What 's Wrong With Supply Chain Systems Essay

What 's Wrong With Supply Chain Systems Essay

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The articles “What’s Wrong with Supply Chain Metrics, Becoming Demand Driven and Staying Demand Driven” by Debra Smith and Chad Smith discuss a very important question whether managers use appropriate tools in a management decision-making process or not. Also, there is a misconception that return of investments (ROI) and overall effectiveness can be maximized through the minimization of unit cost.
There is an immense importance of the flow of information and materials in supply chain systems. It is very true that today companies direct their efforts toward maximizing their profits by minimizing of unit costs. Sometimes, such efforts can impede overall a company’s system efficiency and flow. Also, it is crucial to realize the difference between linear and nonlinear complex systems, since most companies face the problem of their existing complex supply chain system, so they need to reevaluate such a system and assess how it affects a company’s overall performance and flow. As mangers we should try to limit a complexity of existing supply chain systems and try to adopt linear systems.
The article suggests a basic blueprint for change, which includes three steps: installing the right thoughtware in the organization, becoming demand driven and deploying smart metrics. The first step underlines an importance of developing solutions from a system-and-flow-based perspective, as I discussed before. The second step focuses on an idea of adopting new position-centric efficiency rules and a new position-and-pull mode, which ultimately maximize the flow of relevant materials and information. Managerial accounting books also suggest that the push-and-promote mode of operation must be shifted with the position-and-pull approach. The final step ...


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...ncouraged to think systemically. Managers must be able to identify the right rules, metric objectives, tac- tics, and reporting tools to drive flow as well as identify and remove inappropriate and outmoded cost-centric rules that block flow. The new Zara’s operational model includes tactics, tools, and metrics align to a flow-centric strategy.
A demand driven information system at Zara was designed to plan, execute, and focus on improvement using a visible, real-time feedback loop focused on the flow through its supply chain. The ultimate result is maximized ROI, without cutting unit cost.
This example shows how improved supply chain system can change a company’s dynamics, and how crucial it is to analyze current supply chain systems, because managers usually think that cost optimization is the most effective way to improve a company’s overall financial performance.

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