Supply Chain Management: The Complete Spectrum

“The supply chain is everything that is involved in fulfilling a customer request. The entire supply flow, starting from the source – raw materials, outsourcing, manufacture of a product – through the actual value added processes of the firm, on to the customers of the firm through delivery systems, customer relations, call centers.”

In short, says Harry Chernoff, a clinical professor of information, operations and management science at NYU Stern, the supply chain is, “the complete spectrum from beginning to end.” So, as far as subjects for academic attention go, it is a big one.

Recent years have seen a proliferation of supply chain management courses at all levels, from undergraduate courses to specialized MBA tracks. Though all the composite elements of the discipline have long played a central role in MBA programs, it has only really emerged as a discipline in itself over the past two decades.

“Supply chain management is the strategic management of activities in three key areas, we call them the three pillars,” says Judy Whipple, associate professor of supply chain management at the Broad College of Business at Michigan State University. “Purchasing, manufacturing or operations, and logistics.”

The integration of these separate strands has come as a result of increased employer demand, she continues. “It has become recognized by firms as a way of gaining a competitive advantage, whether they are pursuing a low cost or a highly differentiated strategy. In either instance it’s really important to get integration. Companies are recognizing it’s not a necessary evil, but something they have to focus on if they want to manage cost better, and to get better.”

Properly coordinating and managing the supply chain has also become increasingly pertinent due to its increasing complexity, says Metin Cakanyildirim, a professor of operations management at the University of Texas at Dallas. “The network from the supplier to the customer has become longer and is owned by more partners.  Hence, the coordination of partners is both more challenging and more profitable now than before.”

Whipple confirms this: “Compared to 20 years ago, there’s lot more globalization, more differentiated products, selling and buying on a global market. We have to be more precise with supply chain, accordingly.” This is particularly pertinent in a retail sector that now has to consider both online and brick and mortar sales, with the supply chain of the former including additional challenges related to delivery, returns and customer services.

Chernoff adds that the instantaneous nature of 21st century channels of communication means that the margin for error has been significantly reduced. “Companies are dealing more with risk issues and what we refer to as disruption in their efforts to manage the supply chain – this includes support industries such as finance, security and insurance. Due to internet communication, firms must be able to adjust instantly – there is no longer any time slack.” It’s not just a case of making it financially efficient; keeping the supply chain running 24/7 is a key challenge.

Reputations, he adds, are also susceptible to being instantly broken, raising the importance of doing ethical business. He cites the still damaging effects for companies such as Nike and Apple of ethically unsound links in their supply chains. A supply chain is, after all, only as strong as its weakest link.

Returning to the key issue of competitive advantage, another reason for the coming to prominence of the discipline is simply a recognition by companies that those who do it right greatly outperform those who do it badly or even to an average level. Consequently, many are looking to hire expert senior level staff. “In the past 10 years, many companies have created a c-level supply chain manager, so you’re seeing CPO and even CSCMO roles becoming more and more common,” Whipple reveals. In line with its increased importance then, is an increase in the both the prominence and appeal of supply chain management MBA careers.

“The changes that have occurred,” explains Chernoff, “come about because many industries have been basing their decision making on intuition and experience. Companies realize now they need managers with higher level analytic skill, being able to work with big data that companies are amassing. It’s not sufficient to just be able to run Excel.” MBA students are alive to this, he says, having spent time in industry, and it is the MBA community in which supply chain expertise is really being cultivated.

So, what does it take to excel in these functions? “Good supply chain management requires understanding the parts of the chain, and aligning their objectives,” says Cakanyildirim. “It is about integrating a complicated system by using smart mechanisms so that synergies in the system can be found.  Since the system is complicated, sometimes one is obliged to overlook some details. This is the ‘art’ part of supply chain management.”

The increasing seriousness with which it is taken means that, where the supply chain would have once been an afterthought, it is applied today from the product design stage says Whipple.

It also means that more elegant solutions are available, says Chernoff. “Major software suppliers, companies like Oracle and SAP from Germany have very, very complex, innovative solutions that help major manufactures and retail chain operators monitor their products over vast areas. They can check effect of promotion over the whole North America as a total by region, or by store, and tell you why something did or didn’t work. It means tremendous advantages for the manufacturers in those areas.”