Key Drivers of SCM
Key Drivers of SCM
Supply chain capabilities are guided by the decisions you make regarding the five supply chain
drivers. Each of these drivers can be developed and managed to
emphasize responsiveness or efficiency depending on changing business requirements. As you
investigate how a supply chain works, you learn about the demands it faces and the capabilities it
needs to be successful. Adjust the supply chain drivers as needed to get those capabilities.
The five drivers provide a useful framework for thinking about supply chain capabilities.
Decisions made about how each driver operates will determine the blend of responsiveness and
efficiency a supply chain is capable of achieving. The five drivers are illustrated in the diagram
below:
1. PRODUCTION – This driver can be made very responsive by building factories that
have a lot of excess capacity and use flexible manufacturing techniques to produce a wide
range of items. To be even more responsive, a company could do their production in
many smaller plants that are close to major groups of customers so delivery times would
be shorter. If efficiency is desirable, then a company can build factories with very little
excess capacity and have those factories optimized for producing a limited range of
items. Further efficiency can also be gained by centralizing production in large central
plants to get better economies of scale, even though delivery times might be longer.
5. INFORMATION – The power of this driver grows stronger every year as the technology for
collecting and sharing information becomes more wide spread, easier to use, and less expensive.
Information, much like money, is a very useful commodity because it can be applied directly to
enhance the performance of the other four supply chain drivers. High levels of responsiveness
can be achieved when companies collect and share accurate and timely data generated by the
operations of the other four drivers. An example of this is the supply chains that serve the
electronics market; they are some of the most responsive in the world. Companies in these
supply chains, the manufacturers, distributors, and the big retailers all collect and share data
about customer demand, production schedules, and inventory levels. This enables companies in
these supply chains to respond quickly to situations and new market demands in the high-change
and unpredictable world of electronic devices (smartphones, sensors, home entertainment and
video game equipment, etc.).