Judgment Call

February 19, 2013 8:24 pm

Can companies know every supplier?

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The horsemeat scandal has raised questions about the complexity of supply chains

THE PROBLEM

The horsemeat scandal in Europe has focused attention on the complexity of supply chains that involve multiple providers and countries. But can companies track what happens at every sub-supplier, even with advanced management techniques?

THE ADVICE

The manager: Bob Lutz

A complex supply chain is the organisational equivalent of a complex living organism in which each element, specialised in function, thrives symbiotically within the whole. But the number of elements increases risk.

In the car industry, recalls are almost never caused by the manufacturer’s own engineering lapses, but by deviation in some material or process at a supplier, sub-supplier or sub-sub-supplier.

Yet there is no viable alternative. In modern industry and agriculture, failure to capitalise on the efficiency of the global supply chain would render the enterprise uncompetitive in both cost and quality. The bottom line is that it is a calculated risk.

The writer is a former vice-chairman of General Motors and author of ‘Car Guys vs Bean Counters’

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Jay Swaminathan

The academic: Jayashankar Swaminathan

Often what leads to mishaps is not the complexity of supply chains but the lack of management. Companies must monitor process, quality and regulatory standards from the start. Lack of awareness and variations around standards worldwide might lead new partners to adopt questionable approaches. By quickly helping a new partner learn “their way” of doing business, companies can avoid major risks.

It is becoming a best practice to monitor beyond tier-one suppliers. The best companies are getting buy-in from their immediate suppliers to develop visibility and control across the extended supply chain.

The writer is GlaxoSmithKline distinguished professor, University of North Carolina Kenan-Flagler Business School

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Timothy Payne

The analyst: Tim Payne

There are numerous examples of complex global supply chains that deliver quality products. But management practices have to be applied across the key external trading partners. Visibility is fundamental from the beginning of the supply chain through to the end consumer. Such visibility must include not just orders and inventory, but quality and compliance, costs, future requirements and even risk.

Successfully managing a complex supply chain requires clear vision with supporting strategy and supply chain software. In multi-tier supply chains, such as food processing, the application of new cloud-based computer technologies becomes critical to effective process monitoring.

The writer is vice-president of supply chain research at Gartner

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