Small and medium-sized enterprises (SME) seldom “own” their supply chains. That is to say, virtually all manufacturers are part of other companies’ supply chains, and major decisions and initiatives are sponsored or determined by others. Does it matter? And is supply chain management still important, if your company is not in control of its own destiny?
The question of who truly manages a given supply chain is both esoteric and important. Since a supply chain is almost by definition a group of separate companies working in concert to achieve a purpose (source/make and deliver products to customers), it is not a hierarchical organization in the traditional sense. There is no obvious entity with the authority to dictate who does what. So who actually manages the supply chain?
The theoretical answer is that there is a nucleus firm or channel master that organized the supply chain by gathering the participants together and getting agreement on roles and responsibilities. In theory, all partners are equal from that point on and all work together to get the goods to the customers as efficiently as possible. The reality is that the customer is king, even in the world of supply chains competing with supply chains. The problem with that is the customer won’t tell you how to manage inventories or select transportation modes – they only want their products delivered as ordered.
So, who takes responsibility for supply chain management? It’s really a voluntary position, completely unofficial and unrecognized (there’s no such thing as a certified channel master). The channel master firm gets the title by default, through its actions, and mostly comes down to how much clout they have in their network. The most likely candidate for this position is the OEM manufacturer, but it can also be a big retailer. It is, most often, the brand name that the customer or consumer goes to for their purchases. Airlines buy from Boeing and Airbus. Households buy from Amazon and Wal-Mart. When you think about it, these are the firms that are responsible for customer service so they are the most concerned about an efficiently operating supply chain.
Does this mean, therefore, that a mid-sized supplier to OEMs or retailers can just sit back and do what the nucleus firm asks of them? Of course not… at least if you want to remain a viable part of those supply chains.
It’s safe to assume that the channel master will be pursuing new technologies and tools to drive efficiency and responsiveness into their supply network and reduce inventory and costs.
Participating firms will be expected to adopt these same technologies and participate in the digital supply chains that are actively evolving right now. You will likely be expected to provide real-time data through IIoT sensors and smart devices as well as access to data from your operations management systems (MES, ERP). If your channel master is really in touch with the state-of-the-art, you will get the opportunity to collaborate on plans, forecasts, schedules, etc.
Although the channel master may want to direct and control the entire supply chain “from the mine to the landfill”, the truth is that control passes through each tier or echelon. The OEM deals directly with Tier 1 suppliers and sometimes Tier 2 suppliers, but directives and requirements get to most Tier 2 and just about all Tier 3 and lower suppliers through their individual customers on the next higher Tier. As a mid-sized manufacturer, you are a link in the chain and are responsible for managing your own sourcing and distribution, even if the ultimate orders come from several steps further up the chain.
Stay aware of what your channel master is doing in terms of technologies, communications, and requirements for their direct suppliers – you can be sure that most if not all of those requirements will filter down to your company, and probably sooner than you might think. Keep your own technologies up-to-date and compatible with what the channel masters are implementing so you’ll be well positioned to act when the requirement comes down the line. And you don’t even have to wait for the call. Ideally, you’ll see the same potential benefits that the channel master is seeing and you can reap those benefits ahead of your competitors at your own level by gaining control of your piece of the supply chain before it becomes a requirement.
Smaller firms can and should be in control of their own supply chains, whether or not they are a channel master or a link in a larger supply chain. The digital supply chain is moving incredibly fast and you don’t want to get run over by this behemoth. Why not get a running start and keep pace so, when the requirements come, you’ll be able to smoothly hop on board to maintain your position as a top supplier in your channel master’s supply chain.
APICS Enterprise Insights – Q3 2018