Supply Chains

Supply Chains

Where in the supply chain does logistics begin? It may seem something of an esoteric question but it's coming up more frequently and more urgently this year as changes in the American economy suggest a deeper shift in demands on logistics departments for businesses large and small.

The question came to the forefront when the Council of Logistics Management changed its name to the Council of Supply Chain Management Professionals, a decision that certainly takes in a larger view but also points to the potential fault lines between traditional logistics management and the broader role of supply chain disciplines in an enterprise.

Those fault lines underlined the discussions at this month's annual NASSTRAC "Shipping Strategies and Logistics" meeting, where an undercurrent of uncertainty regarding the role of logistics ran through the debates on rates, capacity and service.

C. John Langley Jr., professor of supply chain management at the Georgia Institute of Technology, tackled the issue with the kind straightforward, clear presentation that has made him one of the foremost thinkers in the field on logistics - and one of the most important seers on the role supply chains will have in the developing story of business.

In an address titled "The Challenges and Realities of Supply Chain Management," Langley set out 11 promises that a supply chain brings to an enterprise (delivering more than he promises, Langley titled his list "The 10 Promises of Supply Chain Management," offering 10 percent more value-add to attendees at no extra cost).

Why the supply chain and not logistics? "There's something about the phrase 'supply chain management' that gets the attention of upper management more than 'logistics,'" said Langley.

That's because, he says, supply chain management encompasses more than "just logistics," starting with demand management and planning and taking in procurement, management of relationships with (parts) suppliers, operations management and customer relationship management.

By Langley's description, the logistics operation is a tool of the larger enterprise. The difference was evident in the first promise Langley of the supply chain: "to create value and satisfaction for the consumer."

But does understanding the value an enterprise seeks to bring to consumers lead to stronger supply chain services?

Langley argues it can and often does, pointing to the third promises of supply chains, to drive shareholder value. A study by Accenture, he notes, showed that the categories of supply chain leaders and transformers showed the greatest growth among competitors in market value.

Success for both logistics providers and their customers, he says, comes when supply chain managers keep upper management "from looking at the supply chain imprint as a way to lower costs." To do that, logistics managers and senior executives must "understand the impact good service can have on your company's revenues."

And so the fault line between logistics and the supply chain may really be in the executive suite. "I wish we could get to the day when companies say they need to spend 10 percent more (on logistics) because they know it will benefit their business as whole," says Langley.