The first time I heard about supply chains was when I was working as a production planner at P&G Philippines in 1989. P&G’s top management had just reorganised the multinational consumer goods corporation’s operations worldwide, integrating manufacturing, purchasing, and logistics under one group: the Product Supply Organisation or PSO, for short.
The aim of the PSO was to streamline the flow of materials and products from vendors to customers. Executive leadership emphasised customer service, lower costs, and reductions in working capital, especially inventories.
Top management at P&G Philippines pushed a comprehensive information technology project as the centrepiece to integrate the various functions, with focus on MRP 2, or Manufacturing Resource Planning, the precursor to Enterprise Resource Planning (ERP).
When P&G moved me to manage the shipping department at the company’s Tondo Plant in 1990, I arrived just in time for the implementation of the newly installed MRP-2 software.
It didn’t start well.
The software couldn’t keep up with the pace of orders coming in and the loading and dispatch of trucks. The system would hang often or users from other departments weren’t updating inventories to allow us to pick items for shipping. We ended up overriding the system which earned me the ire of the IT project leader. Marketing brand managers and field sales came after my department as pending orders piled up and the General Manager even had me sat down in a whole day meeting to explain the snafus in the system.
The shipping and IT department people worked nights, holidays, and weekends to get the system to work and ship orders. We finally were able to deliver and the company saw its sales hit record highs.
A lesson learned from the experience was this:
Managing a supply chain doesn’t start with reorganisations or putting in a fancy computer system. Managing a supply chain starts with establishing relationships between the people who’d be running it.
The supply chain is a representation of operations and their relationships not only within the organisation of an enterprise but also with other organisations of other enterprises, especially the ones the enterprise does business with, such as customers, vendors, and 3rd party providers.
A supply chain isn’t an organisation nor is it a system of operations. It isn’t a flowing stream and it is not an ecosystem. (Ecosystems are communities of biological organisms that eat each other).
The supply chain is a model, a paradigm that shifts us from seeing work not as the jobs we do on our own at a work-station, cubicle, or vehicle, but as jobs that connect us with others in getting what we need, producing what are needed, moving to where they’re needed, and delivering to who needs them.
A more-to-the-point definition for supply chains would be: supply chains are operational relationships that make available products and services.
Supply chain management is the management of those operational relationships.
It’s not a system. It’s not an organisation. Supply chains are about relationships―relationships consisting of people working together to deliver products and services.