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Route to Market & Supply Chain Blog

The Supply Chain Function - What’s That All About?

Posted by Dave Jordan on Thu, Jan 14, 2021

Ok, I admit it, I started my career as an R&D scientist-type developing FMCG products for the European and Middle Eastern markets. I was actually using my chemistry qualification in industry, which is an opportunity not everyone receives after graduation, so I enjoyed my job. However, after numerous run-ins with condescending colleagues, I realised that few people understood how a product makes the transition from idea to bench top through pilot plant testing to supermarket shelves.

Back in the 1970s (just after UK joined the Common Market which became the EU), the Product Development processes involved a large number of people but this was hardly a closely-knit team with definitive job descriptions let alone carefully aligned roles and responsibilities. Inevitably, “somebody important” was not part of the project team so with hindsight it was not surprising delays and mistakes would occur. “Somebody” was to blame every time!

Supply Chain departments started to spring up in FMCG, Pharma and other sectors as newly formed organisations around rudimentary ERP deployment. Willing recruits were taken from other departments; commercial, manufacturing, sales and even R&D! Few had any real understanding of Supply Chain requirements and they certainly did not have formal qualifications or training. Thankfully, qualifications and training are now widely available through many organisations such as CIPM and the Supply Chain Council.

Although it might sound logical now, I am not sure who coined the term Supply Chain though, do you know?

supply chain function definition

I have taken a few Supply Chain definitions from the internet and started with the individual word dissection from the Oxford English Dictionary:

“Supply, noun.

  1. An amount of something that is available for use when needed.
  2. The action of supplying something.”

“Chain, noun.

  1. A row of metal rings fastened together.
  2. A connected series of things e.g. a chain of events.”

Seems reasonable and common sense but what about the more technical definition from the Council of Supply Chain Management Professionals (CSCMP):

 “Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology.”

The text in bold is eye-opening!

Wikipedia chips in with “A supply chain is a system of organisations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains.”

I could not resist asking the people at the aptly named Supplychaindefinitions.com?

“… the movement of materials as they flow from their source to the end customer. Supply Chain includes purchasing, manufacturing, warehousing, transportation, customer service, demand planning, supply planning and Supply Chain management.  It is made up of the people, activities, information and resources involved in moving a product from its supplier to customer. Although this Supply Chain definition sounds quite simple, effective management of a Supply Chain can be a real challenge.”

A challenge that is so often underestimated and misunderstood.

Investopedia.com offers up this definition which I particularly like as it highlights Supply Chain as a “crucial process”. Yes, a crucial process and not a second-class cost centre which is sometimes the perception.

“The network created amongst different companies producing, handling and/or distributing a specific product. Specifically, the supply chain encompasses the steps it takes to get a good or service from the supplier to the customer. Supply chain management is a crucial process for many companies, and many companies strive to have the most optimized supply chain because it usually translates to lower costs for the company. Quite often, many people confuse the term logistics with supply chain. In general, logistics refers to the physical distribution process within the company whereas the supply chain includes multiple companies such as suppliers, manufacturers, and the retailers.”

Rightly, Supply Chain is now part of every serious company aiming to put a product in front of customers and consumers whether this is FMCG, Pharma, Telecoms, DIY, Paints etc. However, is it seen as “crucial”? Even today (with UK out of the EU once more), I feel some companies still underestimate the value a “storming” Supply Chain operation brings. Success is not all about brands and advertising as you can spend all you like on clever TV advertising but if your SKU is not on the shelf, you do not make a sale.

 Nevertheless, in some companies Supply Chain does not have a discrete representative at the “top table”. If you delegate Supply Chain management to your Sales Director (or worse, upwards to the CEO) then you should reconsider that decision. One way of ensuring the continuing potential for sustainable sales uplift is NOT to report the Supply Chain community into another non-specific and/or unskilled company function.

 Supply Chain Management is a recognised profession in its own right. Staff it correctly, recognise the contribution and provide continuous training and you will have a valuable competitive edge.

Tags: FMCG, Dave Jordan, Pharma, Supply Chain, S&OP, DIY

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