Supply chain thinking could be doing more harm than good, says Lamming

Supply professionals are facing real challenges over the next few years, not helped by the current terminology and thinking espoused by vendors and consultants, and apparently being accepted by the manufacturing community. So says purchasing and supply chain guru Professor Richard Lamming of Bath University, who gave the keynote address at enterprise software provider SSI’s (Chelford plc) annual user conference recently. Lamming reckons that conventional ideas of ‘supply chains’ grossly over-simplify reality, and can do more harm than good. Rather than notions of linear chains, he says that companies actually operate in – at best – supply networks, or systems, and often – at worst – a total mess! Over-simplification of complex problems, Lamming told the conference, leads to inadequate solutions that can make the problem worse. “You cannot manage supply networks,” he says. Why? “Supply strategy is something bigger than individual companies.” And he insists that attempts to impose control on such networks – usually made by large ‘channel master’ companies, notably the OEMs (original equipment manufacturers) and the huge retailers at the other end of the spectrum – are doomed to failure if spread larger than the existing models. “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,” he observes. SSI agrees. “No one company can actually control a supply network,” says director Neville Merritt. “Obviously, the ideal situation would be a grouping of independent, specialised companies collaborating so closely that they resemble a vertically integrated business. But the problem is that every organisation in the network has its own legitimate [and different] objectives.” And he continues: “Trying to impose an overarching structure on a supply network results in the kind of over-simplification criticised by Professor Lamming. That’s why few of the companies that have tried to implement single ‘supply chain management’ systems, such as i2 and Manugistics, have delivered the sort of improvements they were hoping for. “No one application can possibly hope to replicate the sort of complexity that exists in a large-scale supply network,” he opines. Merritt is right for the whole of the middle ground of manufacturing – where the OEMs or retailers don’t have market domination and can’t readily do as they please with their suppliers. It is, however, fair to say that Manugistics and i2 have had serious successes with some of the global big boys – and indeed that they have further developed their offerings for the web to enable more pragmatic supply chain communication, execution and fulfilment to work in all sorts of industries. The emphasis then is less on control and more on management in the sense of mutually beneficial interactions that strip uncertainty, assumptions, tardiness and ultimately inventory and poor production, warehousing, distribution and administration decisions out of the whole network/mess that is most ‘supply chains’. And in fact, Merritt says that all companies should be focusing on the parts of their supply networks that they can hope to control in this way. “Our motto is ‘start small, think big, act fast’,” he says, “and it’s especially apposite here. “I don’t see the point trying to cover every aspect of a supply network; rather, firms should implement small-scale projects that enable collaboration with specific business partners. Web-based self-service applications, or automation of transactions between manufacturers and individual key suppliers can be set up relatively quickly and cheaply, yet the returns can be immediate and the risks non-existent.” Exactly. “Private trading exchanges can be created at relatively low cost, and may well deliver more immediate benefits than users could get from engaging with public exchanges. Most companies are not going to use exchanges to compare prices from vast numbers of potential suppliers – they have a relatively small number of partners they might do business with – so the scale advantages of public exchanges are not as powerful as it might seem.”