Supply Chains and Supply Networks
The application of TOC and Interdependency Engineering
Ask anyone engaged in Supply Chain Management about his or her measure of success and the answer is some form of ‘right stuff, right place, at the right time’. Some may even add ‘right quality, right price’. Ask about problems encountered in meeting this objective and common responses include ‘too much of this, not enough of that’, ‘too much inventory’, ‘too much expediting’, ‘long lead times’, ‘material shortages’... and the list goes on. The all-too-familiar end result is that customer demand is not always met – or perhaps customer demand is met, but at too high of a price.
Does any of this sound familiar? If so, then a good question seems to be, “ Why is Supply Chain Management so challenging?”
We do know that Supply Chains are complex structures. In fact, even the name does not accurately describe what they really are. The ‘chain’ analogy portrays a linear relationship between links, whereas real Supply Chains are more like a ‘grid’ of chains – with many inter-related links. Essentially, they are more like Supply Networks, with many interdependencies.
To be more accurate, there are actually two different aspects to Supply Networks. One part of the network is more concerned with the logistics of movement to locations and storage of material where it can best satisfy customer demand. That’s really the Supply Network part.
The other aspect of a Supply Network is probably better described as a Conversion Network. It’s the element that is involved with the logistics of converting raw material to finished goods. Or perhaps ‘non-functional material’ to ‘repaired material’. This component is commonly called Production or Operations.
Both Supply and Production / Operations have their own unique challenges, and when they are combined into a Supply Chain, the level of complexity certainly does not decrease! But just as today’s highly complex manufacturing machinery is actually a combination of elementary building blocks of “simple machines” (think of inclined planes, levers, etc.), modern-day Supply Networks are actually combinations of four elementary building blocks of flow. Understanding these building blocks and their unique characteristics is the key to configuring and managing the interdependencies innate in every Supply Chain.
For those organizations dealing with the challenges of managing a Supply Chain or Network or Production / Operations (Conversion Network), AGI has customized TOC solutions for both. One focuses on the proper configuration and management of the Supply Network (called TOC Supply Chain, Replenishment, Demand-Pull). The other focuses on the proper configuration and management of a Production or Operations environment – (called TOC for Production and Operations, Drum Buffer-Rope). The know-how of these two elements, either on their own or in combination, provides the know-how to permanently alleviate the problems encountered in Supply Chain Management.
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