SCM Reality Check - supply chain management - Brief Article

Bobbin, Feb, 2000

The continuous flood of information on supply chain management (SCM) over the past several years makes me wonder if executives have ever felt as if they were stuck on a raft, floating on a vast sea of "consultantspeak." I envision them staring out toward the horizon, pondering questions like: "Where does the blue-sky world -- that utopian partnership environment with its seamless linkages -- meet the ground that our company walks on?" and "Isn't SCM a software package that I can buy?"

In reality, these questions actually have been and I'm sure still are being asked. One reason is because SCM, like other emerging business disciplines over the years, can be elusive and difficult to grasp out of the starting gate. For example, when SCM began receiving a lot of lip service in the apparel industry, about two to three years ago by my estimate, plenty of gurus were talking the talk and extolling the philosophies, but there was little in terms of industry-specific benchmarks to help define the scope and applications of SCM. As a result, the industry appeared somewhat riddled over the place of supply chain partnerships and technologies in relation to existing industry initiatives, such as Quick Response.

A lot has changed since then. Most notably, supply chain partnerships are now being documented within the industry and, as a result, there are tangible SCM models to evaluate. Based on the analyses that Bobbin has presented in the past two years and other industry results, I would say that an integrated business strategy is the "real" deliverable.

To explain further, a supply chain is often defined as a system of facilities and services that procure materials, manufacture and deliver goods to consumers. Traditional apparel supply chains consist of isolated companies in various industry segments that compete against each other. New supply chain management initiatives, on the other hand, are focused on linking companies from fiber to finished product to consumer in collaborative networks -- with technology as the key enabler. Hence, as the answer to one of the "floating" executives' questions: Software technology is a facilitator of SCM, not SCM itself.

As for the answer to the other question (How can you sort the hogwash theory from the real-world applications?), the results are starting to come in. Perhaps the most interesting studies to date can be found in the book A Stitch in Time, Lean Retailing and the Transformation of Manufacturing -- Lessons from the Apparel and Textile Industries.

The culmination of seven years of research by four Harvard professors, the work reports the results of extensive in-field surveys with companies along the entire apparel supply chain. Highlights include statistics revealing the impact of effective supply chain coordination.

One survey, for example, which covered 30 percent of the U.S. apparel base, found steadily increasing profits associated with increased implementation of SCM practices, including EDI, improved order entry systems and floor ready merchandise programs. More specifically, one company in the survey reported decreasing stock outs by a factor of 10 with the implementation of an "Accurate Response" program, which uses demand information to predict what will sell later in the season. And the list could go on.

One of the book's authors, professor and researcher Jan Hammond, joined a prestigious group of presenters at the recent conference "Creating Value Through Supply Chain Management," a November 1999 presentation of the Apparel Research Committee of the American Apparel Manufacturers Association (AAMA). As she simply summed it up: "In the medium to long term, finns without excellent supply channel management capabilities will fail to be competitive."

Now for the reality check. To their credit, Hammond and her collaborators, as well as other industry experts, have been up-front in documenting the difficulties companies have experienced in the SCM arena. Namely, they have found that increasing product proliferation and decreasing product lifecycles make forecasting in an SCM environment extremely difficult.

Moreover, noted Clay Parnell, a principal with Kurt Salmon Associates, who also took part in the conference: "A lot of SCM is about managing expectations. ... Many times failure is perceived only because things take longer or cost more than expected."

The bottom line according to the experts: SCM is a continuous improvement process, not a project or a software package, and without this mindset the industry will not be able to leverage SCM as a competitive advantage.

LISA C. RABON

Lisa C. Rabon is editor in chief of Bobbin.