FAQs (frequently asked questions) on supply chain management (SCM)
Following are some of the frequently asked questions (FAQs) on supply chain management (SCM) that we have encountered in our university lectures, keynote speeches, Quora Q & A sessions and other forums.
For a number of years we have enjoyed helping students and supply chain new comers with answers on Quora. Since then we became the highest read contributor on the topic of supply chain management.
Feel free to ask more questions if your particular question is not answered below.
Why we are qualified to write this list of FAQs?
For nearly three decades now, our co-founder Vivek Sood has been considered one of the most authoritative professionals in the field when it comes to the subject of understanding supply chains and configuring them to benefit his clients' corporations on all five continents. He has written four seminal books about using supply chains to gain massive advantage in business. He also regularly delivers keynote speeches at business schools and conferences such as University of Technolgy Sydney, Supply Chain Asia, Asian Bankers Forum, APEC Business Advisory Council. He has been quoted in the authoritative business press and over 100 academic papers written by supply chain researchers around the world. Vivek and his team have examined thousands of supply chains during their projects over the last three decades and helped hundreds of executives build safe, profitable and sustainable supply chains and careers.
A supply chain is the connected network of companies with a common goal - serving an end customer with a product and service bundle that would delight him/her at a price they would willingly pay.
When you go and buy a cup of coffee in a Starbucks, or a big mac in a McDonalds, a lot is going on behind the scenes to make sure that you get it piping hot and with precisely the same configuration that you expected.
Someone grows the ingredients - coffee, sugarcane, wheat, feed-stock, beef etc., someone else transports and processes it, and finally, someone brings it to the store to put the final products in your hands.
It is a supply chain that makes it all happen.
President Trump talks a lot about the growing influence of China in the global supply chains because he and his constituents are concerned about the USA losing its prime position in global supply chains as a result.
Most global supply chains are highly complex, and the debates around the control of these are even more complicated and unclear. But the complexity does not stop the politicians from offering simplistic solutions that may, or may not solve the problems.
Also, keep in mind that supply chains are based on systems theory of Jay Forrester, and, one of the fundamental underlying principles of supply chain management is that every event and action has far-reaching consequences which are sometimes difficult to appreciate. This is frequently known as the butterfly effect in systems theory parlance.
No, logistics and supply chains are two different, but somewhat related, concepts - just as a builder is related to the architect of a building.
It is common for many companies to treat supply chain and logistics as the same.
The reason is that when supply chain management became very popular in the 2004-2010 era, many companies scrambled to get expertise in supply chain management on board.
However, due to a lack of expertise in the professional circles, and no one in the company knowing any better, they ended up making just cosmetic changes. They just renamed their logistics department as the supply chain department and continued on as before.
Logistics managers were simply given a new title of supply chain manager, without any commensurate enhancement of skills sets. Later, many of them managed to enhance their skill sets to some degree by attending conferences, supply chain software vendor seminars, expositions and short courses run by a variety of institutions with varying levels of expertise themselves.
The precision of language is even more important than the precision of data for accuracy and quality.
Logistics management combines the art of moving and storing the right goods in the right place at the right time in the right quantity. There are generally two components:
- Warehousing Management - there are companies that own, operate and manage warehouses for themselves or third party customers. A great majority of industrial companies manage their own warehouses as well as outsource part of the warehousing function to the third party warehouse operators who call themsleves third party logistics companies (3PLs), or supply chain service providers.
- Transportation management - there are companies that own, operate and manage trucks, trains, ships and other equipment of varying configuration for themselves. A great majority of industrial companies outsource almost all of the transportation function to the third party operators who call themsleves trucking, rail or shipping operators, or third party logistics companies (3PLs), or supply chain service providers.
The simplest way to define supply chain is below:
Supply Chain Management combines the art of simultaneously managing the demand and supply for your product and service, in time and space, to maximise your profitability for the short term as well as the long term.
If it sounds complex to comprehend and visualise a supply chain, then be assured that the practice of supply chain management is even more so.
In late 1970s, Keith Oliver and his team, while working for a client in Europe at management consulting firm Booz Allen and Hamilton, conceptualised supply chain management.
Our senior partner in Germany, Dr. Wolfgang Partsch, was part of this team at that time. He tells the full story in our book Unchain Your Corporation. He is the only surviving member of that original team who is still pro-active in making supply chain even better every day.
Every ten years or so, since it was first invented, supply chain management has evolved into its next version. As the computing power progressed it become to integrate wider functions in the company, and optimise the profits better. Our book Unchain Your Corporation gives full details of each of these generations of supply chain. We have also written a number of blogs on this topic, with links given below.
If you are not sure that your company incorporates the most advanced version of supply chain management that is possible for it, be sure to contact us - we can quickly run a diagnostic and give you the results.
