With the surge of coronavirus, the word “Supply Chain “continuously pops up into the news headlines.
So what is supply chain and how/why is it an area of knowledge each business analyst must master.
What is a supply chain?
One of the biggest misconceptions about supply chain is people think supply chain = logistics or transportation.
Supply chain covers a far wider scope than logistics. According to APICS SCOR, supply chain covers 5 areas:
- Plan,
- Source,
- Make,
- Delivery,
- Return and
- Enable
It covers 3 types of flows: (1) physical material flow, (2) information flow and (3) cash flow.
Here are some specialty areas of supply chain
- Warehouse/inventory management
- Forecasting
- Logistics
- Information technology
- purchasing/sourcing
- Manufacturing
- Import/export
- Freight management
Why do Business analysts need to have an in-depth knowledge of the supply chain?
Reason #1
A supplier, a producer and a customer are 3 essential players to form a supply chain.
As long as the business has the following components, it has a supply chain
- Has a producer to create goods/service as output
- Has supplier(s), who provides goods/service to the business
- Has customer(s), who requires goods/service from the business
Therefore, every single business has a supply chain. So from a small barber shop at the corner to the government providing product/services to the public, the supply chain exists in every single day of our lives.
When you view from supply chain perspectives,
- You can trace the stakeholders to the supply chain upper stream, from the tier 1 supplier (business’ direct supplier) to tier 2 supplier (direct supplier’s direct supplier) to tier N supplier
- You can trace the stakeholders to the supply chain downstream, from the tier 1 customer (business’ direct customer) to tier 2 customer (direct customer’s customer) to end customer
- You can trace the stakeholders through one of the three flows"
- Cash flow
- Physical material flow
- Information flow
To view each of the process, operation, business from a supply chain perspective, it makes business analyst’s life much easier to generate a complete stakeholder list and avoid missing any key player, which ensure a complete impact analysis to all affected stakeholders
Reason #2
Understanding the supply chain is to truly understand how the underlying business is running and why it exists.
Supply chain mindset focuses on system and critical thinking approach for problem solving. It intends to break the organization department solos and address the potential butterfly effect in any process/sub-process within the supply chain value stream.
Often enough a department/function/business unit is implementing improvements within its own four walls, without/forgetting considering the potential negative impact to other departments, which leads to scenario called sub-optimization. With a supply chain mindset, business analysts will be able to focus on the big picture and look for process optimization for the entire supply chain, and avoid the pitfall of sub-optimization.
Also by understanding the supply chain strategy, all the requirements can be traced back to business strategy and organizational strategy and ensure the requirements are validated and aligned with strategies. If any conflict is discovered against the strategies, it will provide an obvious red flag to the business analyst, so the requirements can be reviewed and revised to align with business strategy.
Reason #3
Supply chain knowledge provides potential design solutions, for both software perspectives and best practices perspectives
From software perspectives
The software is developed to serve the business. As the supply chain covers various areas of business, it provides business analysts a good knowledge base of the tools required by business to improve information sharing and collaboration.
From very specific tools for certain business function such as
- supply chain event management system (SCEM)
- Warehouse management system (WMS)
- Transportation management system (TMS)
- Supplier Relationship Management system (SRM)
- Customer Relationship management system (CRM)
- Advanced planning and scheduling (APS)
To generic tools can be applied to many business functions
- Power BI for data visualization
- ERP system
- Middleware for data communication
- EDI
The knowledge provides a direction on what type of functionalities/features required for particular supply chain activity
From best practice perspectives
Supply chain strategy is closely linked and aligned with business strategy and organization strategy. And also the supply chain knowledge provides examples of best practice, KPI and benchmarks.
So truly understand the supply chain strategy is the key elements for strategy analysis to understand what is the true reason for why organization is looking for change and whether the potential solutions fits into:
- Business strategy
- Business culture
- Business limitation
Business analyst can take the advantage of those supply chain knowledge as guideline for:
- Searching for potential solution, and
- Developing evaluation criteria.
For example, according to APICS, there are 4 stages of supply chain:
- Stage 1—multiple dysfunction
- Stage 2—semi functional enterprise
- Stage 3—integrated enterprise
- Stage 4—extended enterprise
Any supply chain must evolve 1 stage at a time and cannot reach a higher stage by skipping the stage(s) in between.
So when a solution to bring a business from department-focus (stage 2) to a business which is fully integrated with suppliers (stage 4), it can be easily defined as impractical to implement. And the solution should be focusing on integrating the operations internally (stage 3) first.
Reason #4
Supply Chain knowledge will improve the Non-Functional requirement analysis. By understanding the information flow within the process, it will help business analysts to exercise techniques such as interface analysis, data flow analysis, data modeling and so on. It will be extremely beneficial when the solution may have impact to
- Multiple departments
- Multiple organizations
- Multiple applications
Reason #5
Supply chain knowledge will ensure the requirements properly gathered, verified and validated against the business strategy
By reviewing the all impacted stakeholders, from following the information flow, physical flow and cash flow, business analysts can ensure proper stakeholders are engaged starting at the early stage of elicitation, through interview, survey or focus groups. From different perspectives of stakeholders, the requirements can be verified from multiple angles, in terms of information, physical movement and monetary.
How can business analysts obtain supply chain knowledge?
1. Start with reading introduction level books on overall supply chain management
a. By reading content about introduction to overall supply chain management, it will help business analyst to build a solid foundation of
i. What is supply chain
ii. The key elements within supply chain
iii. How supply chain aligned with business strategy and organization strategy
2. Learn to think as supply chain professional
a. Supply chain is all about 3 types of flows
i. Physical flow
ii. Information flow
iii. Cash flow
b. Business analysts need to get used to seeing any process/business by following those 3 flows and gain the big picture of the entire process.
c. When planning, executing and evaluating any task, business analysts need to keep asking the following questions
i. How does it fit with the overall process?
ii. How could the solution to benefit the entire process
iii. Is the task align with supply chain strategy, business strategy and organization strategy
3. Pick particular areas/fields for deep diving
a. Choose the knowledge area interesting/beneficial for you the most, and trying to spend more times and efforts to become subject matter experts in these areas
Conclusion
Supply chain never stops and keeps evolving. Supply chain is closely linked to daily operation, and it is part of daily operation. By gaining the supply chain knowledge, business analysts will:
- stay on the cutting edge of business knowledge,
- always align with business strategy, and
- always focus on the total optimization and avoid sub-optimization
It is the time to arm business analysts with supply chain knowledge, to enable the changes smoothly and get the changes done right.
Author: Max Yao
Business professional with over 10 years’ experience in supply chain management and business Analysis, lean manufacturing/Business Process Improvement. I have been working with supply chain and ERP system for the majority of my career.