Just as we were all getting used to talking about supply chain rather than logistics, it appears that the term is running out of steam and no longer describes what (for want of a better expression) supply chains do.
In fact, there is a better expression according to John Gattorna, the supply chain guru who gave the keynote address at the Extended Supply Chain conference in London last week.
The term we should be using, he says, is “Value Network”. Gattorna, one of the most respected and original thinkers on the industry, argues that what the term describes is a network of multiple pathways through a business covering both supply and demand.
The need for new terminology reflects Gattorna’s recent work on the dynamic nature of supply chains. He argues that when it comes to supply chain, one size does not fit all and organisations need to be able to configure their supply chains to meet different demands.
There are three or four dominant buying behaviours that need to be accounted for, he says.
* Collaborative. Loyal customers that can make up to 25 per cent of the business and are all too easily overlooked.
* Efficient customers who demand consistently low cost are all too often over-serviced.
* Dynamic customers. Gattorna described these as volatile – demanding rapid response to unpredictable supply and demand.
The fourth group, which is much smaller, came under the heading of “Innovation”. Examples of this would be humanitarian supply chains where rapid reaction and innovative thinking are vital.
This implies the creation of three or four different supply chains (or value networks). Of course, cynics might say that there are plenty of organisations that struggle to make just one work efficiently.
What cannot be denied is that it makes sense to tailor supply chains to the demands of the customer and Gattorna has a lot more to say on how this is achieved.
But the question for me was: how often do we ignore our best customers to meet the demands of those who are less loyal or profitable to our business?
