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That supply chain stuff is really tricky – says Elon Musk.

I agree, Elon, I agree. When one of your business goals is to colonize Mars, shipping is going to be a heck of a job, it doesn’t matter if you are visionary. This is due to the fact that even the simplest supply chains, with only a handful of suppliers, are rather complex nowadays. A good logistics manager will need to address issues such as transport services, inventory management, reputation, sustainability, asset management and legal requirements. The good outcome of these processes will then depend on several variables, such as business agreements, personal relationships, staff morale and market conditions. This balancing act is not easy to pull off for anyone (especially in the current market conditions), let alone if you want to build a city on a different planet.

However, Space X can be of inspiration to those looking to keep in check all the different pieces of the supply chain puzzle. Even though it has experienced its controversies, Musk’s company has implemented a couple of clever supply chain management strategies, leveraging complexity and making an ally out of it. One the one hand, part of the production of key manufacturing components has stayed in-house, while on the other one Space X engaged in the active scouting of new, exclusive partners and collaborations.

This reveals the importance of complexity factors in the supply chain, which have the potential to boost supply chain efficiency, even though some might see complexity only as a negative trait. In the words of Martin Christopher, a well-known academic in supply chain management: “In its strictest sense, complexity does not mean complicated, but rather it describes a condition of inter-connectedness and inter-dependencies across a network where a change in one element can have an effect on other elements – often in unforeseen ways”.

As shown by Space X, the role of collaborations, partnerships and the relationship with suppliers can help a company strengthen its supply network. Supply chains are often subject to changes and shifts in the market, which are cascaded through the various tiers, even in normal times. As customers change their preferences, legislations change and technology kicks in, it is pivotal to adjust and innovate internal processes.

A key capability that organizations must develop is therefore flexibility, which can take many forms. It might consist in the ability to switch from one supplier to another or to broaden the capacity of the inventory if there is a larger request for a specific product. It also involves an agile management of the workforce, whether you need to employ a different number of internal resources or external suppliers. Furthermore, being flexible entails having a flexible mindset towards change, as in the case of the implementation of a new technology.

It is also important to be proactive and lead change. Many companies do not do this, they tolerate or endure change at best, but they never seize the opportunity of making it a success. Reacting just won’t do anymore, instead companies should be fast in capturing future trends or even creating them. Easier said than done you might be thinking. True, but it has been proven by academic studies in supply chain literature that partnerships and collaborations are a good solution to turn uncertainty into success. Shared tasks, knowledge and person power create an advantage in terms of market posture, ultimately having a very real impact on the bottom line. In addition, collaboration can also produce benefits when it comes to inventory management, as it might improve its efficiency.

However, building a supply chain based on collaboration is not an easy task. Some believe they can make up for the lack of trust with technology solutions such as blockchain and artificial intelligence, which is not ideal. Technology is not magic; it can only work if there is the right organizational culture. Others, differently, tend to over rely on contracts; however, service level agreements are a form of protection, but they do not ensure collaboration and efficiency by themselves. Hence, it is important to establish a good business relationship with suppliers. Whilst it may not be possible to reach out to all the vendors in the network, the focal company should at least focus on Tier 1.

Key takeaways

In conclusion, here are a few takeaways that might help supply chain professionals:

1) Talk to your suppliers. Make sure you understand how they conduct business and their business culture;

2) Establish trust and communication. Supply chains are often subject to changes and market variations, it is important you talk to your suppliers regularly to ensure operations are running smoothly;

3) Don’t rely on contracts too much. They are very important but it can be the case that a breach might cause a level damage that exceeds the compensation agreed;

4) Check for standards and professional certifications. Whilst these should be only a starting point, it is a good indicator that your supplier at least makes the effort to certify against best practices;

5) Establish partnerships. These can help you share costs and increase efficiency, especially in the case of unforeseen events;

6) Remember that innovation is not just technology. Finding a new way of doing things, establishing new collaborations and investing in your workforce is also innovative and it might bring more benefits than an algorithm.

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