Business Bursts: Supply chain

Leslie Budd, Reader in Social Enterprise
Supply chains connect the production or raw materials to the final consumption of goods and services in shops and malls or online.  They’re both static but dynamic, because you’re talking of a throughput of say steel that comes from iron-ore, which comes from coal, which goes into pots and pans, cars, steel girders for bridges and offices, through to the final sale at well-known high street shops, or again through internet sales.

There are two types of supply chain you can distinguish: agile supply chains and lean supply chains.  Lean supply chains usually are concerned with a single good, let’s say a car.  A car is made up of various parts, including tyres, wheels, steering wheels, even a music system.  And in the case of automobile manufacturers or car manufacturers they seek to shorten those lean supply chains so that the cost at each stage of production from buying the steel, to part manufacturer supplying them with steering wheels or wheels, creates a greater value for them at less cost.

Nick Spencer, Supply Chain Director: MINI Oxford
Our customers value the highly individual nature of Minis.  They like to be able to customise their cars to their own specific requirements.  Right up until seven days before the car goes into production the customer can change his mind, for example, about the exterior colour or the interior options.  It means we have to be particularly flexible.  Of course we can’t hold that volume of stock on site; we can’t react from our stores in order to be able to build that variety, our suppliers have to help us. They have to be just as flexible as we are, being able to supply to our customer requirements in the order that we pull it.  That means that they have to be able to call different production schedules and different production mix just as often as we do.  That extends beyond the first tier suppliers, those who supply directly to us, in a domino effect extending back through an extremely complex and extended supply chain.

Leslie Budd
If we take a high street shop like WH Smith, it’s like an emporium of the whole earth.  You have water, confectionary, books, pens and perhaps even in the future iPads, and they bring these goods together under one roof.  So they’ve having to negotiation simultaneously a number of supply chains.  Say it’s from a water spring in deepest rural France to its bottling and shipping to its stores all over the UK.  Similarly, you could find the books it produces, that the editor for the book was in New York, the writer was in Afghanistan, and the paper is printed and produced in Brazil.  So in trying to actually create shorter supply chains and therefore greater value for these kinds of companies is a bigger management, but also marketing challenge particularly because of concerns about sustainability of the goods they sell and the energy input into producing them and where they come from.

3’52”