Two weeks ago (www.scdigest.com/assets/News/05-06-02.htm), we ran some retrospective commentary on former Gartner analyst Art Mesher’s influential piece on "the 3 V’s" of supply chain: visibility, velocity, and variability.
The original piece, as we noted, was written in about 1998, and was the basis for much derivative supply chain thinking and writing from that time to this very day. Our retrospective and commentary generated a lot of reader feedback, including a letter from the original author himself, Mr. Mesher, now the CEO of Descartes Systems.
Mesher notes that at the time, the piece was written in large measure to focus the efforts of more companies beyond the cost reduction focus that characterized most supply chain initiatives at the time, towards those that used supply chain improvements to fuel profitable growth.
"My belief was that companies would view the 3 V’s differently as they moved from a focus of saving money by cutting costs to increasing profit by growing revenues and market share,” Mesher wrote us. “For example, saving money focused on the improving the velocity of the order-to-cash cycle, while improving profits focused on the improving the velocity of which new products and channel configurations could be created or recreated."
The original piece, it should be noted, predicted this shift from cost focus to market gains were expected to occur over the next 4-5 years from its publication in 1998. What happened, however, was a nasty, technology-led recession in 2001-2003 that caused virtually all companies to maintain a highly tactical, cost-cutting focus on supply chain improvements. But lately, there’s a growing sense that supply chains should be offensive as well as defensive weapons, driven in part by the CEO’s focus on profitable growth, which stands at the top of virtually every executive survey we see. SCDigest contributing editor Gene Tyndall has noted much the same in a few of his columns for us, such as his two-part series on "Using Supply Chains as Growth Levers." (www.scdigest.com/assets/Reps/Executive-View_05-02-24.cfm)
Mesher also notes that the 3 V’s will have different importance for different companies. "The three V’s are somewhat like an equalizer in music - different songs are best heard with different settings of mid versus treble or bass," he continued. "All supply chains are not created equal; some are long (global) and very focused on coordinating and controlling material flows, working capital optimization, and channel management. Short supply chains (regional or local) tend to be more focused on service policy optimization and asset utilization. I would suspect that managers of these different types of supply chains would have different views of the priority rank of each of the three V’s."
I agree. As we noted two weeks ago, obviously many companies have decided that the benefits of inventory velocity are outweighed in favor off offshore cost savings, as for many their supply chains are getting increasingly long. But then again, those supply chains require improved visibility to manage those long product flows.
You’ll find Mesher’s letter along with a few others in this week’s feedback section nearby. We can’t publish all we received this week – we’ll try to catch up next week.
That are your thoughts on visibility, variability and velocity? How does a company’s supply chain design and strategy impact which of the three are most important? Are there trade-offs that must be balanced?