Sometimes duplication is necessary

I find it fascinating to watch a business open up to supply chain thinking. One day it operates in isolation, mistrusting the competition, suppliers and clients alike. Next, it opens up to a new world of supply chain collaboration, integration and sourcing.

Despite this, one aspect of the business should not change: the performance drivers.

While supply chain integration presents new possibilities, the motivation should remain consistent. It should be a balanced mix of customer service, quality, cost reduction, and responsiveness - and it should not forget the underlying goal of making money.

The danger comes when the business loses sight of these drivers or when one measure, like cost reduction, for example, takes over.

Of course it makes sense to remove duplication from a supply chain to reduce costs. Vendor managed inventory is a fantastic example. You should remove the duplication of stock being in two places, and let one supply chain link manage the combined replenishment.

But can you take out duplication in quality control in the same way? A friend put it to me once in very simple terms: "Never forget who the supplier works for!" The answer is, first, for himself.

Collaboration and integration does not necessarily mean removing certain links completely. Take the forecasting process as an example. It is an ideal candidate for supply chain collaboration, where better information flow will improve the accuracy.

But you should never abdicate the process, using your customers' forecast data without applying your own knowledge and expertise.

In fact, you should think about fourth-party logistics: here we have actually introduced an additional link to the supply chain, in order to optimise the use of third-party logistics.

Hugh Williams​ is founder of supply chain planning specialist Hughenden​.