When it comes right down to it, supply chain managers have three (3) questions to answer:
How do we get what we need when we need it?
How do we make available what whoever needs them at when they need them?
How do we deliver to whomever wants them when they need them?
When supply chain managers answer these three (3) questions, their responses must be relevant to their mission, which is: Fulfil Demand.
And when we say Fulfil Demand, it must meet the following criteria:
It must be productive, i.e., at lowest cost to maximise profit margins and at minimal capital investment;
It must result in competitive advantage, that is, the enterprise should come out better than that of its rivals;
It must meet expectations not only of customers (i.e. quality, complete & on-time deliveries) but also stakeholders (e.g. shipment volume targets) and the communities they work in (e.g. compliance to laws, environmental sustainability)
It must result in stronger relationships with customers, vendors, stakeholders.
When supply chain managers answer the aforementioned three (3) questions to the satisfaction of the criteria mentioned, they would be deemed on their way to success.
The following are questions customers typically ask supply chain managers:
“Why is it taking you so long to deliver my order?”
“When will you deliver?”
“How many of the items we ordered will you deliver today?”
“How much of an item do you have available?”
“Your items didn’t meet our specs; when will you replace them with the right ones?”
Executives also ask supply chain managers the following:
“How much did we ship today?”
“How much did we ship so far this month?”
“How many orders did we receive from Sales today?”
“How many pending orders do we have?”
“Why do we have so many pending orders?”
“When will you deliver the pending orders?”
“When will the items be produced?”
“How many of the items will we make?”
“Why does it take so long to produce?”
“When are the materials for production arriving?”
“How much will we pay for materials this month?”
“Why are we getting customer complaints?”
“How are you responding to the customer complaints?”
“Our costs are too high; how can we reduce costs?”
“What’s your plan to comply with government rules on sustainability?”
“How safe is our product?”
“What’s your plan to stop pilferage of our products?”
“Why are we wasting materials?”
“How can we reduce inventories?”
Vendors and 3rd party service providers also ask questions:
“How much of this material are you buying?”
“When are you ordering?”
“When do you need the materials that you’re ordering?”
“What are the specifications of the materials that you want to buy?”
“When will you pay me?”
“How much will you pay me today?”
“What is your company’s response to my bid?”
“How many trucks do you need tomorrow?”
“How long do my trucks have to wait before they get loaded at your warehouse?”
“Your bid is too low; can you pay me more?”
Supply chain managers encounter questions like these all the time. Most who ask want answers immediately and supply chain managers feel the pressure to respond.
The questions, however, lead to more questions. And it leads to more searching for answers. Supply chain managers sometimes spend the whole day (if not days) trying to answer questions than actually managing their operations.
Supply chain managers work in a broad scope. The questions they are asked would likely touch not only where there are assigned but also functions adjacent to theirs. Logistics managers who are asked the status of shipments may find out there are issues with production shortfalls and materials shortages.
And because supply chains aren’t only limited to an enterprise’s internal functions of procurement, manufacturing, and logistics but also include the interactions with other enterprises upstream (vendors), downstream (customers) and branches (e.g. service providers, parts suppliers), the questions that supply chain managers are asked would also lead to issues outside the borders of the enterprises they work for.
Supply chain managers, therefore, are in that unique and unenviable position of dealing with questions that go beyond their job descriptions.
Supply chain managers should welcome questions, however, not dread them. Not only they should anticipate them, they should seek them out.
Questions like the ones above offer windows to opportunities as they indicate what executives, customers, vendors, and other stakeholders find important.
Questions are not problems. But they together are the first step in figuring out what and which important problems need to be addressed and solved.
Questions unravel the problems we need to solve. Seeking them out and defining the problems behind them are proactive methods for supply chain managers to not only answer pressing questions from stakeholders but also open avenues of opportunities which lead to lasting benefits.
What’s the difference between a product and a service?
A product is an item of value that benefits a user.
A service is an activity that leads to the benefits for those availing of it.
Products are tangible, i.e., as in solid, liquid, gas, or energy, or as virtual (e.g. software, streaming videos, speeches, images).
Services are intangible; we can’t see, hear, smell, taste, or touch them.
Products are things which when used provide specific experiences or add value to activities such as materials for manufacturing.
Services are not only activities which also result in experiences but also are those that provide value to other activities such as freight services for deliveries.
Products are mostly straightforward items we can easily identify with: soap, food, metals, books, toys, cars, and movies.
Services are not as obviously straightforward. To experience a service, the service provider has to make us aware of it.
Products and services aren’t mutually exclusive, that is, they both can work as a tandem in what enterprises offer. An appliance like a refrigerator (product) may come with a warranty (service). A hotel offers rooms (products) and dining & housekeeping (services). Shipping lines transport (services) containers of merchandise (products).
Services are value-added experiences aimed at people for them to appreciate. A fine-dining restaurant, for instance, would invest in air-conditioning and interior décor, and train waiters to be polite and formal to provide a service of ambience for patrons.
Products offer value-added experiences from their usage. The food of the fine dining restaurant, for instance, is the product that gives patrons that experience of excellence in taste.
Supply chain managers sometimes swing their focus from service to product and vice-versa. SCMs can sometimes become so process-oriented about the product and end up sacrificing service.
A supply chain manager of an enterprise that makes floor tiles, for example, instils a policy in which freight trucks must be fully loaded before they will deliver to customers. A customer who doesn’t order a full load of tiles would have to wait for the floor tile company to process other customer orders that would fully load the delivery truck. The waiting customer wouldn’t appreciate the delay and wouldn’t rank the service as satisfying, never mind that she likes the product.
It may not be beneficial if the SCM decides to put more stress on service than the product. If the floor tile enterprise delivers less-than-truckload (LTL) to customers, the customers would no doubt be thrilled by the service but the enterprise would lose more from the cost and not turn a desired profit margin. The enterprise may then raise prices which may erode their customers’ appreciation of the product.
It is therefore important to have policies that consider both products and services. Policies for products and services should govern the scope of supply chains, that is, they shouldn’t be limited to just deliveries or purchases. The policies should be shared and owned by all who plan, buy, make, and deliver the products and provide the services.
SCMs have to take care that the policies are people-oriented as much as they would be customer-oriented. Airlines have made strides to avoid forcing passengers out of planes because of overbooking of flights; it doesn’t look good when one sees uniformed security personnel hauling a hapless passenger off a plane. On the other hand, airlines also have made progress in supporting their pilots and attendants such as ensuring the latter have rest days between flights and the authority to discipline misbehaving passengers. Policies are for people, whether customer, employee, or stakeholder.
The overall value of products and services, whether done individually or in tandem, is always a result of people (workers) doing their jobs and people (customers) appreciating (and paying for) them.
Products and services are different from each other but both add value for the enterprise. Supply chain managers play an essential role in how products and services become realities. They should take care that the policies they develop for each not only cover the scope of all activities behind them but also are centred on the people who are instrumental in bringing and appreciating value to those activities.