Supply chain management

The goal of supply chain management
is to balance supply and demand,
profitably, for products and services.

Supply chain management involves many
“rights,” according to Suresh Sethi, Ph.D.,
director of the Center for Intelligent Supply
Networks (C4iSN) at The University of
Texas at Dallas School of Management:

“The delivery of the right product at the
right price to the right store in the right
quantity to the right customer at the right
time. Similar rights apply to services.”

Delivery of goods and services to customers in modern economies requires a network of enterprises. “It is not uncommon for
a single customer’s request to be fulfilled by
an average of 20-plus supply network partners,” says Sethi. “This increases the complexity of managing supply chains. Add
other complexities such as demand uncertainties, supply risks, transportation hazards,
product governance and environmental regulations, and the task of managing supply
chains becomes enormously difficult.”

Smart Business spoke to Sethi about
ways to improve supply chain management.

What is an intelligent supply network?

A supply network consists of all parties
involved in fulfilling a customer request.
An intelligent supply network is one that
can adapt efficiently and profitably to
unforeseen events. This is accomplished
by designing flexibility into the network
and the presence of software and hardware agents that enable the network to (1)
detect shocks and modify decisions in
response, (2) learn in the process, and (3)
make better decisions in the future.

What are some of the current drivers for
intelligent supply networks?

Global competition, outsourcing and
poor visibility — a firm’s ability to collect
and analyze distributed data, generate specific recommendations and match insights
to strategy — have increased supply-and-demand risks. There is a tremendous need
to transform static supply chains into adaptive ones to boost their operational agility.

Other drivers include lack of trust and coordination, and inability to allocate profits fairly. Many supply chain partners have
conflicting goals and objectives. Solutions
need to be explored in order to align those
goals and objectives, perhaps in the form
of incentives and contracts for the benefit
of all members of the chain.

Why are today’s supply networks inefficient?

Supply chains are not well integrated. This
happens when production cannot access
real-time purchasing information. Up-to-date parts and component information is
not available. Product design collaboration
is made difficult because of incomplete
CAD standards. Frequent supply shortages
occur because of machine breakdowns or
transportation hazards. Short product life
cycles result in high demand variability and
poor forecasting. Complexities are present
due to globalization and outsourcing. High
levels of inventories result from unforeseen
events and poor visibility.

How can corporations improve supply chain

Supply chain partners should treat supply
chains as end-to-end entities. Focus not on components, but on the entire chain.
Ensure visibility and proper coordination.
Explore contracts and incentives that will
align the supply chain partners. Ensure
proper cash flows to align with the flow of
products and services.

What are some of today’s most challenging
supply chain problems?

When introducing new products in highly
decentralized global supply chains, there is a
need to align product life cycles with supply
chain activities in order to bring high-quality
products faster to market and at low cost.
Use of technologies such as Radio Frequency
Identification (RFID) and decision support
systems may provide better visibility. Thus,
methods have to be devised to evaluate
investments in these technologies, including
models for making optimal decisions when
faced with poor information.

Additional challenges include: How to
deal with risks faced by supply chains?
What are the objectives to be maximized
when faced with such risks? How do we
coordinate supply chains so that the objectives of the various partners are aligned?
Again, this requires the development of
proper contracts and incentives, and methods of allocating profits to the partners.

How can schools help?

Schools such as UTD’s School of Management offer supply chain management
concentration in its graduate programs and
have high-quality doctoral programs devoted to supply chain management research.

Our C4iSN was created to help local industry improve supply chain performance, be
the knowledge portal and thought leader for
the supply chain community, and to advance
scientific and operational knowledge.

SURESH SETHI, Ph.D., is director of the Center for Intelligent
Supply Networks and Charles & Nancy Davidson Distinguished
Professor of Operations Management at The University of Texas at
Dallas School of Management. To learn more about C4iSN’s
activities, contact Divakar Rajamani, managing director, at (469)
371-4300. Reach Sethi at (972) 883-6245 or [email protected].