions and guidelines on how firms should go about putting supply chain theory into practice. He has vast experience working in the UK automotive/ manufacturing industry and has contributed to, and written books on supply chain theory. He began his career as an engineering apprentice at Jaguar Cars 30 years ago and has extensive international experience in purchasing and subcontracting policies, including manufacturing industry and some government initiatives. He has a degree in production engineering. As well as holding the Bath University post, Lamming is currently advising the Department of Trade and Industry (DTI) vehicles division and the Society of British Aerospace Companies, and also works for specialist purchasing and e-procurement consultancy firm Aria group. This was set up in 1999 to advise large and medium-sized European manufacturing companies on their overall purchasing and supply chain strategies. So Lamming really does know what he’s talking about. Speaking at enterprise software vendor SSI’s annual user conference in November last year, Lamming explained to the audience that, “An oversimplification of complex [supply chain] problems leads to inadequate software solutions that only make the problem worse... You cannot manage supply networks. Supply strategy is something bigger than individual companies... We’re at a time when simplistic software solutions are plentiful.” He even goes as far as saying that some people’s professions these days are based on flawed concepts and, “Things are not always simply black or white.” He warns that firms’ attempts to impose control on these supply networks (usually made by large ‘channel master’ companies such as OEMs or retailers) are doomed to failure. “Open book negotiation is based on the fatuous idea that the customer - who is always right, remember - knows more about the supplier’s business than the supplier does.” So what advice does he offer manufacturers considering supply chain strategies? “Relationship evaluation is key. But these popular supply chain decisions firms make to rationalise their supply base are like playing with fire. They need to consider what really adds value and where the two firms’ interests overlap.” Go beyond the norm He cites some examples: “Firms should change the way they view supplier relationships. How about companies managing the risk of investing their information in the supplier? Or try focusing on things that go beyond the norm, like rating or scoring the relationship rather than the supplier’s delivery performance.” He offers four key areas that businesses should consider: “First, recognise the ‘mess’ and focus on what can be managed. Next, understand that supply relationships can be managed but you can’t manage them. Don’t fall into the trap of thinking that supply networks are simple and can be represented by simplistic diagrams. And recognise that customer-supplier relationships are dynamic operating spaces in which parties use the principles of competition in order to collaborate.”