The Advantages of Multi-Tier Supply Chains Come at a Price

A recent article over on Supply Chain Digest on The Next Big Thing: Multi-Tier Supply Chain Management did a great job of summarizing some of the major benefits of multi-tier supply chains. In brief, these are:

  • More Seamless Product Launches
    as coordination across multiple tiers helps to ensure that rapid production ramp-up is smooth and controlled
  • Ongoing Streamlined Operations
    as the ability to exchange information across multiple supplier tiers enables the rapid communication of demand (and changes) across the supply base which in turn reduces risks of shortages, lowers lead times, and improves forecast consensus
  • Reduced Planning Cycles
    as the accelerated velocity of information flow improves the quality of information used in planning processes
  • Improved Supplier Performance
    as the buyer can measure ongoing performance metrics and step in as soon as a hiccup is detected
  • Less Supply Chain Risk
    as the visibility into the extended value chain allows a buyer to see operational disruptions many tiers down as soon as they occur and take necessary mitigating actions before a minor hiccup becomes a major disruption

What it did not do a good job of was explaining the amount of effort to go from a single tier supply chain to a multi-tier supply chain. It requires more than executive commitment and a significant amount of resources. It requires time and considerable technical and educational prowess. Chances are that the further down you go, the less technically capable the suppliers will be. If a raw materials supplier still does business by fax and telephone, it doesn’t matter how good your new real-time portal is as there will be no real time system to link into at the supplier’s head office. A considerable effort will need to be made to train the suppliers on the benefits of a multi-tier system. Then a considerable effort will need to be made to help them implement modern supply management systems that can be integrated into a multi-tier visibility application. Then the integration will have to take place. Typically, the exercise will be worth the effort for a Global 3000, but the effort will be longer, harder, and more costly than the organization will expect.