Supplier Circles? That's Just Loopy!

Don't know how SI missed this, but apparently McKinsey has been telling everyone to abandon supply chains in favour of supply circles for almost a year now! What? While it's true you can loop a chain to make a circle, it's not always the case that you should. And, moreover, it's not really a circle that you want, but a chain where information, inputs, and values flow up and down. Just like you can walk up and down stairs, you can push value up and down the chain.

But we're getting ahead here. Stepping back, the article from last spring on Manufacturing Resource Productivity stated that manufacturers can generate new value, minimize costs, and increase operational stability by focusing on four broad areas: production, product design, value recovery, and supply-circle management. All true, but none of it requires you to manage a supply circle, or even treat the supply network as a circle.

Digging in, we find the article is building on an inforgraphic released at the same time that takes us from supply chains to supply circles and explains how companies can respond [to pressures on profit as a result of higher variable costs] by improving resource productivity. Furthermore, it goes on to say that leaders in the field are exploring circular operating models where value is created by looping products, components, and materials into the value chain after they fulfill their utility over the life of a product.

Essentially, the article is saying that you should recycle, refurbish, reuse, and repair -- the reduce, reuse, recycle that environmentalists have been preaching for years. The only difference is that they are preaching that this thinking should pervade the supply chain and influence new business models that improve recovery, create new sources of supply, optimize production, and increase revenues and products. Isn't this just the Design for Recycle that SI and other thought leaders have been preaching for over 6 years?!? (SI's post is back in 2007!) It is! The only difference is that they are confusing you by saying that you have to circle your supply chain to make it work.

Sorry, bub, but this ain't the case. As long as you build a recovery mechanism that is usable, and attractive, it doesn't matter if you have a chain, a loop, a circle, or a figure 8. It's not the physical design of the chain, but the capability. Maybe the consumers return unwanted / end-of-life products to a recovery centre that breaks your product down into component parts, and returns the working ones to your primary manufacturer and sends the broken ones to a base metals extractor that, in turn, sends the extracted metals to the component manufacturers that feed the primary manufacturer and the waste that it can't process to a waste processor for further recovery efforts. And maybe the consumers return the produts to the retailer that sends them to you and you repair, or send them to a raw material extractor, as needed. The supply network might end up being circular, might loop back in to the manufacturer, or the return (and recovery) paths might be the exact inverse of the supply paths. The design doesn't matter -- it's the capability to insure raw material supply and keep variable (and unpredictable) costs down that matters!

 

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