As mentioned above, supply chain management was invented by a management consulting firm in the late 70s. Since then 3 groups have been active in advancing the thought leadership in in supply chain to a varying degree:
A - Academia - Universities largely ignored the growing phenomenon of supply chain management for the first two or three decades of its existence, and then suddenly almost all of them jumped on the gravy train with courses of varying quality and impact. Academic research in supply chain management is still heavily theoretical and focused on old and aligned disciplines such as operations research and industrial engineering. Most of the academic papers bear little relevance to the practice of supply chain management in the business world today.
B - Business - Industrial companies come largely in three types:
- Winners - these are the top 5% corporations that take away almost 70% of the profit in every field. Not all of them have the most sophisticated supply chains, but they do make an attempt to get there pro-actively. Almost all the business focused supply chain thought leadership exists in these companies.
- Mediocre - These are the next 30% corporations in every industry that scramble to make their budgets at the end of every quarter because somehow the results are never as good as the plans. A number of them call their logistics departments as supply chain management and run heavily stressed operations in most cases. In many cases they are now making an attempt to put real supply chain management in place within their organisations. Occasionally, some of the business focused supply chain thought leadership exists in these companies.
- The Rest - The remaining businesses survive on the strength of their superior product range, their historical connections or strong personalities of the current leader. Their supply chains are largely uncoordinated and uncontrolled. Profits fall where they fall despite a lot of pushing and pulling. Rarely any of the business focused supply chain thought leadership exists in these companies.
C - Consulting Companies - Some consulting companies such as Booz Allen and Hamilton (our alma mater) took a commanding position in development of supply chain management thought leadership early. Others, such as our own company, took this even further by dedicating all over effort since founding in 2000 to development and propagation of supply chain management thought leadership all day, every day. Almost all the consultants derived supply chain thought leadership exists in these companies.
Many others jumped on the bandwagon when the clients started asking them about their supply chain capability. Today, even accounting firms and law firms offer supply chain consulting despite the fact that accountants and lawyers rarely know much about supply chain management. Rarely any of the consultants derived supply chain thought leadership exists in these companies.
The best way to answer this question is to watch this short 30 second video.
This question can be answered in many different ways.
Firstly, looking at the key differentiators between a good supply chain and a great supply chain - the two key components are Optimisation and Integration. Great supply chains tend to be a lot better optimised and integrated than the ordinary supply chains. In fact the picture looks somewhat like the following:
On the other hand, if you talk about the activities in a typical supply chain, you will find a number of components, as named in the picture below:
Many people ask these questions as the number of new entrants in this growing field increases exponentially. We have written a simple guide for them called - Everything That You Want To Know About a Supply Chain Career, which is available for a price of a drink ($9).
The best way to get better at supply chain management is to work with companies that are already excellent at supply chain management. This includes businesses such as Amazon, or consultants such as our company.
Beware of companies that still confuse supply chains with logistics, or are stuck in the first or second generations of supply chain management. Unfortunately, a large majority of companies and consultants are in this category and you are likely to get steered in the wrong direction if you do not do your own due diligence.
If you have a question about any company, leave a comment below, or contact us privately and we will be happy to give you our opinion.
There is a large body of young graduates who are starting to explore a supply chain career due to increasing salaries and prestige attached to a real knowledge base in this field.
The best way to enter the field is to find an internship, or a job in one of the companies that are regarded as the thought leaders in this field. You might have to work very hard because these companies get to their position only by hard work, but you will learn a lot in short period of time. It will be like joining GE in the 90s or joining McKinsey in the 00s.
We have read only a few PhD dissertations that would have any real world value in practical supply chain management. That is the reason why we are generally reluctant to answer this question.
Most of the practical applications of supply chain emerge from the business or consulting projects that continue to push the boundaries of integration and optimisation.
If we have not yet convinced you of entering supply chain consulting instead of a PhD in this field then the following topics can considered for a research based degree:
- Economic impact of automation of supply chains
- Substitution effect - labour vs technology - in automated supply chains
- Emerging supply chain network models in the post COVID society
- Global manufacturing footprint optimisations - risk reward analysis
- Offshoring, Nearshoring and Reshoring - rewards vs risks quantification for a typical company
- Intellectual Property thefts and safegaurd mechanisms in supply chain management
- Digitization of international trade insturments and supply chain information flow
If you need more suggestions, or want to discuss a particular topic you have in mind, feel free to send us an email on email@example.com. Please allow a few days for the reply.
Notes on FAQs
Clearly, any such list of frequently asked questions (FAQs) about supply chain can never be fully exhaustive. Neither is anyone, including us, the final authority and arbitrator on this or any other topic.
You will have your own opinions on many of these topics, and will have many other questions.
We throw open the comments section to you for your opinions and questions. We will try to address all of these, and the best ones will attract a reward in the form of one of our books, or publications.