I reviewed with a client recently the overall historic progression of supply chain thinking, and it had a somewhat jarring effect. I think we’re all familiar with the early ideas of what I call “General Ledger” driven supply chain – there’s a line item for Procurement, there’s a line item for Manufacturing, a line item for Logistics… And you optimize those organizations to be very efficient.
The problem of course is that efficiency in any one focus area may drive inefficiencies in the other – great purchasing may drive inefficient manufacturing; great manufacturing efficiency may drive terrible logistics to the customer. The highlight of this kind of thinking is essentially that you’re not just inwardly focused; you’re even blind to the issues in your own company. The next stage was focus on the supply chain, the great discovery: how you focus on orchestrating activities cross-functionally to efficiently move a product to the customer. Unfortunately, there you can also evolve the “General Ledger” supply chain to the “Product P&L” supply chain – the vital link to the customer is still hidden, and while you may be very optimal for a product, you’re not optimal in a market. Continue reading