Value(s) networks: Part 2 – The supply chain
Tuesday, 20 April, 2010 Leave a comment
As individuals and businesses we all consume products and services that are a result of, often, hybrid versions of a linear production method that is hundreds of years old. OK so it’s hardly the most startling revelation with which to open a blog item. But stick with me. To see where we are going you, first, need to understand where we have been, how it looks and what the subtle (and not so) changes are:
Old time factories had a linear layout, because there was just one steam engine driving one drive shaft. Every machine in the shop had to line up under the shaft (connected by a pulley) in order to get power.
That metaphor extended to the people working in the factory. Each person was hired and trained and arranged to maximize output. The goal was to engage the factory, to feed it, maintain it and have it produce efficiently.
Distribution was designed in sync with the factory. You wanted to have the right number of trucks and drivers to handle whatever the factory produced and to get it where it needed to go.
Marketing was driven by the factory as well. The goal of marketing was to sell whatever the factory could produce in a given month, for as little as possible.
And things like customer service and community relations were expenses, things you did in order to keep the factory out of trouble.
What happens when the factory goes away?
What if the organization has no engine in the centre that makes something. What if that’s outsourced? What if you produce a service or traffic in ideas? What happens when the revolution comes along (the post-industrial revolution) and now all the value lies in the stuff you used to do because you had to, not because you wanted to?
Now it doesn’t matter where you sit. Now it doesn’t matter whether or not you’re adding to the efficiency or productivity of the machine. Now you don’t market to sell what you made, you make to satisfy the market. Now, the market and the consumer and idea trump the system.
Suddenly, the power is in a different place, and the organization must change or else the donut collapses.
Buying trends have changed. We are increasingly aware of the frailties of this system even from the best manufacturers. Toyota: What they had viewed internally as a “$100m win” from cost savings on components, is an illustration of the financial pressure upon a supply chain. Why? Because the prevailing business culture has been about sacrificing tried and tested strategies in favour of the “quick win”. Results before sustainable profit. Financial reward before customer satisfaction…or safety!
According to Zurich “…70% of most companies costs today…” come from the supply chain.
Understanding and managing the inter-connectedness and interdependencies of a modern Corporation is VITAL for company leaders and their shareholders. BUT really smart organisations have sussed that the wider their network the greater the need to ensure that STAKEHOLDERS are at the heart of all that they do.
This is 2010 and the world has changed. But many “traditional” and professional businesses who possess values and skills that they believe are there to be “bought”. In short they want to do business but not do selling. It is alarming the number of businesses who just aren’t good at sales! They fail to recognise that they are missing out on opportunities to turn their commitment to their existing and future customers to their advantage.
A VALUE NETWORK approach offers the opportunity to achieve so much more by embracing INTERDEPENDENCE.
There are obstacles and issues to be overcome but with the collective will of like-minded individuals these are never insurmountable.
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