Supply Chain, A Competitive Advantage

This week Business Week published an article about Apple's competitive advantage (http://www.businessweek.com/magazine/apples-supplychain-secret-hoard-lasers-11032011.html).  Frankly, this is not the first article, nor most insightful article, about this topic but it inspired me to this more broadly about supply chain...

(Petty comment first:  I frankly dislike how everything Apple does now is treated like a new revelation...fire from the gods, if you will.  Enough said.)

About seven years ago we started laying out a plan for how supply chain could become one of our competitive advantages as we tried to turn around Sony Ericsson.  A few elements (there were many more) of our plan were:

1. establishing a transparent demand-creation process with the regions
2. providing our factories and suppliers with clear visibility to changes in demand in exchange for record-short lead-times
3. co-location of component manufacturing for custom components so we could do JIT customization of our products
4. direct shipment of product from factory to customers

Our work paid off and we were able to create a competitive advantage that helped bring back Sony Ericsson from the brink of bankruptcy.  However, this supply chain was built for speed and agility; what Apple has done is build a supply chain for speed and technology.

Seven years ago, Nokia was the king of the supply chain.  Their presence was ubiquitous; every supplier either did business with Nokia or wanted to do business with Nokia.  Nokia was a benevolent king using their power judiciously to better the lives of their subjects (the suppliers).  Later, when Sony Ericsson became also influential in the supply chain, they too were a benevolent Baron (king is too generous).  Some of the underlying philosophies behind how Nokia and Sony Ericsson managed their suppliers were:

1. A supplier controlled their own destiny.  If they provided quality, continuity of supply and competitive pricing then they would always have access to new business.
2. Partners, not just suppliers.  Nokia actively worked with their suppliers to develop technologies, improve their factories, establish better processes.  Suppliers were developed into partners.
3. Always "do the right thing."   "Doing the right thing" was a philosophy that helped guide decisions whether it was about making sure the suppliers were environmentally responsible or making sure that suppliers brought in business from competitors so they wouldn't be too dependent on business from Sony Ericsson, etc.

There is a new philosophy that is taking over supply chain and it's not based on benevolence.  If Nokia was Henry IV, then we are now under the rule of Henry VIII.  I see a mindset of hoarding, short-sightedness and callousness starting to heavily influence.

There are some who believe that everything they touch is theirs.  Reminds me of Stingy from Lazytown (http://youtu.be/AX5sIRop-M0).  I could change the words to be "that flash memory is mine, that CNC machine is mine, that QX display is mine"...you get the point.  The truth is that every company has a right to hoard those technologies that they develop but many times that thinking extends to technology that the suppliers developed and it keeps those suppliers from giving other companies access to technology.  It's  bad business for everyone except the company at the top of the haystack.

There is also a general lack of accountability for the supply chain impact on the environment.  Let's be honest, would anyone buy a smartphone if they knew that somewhere in China the production of that device was giving a little child cancer?  I hope not.  China is going through a similar transformation as the US did back in the first 75 years of the 20th Century where rivers and lakes are being polluted, toxic material is being dumped (here we call them super fund sites) and people are suffering as a result of that carelessness.  The difference between what we did and what's happening to China is that we learned our lesson and should be carrying those lessons with us as we manage our suppliers but that is not always the case; many turn a blind eye.

When I was a kid everyone called me an "old soul", now they just call me "old" (ok, 38 is not very old) but the reason was because when I looked at situations, I did so with a perspective that spanned multiple generations; I understand that there was a yesterday and there will be thousands of "tomorrows" and the decisions we often make today or made yesterday can make life very difficult for those who we've entrusted with "tomorrow."

My main concern is that there will be a new generation of supply chain practitioners who will grow up idolizing companies who are short-sighted in their approach.  Hell, who knows if Nokia, through this transition, turns their back on their own philosophies.

A perfect world would be one that combines hunger for technology demonstrated by Apple and the benevolence of Nokia past. This is what I plan to do in my next role...