Herding cats? – a dysfunctional supply chain

This post is a continuation of our theme on the importance of performance objectives within collaborative relationships. We describe a number of relationships in the UK cereals supply chain. This was a traditional industry with a focus on price which was gradually modernizing. It began with the farmers who grew, harvested and dried the grain. It was then collected by hauliers who took it to intermediaries where it was aggregated. They in turn sold and then transported it on to the manufacturers such as millers, brewers, bakers and animal feeds producers. Haulage was considered to be a ‘cheapest price’ commodity function even though it stitched together the supply chain.

The farmers complained that they were expected to be ready at a moment’s notice to load trucks with the quality and quantity of grain demanded. The fact that they had to be out in the fields in all weathers didn’t seem to register.

The hauliers claimed they were the experts in transporting a quality product delivered to tight deadlines in optimum condition but this was completely ignored by the agents. Moreover, they were treated as a commodity service where the lowest price got the job which must be done yesterday.

The intermediaries felt they were being squeezed by both ends. The manufacturers gave unrealistic delivery deadlines and quibbled about product quality. Then they struggled to get the farmers on the phone so scheduling collections was fraught. They had tried unsuccessfully to get all sides, including the hauliers, around the table to agree a plan but nobody was interested because it was ‘too difficult’. They also tried to suggest cost reduction ideas but to no avail. The final insult was they had discovered the manufacturers were bypassing them and buying direct from the farmers when they needed an urgent delivery.

The manufacturers had developed some performance measures in an attempt to smooth the flow of this supply chain but, since the operational model was flawed because it was based on sell at the highest price vs buy at the lowest, it didn’t work. At heart no one thought that innovation was relevant to this supply chain or wanted change.

Overall, end to end performance objectives were missing and it was clear that the parties did not realise that their relationships were strategically important. Further there was acrimony at every step in the supply chain which made it inefficient and increased costs. Ultimately, they understood that something needed to be done because they were losing their competitive edge.