HOW DO SUPPLY CHAINS BECOME MORE POWERFUL IN EVERY TEN YEARS?

The company was on a cliffhanger and many people were barely hanging on to their sanity. The board was worried because profits were plummeting, delivery deadlines were being missed, bottlenecks and resentment were skyrocketing, and things were out of control. On top of it, the work-in-progress inventory was growing like a fetus that was just growing faster than its mother’s womb could handle.

At one point, the CEO thought about what else could he do besides getting out there, and carrying messages from one department to another, or using his own vehicle to transport whatever was left out by logistics, or even asking his acquaintances to store bits of inventories in their redundant storage places scattered across Europe. But luckily, before any of this irrational thinking took over, someone offered his company a helping hand.

That was back in 1980. Even now, only 20 percent of businesses truly grasp the concept that could save them from being in situations similar to above, and, move beyond the boundaries of logistics and procurement, as well as corporate silos to occupy the winning space within their industries.

There is perhaps no better way to find out what the concept is than talking to its founding father himself, and his partner who are among the global thought leaders in this constantly evolving field.

Dr. Wolfgang Partsch was among a group of four Booz Allen & Hamilton consultants untangling the aforementioned CEO’s problems. The Switzerland-based company was ahead of its time in terms of its core technology, yet that was also how things went downhill. Customers from more locations were clamoring for more and faster material, putting pressure on the business to expand haphazardly.

Companies such as this one were, back then, competing mainly on product’s technical superiority. “However, as a result of growing business model complexity, they soon found themselves mired in the unprofitable clusters with poor customer services as well as rising costs.” Dr. Partsch describes the situation with a slight flinching of the eyebrows as if he can still experience the pain conveyed to him by the Swiss CEO all over again.

Executives within the company were already experts in materials management, inventory targeting, logistics, and physical distribution – yet the problems were becoming unsurmountable and intractable. As the team went through its diagnostic, they took into account the current capabilities in logistics, materials management, and physical distribution management. But, they were cognisant that these capabilities were only part of the bigger picture as it appeared in Dr. Partsch and his team’s minds.

The missing piece of the puzzle was a seamless approach of integrated processes from purchasing basic materials to shipping finished products, which called for the ability to exchange information seamlessly and in real time. Certainly, this would have to prevent the distraught executives from running around handing memos, and, telling their teams what to do in a constant fire-fighting mode.

Due to an extraordinary twist of events, the project Dr. Partsch and his team were working on became the birthplace of this new concept. It not only cured the CEO’s torment, successfully established the company’s pan-Europe operations, but also lent itself to the first application of Supply Chain Management (SCM) on earth. That is the concept – SCM – something still misused or misunderstood by many.

Joining hands, head and heart with Dr. Partsch to spread the right supply chain know-how and its application is Vivek Sood. Seeing Dr. Partsch was also an alumni from Booz Allen & Hamilton, Sood approached the Munich-based expert and together with some other partners, they formed the world’s first supply chain strategy consulting firm in 2000.

“There was a lot of complementarities in our activities where he was doing in Europe and what we were doing in the Asia Pacific and Australia. With the genius of SCM’s founding father, we couldn’t possibly go wrong in helping people realize when a twist in their backbone is causing insurmountable pain,” says Sood.

The story of how the terminology Supply Chain Management came about is not as well-known as the phrase’s universal usage in business. Let us rewind time.
The group of four consultants at Booz Allen & Hamilton, in which Dr. Partsch was the youngest, had been sitting on the brink of inventing something for a while. They all recognized the problems with the then state of materials movement, and, they also had some ideas on how things should be done. As if that bubble of conceptualization was hanging over their heads, waiting to be burst by a trigger.

Coming from a natural science background, Dr. Partsch brought to the table his scientific clout, aptly encapsulated in his German accent: “When something happens, let’s say an earthquake, I can measure it hundreds of miles away, where it was, what was the reason, how strong that was.” Of course, he was not trying to convert his client projects into a science experiment, but rather, he borrowed the idea for its relevance to the issue at hand.

As commonsensical as it may seem to us now, at the time, the idea was still novel: the repercussions of an event do not stay within where it is bound. “If something happens in sales, it will have an impact on purchasing and vice versa.”

Closely tied to that train of thought was the idea of seeing the entire hosts of separate business processes as a human body. Dr. Partsch’s knowledge of Industrial Dynamics came from Jay Forrester, the creator of system dynamics.

This input led the 4-people group to build on the view that just as different human organs interact with one another, there are “a lot of interactions along these processes from purchasing through production, through logistics, through sales, through planning, etc.”

By this point, they knew they needed to come up with an overarching concept that governed all the dynamics inside a company. Then the project came along.

Details of that client project along with the use of the term SCM, and its conceptual underpinnings, were later published in German Business Week magazine in 1982. The group of SCM pioneers described the methodology that covered all operational units of a company – considered almost an apostasy in the then “division of labor” driven management paradigm.

This was also the world’s first usage of the concept of supply chain management in print as we know it today. “We have come a long way since then,” reminisces Dr. Partsch.

SCM indeed did not simply emerge to be a fashionable jargon. From 1980 onwards, Dr. Partsch has been devoted to developing the art of SCM, engaging in over 500 successful projects. Some of them were very high-impact and bear the hallmarks of SCM as evolution itself. When asked “If SCM was such a powerful invention, why aren’t we seeing any symbols such as ® or ™ next to the word SCM?”

Simply, Dr. Partsch and his team members did not patent the term SCM. Instead, they disseminated the knowledge for free. The quest of Dr.Partsch and his team was not to capitalize on a name but to help businesses capitalize on the concept’s application. “If we got one cent every time the word SCM is used, I would probably be the second richest man on earth,” jokes Dr. Partsch. 

How supply Chain become more powerful every 10 years?