The Supply Chain Triangle of Service, Cost and Cash

Finding the equilibrium between costs and the amount of cash coming in is a constant battle for any modern day company that provides goods or services. This daily struggle can be captured with a concept called ‘The Supply Chain Triangle’. In today’s episode of LokadTV, we meet The Supply Chain Triangle’s creator, Bram Desmet, to learn more.

Bram is Professor of Operations & Supply Chain at Vlerick Business School and Peking University, as well as the founder and CEO of Solventure, which implements S&OP primarily in production companies. After nearly 20 years in the field of supply chain observing the various problematics that businesses face, Bram created The Supply Chain Triangle.

The three corners of The Supply Chain Triangle are “service,” “costs” and “cash”. More and more companies are sourcing their products in Asia to reduce the cost, but due to longer lead times and more complex quality controls, they ignore the fact that their inventory will also go up, which has an impact on both service levels and cash.

Another example is that marketing departments push for a more expansive product portfolio, believing that it will increase service levels for the customer and sales revenue. However, if a company were to introduce 20% more products, this risks introducing a longtail of slow moving products. This means that more inventory is needed on average. As inventory is “cash”, sometimes supply chain managers try and lower safety stocks to free up cash, which reduces inventory but introduces a whole slew of service issues and their resulting costs. Overall, it’s a very delicate balance to achieve.

It could be said that the core of the problem lies in a reoccurring conflict between sales and operations. Supply chains are extremely complex and it’s sometimes difficult to get different key stakeholders to understand its various facets. The Supply Chain Triangle aims to make these complexities easy to understand, putting supply chains more at the centre of businesses. Often, supply chains are overlooked and their power as a value driver for a company is seldom fully utilized.

To conclude, we discuss how business leaders can learn to identify their supply chain issues, balance their sales and operations and discover the true potential of their supply chain within their business.

Timestamps

00:08 Introduction

00:26 Bram, perhaps you could start by telling us a little more about your company, Solventure, and your background?

01:54 Can you give us a brief overview of the Supply Chain Triangle, and how it actually works?

04:07 Joannès, what are your initial thoughts on this concept? How does it fit in with your idea of the Quantitative Supply Chain?

06:43 What did you observe in the industry? How were people reacting to that trilemma?

09:54 Will there always be this conflict between sales and operations?

12:21 What are you trying to optimize, when it comes to the Supply Chain Triangle?

14:33 Do you agree with the fact that it is hard to get stakeholders on board if there are concepts they don’t understand?

17:09 Is it easy to prove tangible benefits if you are using this idea of the Supply Chain Triangle?

20:04 Would you say that companies are ready to see supply chain as a much more strategic part of their business?

23:27 If you are a supply chain practitioner watching this video, what is the first step you should take if you want to identify your own Supply Chain Triangles and ultimately see supply chain as a key part of your business’ strategy?