The Death of Supply Chain Management. The Death of Supply Chain Management. digital article. Allan Lyall · Pierre Mercier Format. PDF. The supply chain is the heart of a company's operations. To make the best decisions, managers need access to real-time data about their. Introduction to Supply Chain Management. Introduction to Supply Chain Management. case study. Gal Raz. Save; Share. Save; Share.
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Harvard Business Review on Managing Supply Chains. The Harvard Business Review articles in this collection are available as individual Fast, Global, and Entrepreneurial: Supply Chain Management, Hong Kong. Included with this full-text Harvard Business Review article: The Idea in . If you' re disengaged from supply chain management, you run the risk of sabotaging.
In another case, an LGE-Qualcomm team figured out how to combine on one chip functions that had previously been performed on multiple chips, eliminating the need for several components. Had LGE merely imposed a unilateral price reduction on top-tier suppliers, as many OEMs do, it could never have realized such large savings and probably would have alienated critical top-tier suppliers.
In emerging markets in general and in India, China, and Taiwan in particular, the rapid growth in the number of college graduates is spawning a network of creative new suppliers.
But OEMs that have outsourced purchasing and cut their own purchasing staffs might not be able to spot these up-and-comers. The companies that supply important technology might not necessarily account for the highest-cost materials for a product. If a particular supplier shows promise, an OEM should consider retaining control over that relationship. Managers should remember that the suppliers of important technology might not necessarily be those currently responsible for the highest-cost items on the BOM.
A case in point is human-machine interface HMI technology, which makes the operation of products more intuitive. But Apple, for one, felt that HMI technologies would play a strategic role in future products, so it maintained close relationships with companies in that domain. How can an OEM identify inventive lower-tier suppliers?
One way is to look for suppliers that have been especially successful at reducing the cost of what they produce.
Cost innovators usually are also technology innovators. Another is to look for suppliers that serve multiple industries and whose vendors also serve several industries. They typically are exposed to a wide diversity of ideas.
Take into account the environmental and social impact of parts, including the processes used to produce them. We suggest that in addition to using approved vendor lists, OEMs employ an updated form of value analysis when making sourcing decisions—including which items top-tier suppliers will be allowed to purchase on their own.
Traditionally, value analysis has focused on maintaining the functionality of a product while reducing its cost. The new sustainable value analysis focuses on maintaining the functionality and cost of a product while reducing its negative effects on the environment.
This kind of analysis led IKEA to learn how to design and manufacture furniture from wood with knots, which in the past had been considered waste. Similarly, LGE swapped the metal it used for the back panel of its TVs for a plastic composite, thereby decreasing the environmental impact, weight, and cost of those products.
Stay close to vendors that can provide early information on shifts in the economy. Those were all indicators that the global economy was going to rebound in , sooner than many anticipated. In response, LGE rushed to negotiate deals with suppliers and was able to lock in cost savings before prices rose. An OEM can forge direct ties with lower-tier suppliers in a number of ways.
Alternatively, it can establish a formal agreement. Honda of America and Toyota, for example, negotiate contracts with select lower-tier vendors, and then order their top-tier suppliers to use those vendors exclusively and execute the terms.
In essence, Honda is asking the top-tier suppliers to manage those vendors for quality and delivery, while it manages them in areas related to cost and technology. This approach allows Honda to be efficient but retain control over vendors that have a significant impact on cost and quality.
Honda protects itself against risks with the remaining lower-tier suppliers by requiring that most of them be chosen from its approved vendor list. Manufacturers that radically shrank their purchasing departments when they delegated sourcing may have to expand them in order to handle more relationships.
They may need to supplement or replace people who have only commercial expertise with people who have analytical skills and deep knowledge of commodity markets. A move to managing select lower-tier vendors constitutes a major change for OEMs that have been focusing predominantly on top-tier suppliers.
It can take one to two years to accomplish. In addition to reshaping the purchasing function, it involves getting the buy-in of key internal stakeholders such as the product divisions, the chief technology officer, and the chief financial officer. Since one aim of the approach is to consolidate commodity purchases further, product divisions may be asked to compromise on particular components or materials.
Since they stand to lose power, top-tier suppliers naturally will not be happy with the new arrangement and may resist it. So another challenge is maintaining the peace and persuading them that by enabling the OEM to be more competitive and sell more products, they will profit over the long term, too. The reality is that an OEM simply cannot delegate responsibility for keeping itself competitive to its top-tier suppliers.
It must control its own destiny. A version of this article appeared in the December issue of Harvard Business Review. Thomas Y. Carey School of Business.
Tom Linton is the chief executive of Linton Advisors, a procurement and supply chain consulting firm in Newnan, Georgia. The explanation is simple: the workers will feel more appreciated, accepted, and integrated. HBR used a simple example of a permanent employee versus a contractor.
A contractor is much less likely to feel an emotional connection, or any connection, to a particular company. Thus, she is more likely to put in the minimum effort required to finish the job, and move on. If the company is investing in their leadership and development, the employee is further rewarded. The remaining question is, who is responsible for attracting this external workforce? And who is responsible for assimilating the workforce into the company culture and ensuring a company connection?
Respondents of the survey had opposing opinions. The question is, which strategy works best? While a different strategy may work better for some than others, HBR suggests that HR and procurement should work together to source and manage talent as opposed to just procurement or just HR.
In all, HBR found that best practices surrounding talent management include hiring external help, fully integrating that help into the company culture, and engaging employees cross-functionally at the HR, procurement, and business unit levels.
The result is more likely to be a happy and engaged workforce, which might even help shift the focus from short-term to long-term, which is especially important in this environment where good talent is hard to find and retain.