Supply Chain

The Dynamic Vs. The Sluggish Supply Chain

Companies need to create supplies chains that are dynamic, adaptable and aligned with the goals of all parties involved. A successful supply chain will be dynamic. It will be able to adjust to rapid changes in marketplace demand. On the contrary, a static or fixed supply chain will not react to demand. Accordingly, the amount of product delivered to customers will not be adjusted. The end result of a sluggish supply chain can be excess capacity, excess inventories of unsold goods, shortages and lost sales.

The problems resulting from a sluggish supply chain can be seen in the current financial market place. For example, Citigroup’s consumer bank is a supplier of many financial services and products. Over the last several years, one of their most profitable products has been home mortgages. As the value of real estate rose, the number of mortgage products sold rose. Citigroup was able to add capacity, both internally and through outside vendors, and provide to the sky rocketing demand.

As the value of real estate began to fall, Citigroup was left with excess service capacity. Citigroup has responded by reducing capacity and eliminating entire divisions of employees. Outside mortgage vendors who sold Citigroup products have either drastically reduced in size or become bankrupt. Although internal and external jobs have been eliminated, Citi’s response in this respect was relatively agile.

Citi’s and its supply chain’s response to its lending capacity and inventory were quite the opposite. It had established an inventory of financial products which had enabled it to ramp up lending capacity and provide to the rising demand and yield high profits. As the demand for real estate fell, the inventory and resulting capacity, which it had established, plummeted in value and forced the company to endure some of its largest losses in history.

Every company in a supply chain should have goals and interests