How fit is your supply chain?

by Dr. Helmut Abels

Under the headline “Are You up for the Supply Chain Challenge?”, which loosely translates as the question of willingness to rely on the supply chain, an English university on the Internet vividly outlines an everyday situation that could possibly also take place in your supply chain: You go to the nearest music store and would like to buy the new CD of your current music group. “Sorry,” says the sales assistant, “this CD is currently sold out. “They are naturally disappointed and either go to the nearest store or simply forget the whole thing. Apart from your personal decision, this situation certainly has consequences for the supply chain. For the music store, the non-existent CD means a lost purchase and possibly a dissatisfied customer who will perhaps do his shopping elsewhere in future. The de? A CD producer who loses sales, has an unhappy retailer and has to listen to the anger of an unhappy music group. That leaves the group itself: It loses commission, possibly a fan, and may never be able to rise to number 1. Conclusion: Everyone involved loses and no one is satisfied with their situation.

This example shows simply and accurately how the delivery situation can also present itself in many other supply chains. So how can we ensure that everyone involved comes out of this situation as winners? The term supply chain generally stands for a sequence of actions and events to satisfy (end) customer demand. The term supply chain covers all technical and logistical functions from the procurement of raw and primary materials, the production of semi-finished and finished goods, the distribution of finished products to the end customer, supported by transportation and warehousing activities as well as information technology. To ensure all of this, end-to-end planning of the processes involved across all stages is essential for the efficient management of the entire supply chain. The objectives are, on the one hand, to ensure the desired delivery readiness and delivery reliability and, on the other hand, to ensure the most cost-efficient processing possible.

Discussions on supply chain management are increasingly focusing on improving information technology. Aspects such as the increasing spread of e-commerce in companies, the definition of standards such as XML and the development of special software for supply chain management play an important role here. All these developments are certainly important, but not sufficient conditions. The task of supply chain management is the integrated optimization of the chain, and this requires not only the right technology but also the right organizational coordination of all processes involved in the supply chain. This organizational design aspect raises two new questions in practice: Where does the overall optimum of a supply chain actually lie and how can the companies involved benefit from it? Both questions have the same origin, because it is well known that the overall optimum is not always the sum of the individual optima. The coordination of the chain therefore requires greater openness on the part of all parties involved, e.g. with regard to the provision of detailed information about their manufacturing processes, the current capacity situation and the cost situation. Redefining planning objectives and selecting suitable planning tools and methods for each company involved is also of paramount importance.

Last but not least, clarification of the distribution rules with regard to the expected synergy effects is an important issue. It must be conducted with great sensitivity so that individual “partners” do not fall by the wayside in the pursuit of the common overriding objective of profit maximization, as this in turn would result in a failure to achieve the overall optimum for all.

Picture of Prof. Dr. Andreas Kemmner

Prof. Dr. Andreas Kemmner

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