Supply Chain – the Way We Were. The term “supply chain” many years ago was a phrase that not many people understood, but it distinctly described the nature of moving goods to market. Everyone in the supply chain knew who they were linked to in the supply chain. The supplier linked to the manufacturer, and the manufacturer linked to the distributor and so on. Also, every member of the supply chain knew what the end product was and who the end-customer that would use the product. Additionally, the supply chain usually only had a couple of links. If one link failed, everyone in the supply chain was affected. If all the links in the supply chain were strong, then the entire supply chain was strong.
Supply Chain Network – the Way We Are. The term “supply chain” now is a commonly used term to describe the process of moving goods to market, but now the term “supply chain” does not fit what is really going on in the supply chain. The supply chain has turned into a supply chain network. A computer chip manufacturer may manufacture a computer chip, but many times chip manufacturers do not know if their chips will be in a TV or an electronic toy. If a link in the supply chain network fails, it does not necessarily mean disaster up and down the supply chain any more. Ideally, each link in the supply chain network has many links and is not completely dependent upon one link in the supply chain network. With a network, one chain will not bring down the system. On the other hand, a supply chain network can become fairly unpredictable when it is under stress such as the current recession. You can be a manufacturer of machine tools in California, and be immediately affected by the changes in the local economy in China.
Wall Street Journal posting, Clarity Is Missing Link in Supply Chain, has a great write-up on the effects that the current recession is having on an electronics supply chain network. It brings home the point that most supply chains now have many connections, many of them global, and that many supply chain “links” have dependencies to other distant links in the network. In many cases, these dependencies and risks are not known to many businesses in the supply chain network. Not sure if I agree with the author’s use of the work “clarity” in the title. It implies that supply chain networks need clarity. Not sure that will happen within a complex supply chain network. What is needed is redundancy in the supply chain network and methods to manage risk. No supply chain link (business) should be completely dependent on another business for its survival.
Tags: international, supply chain