Supply Chain Frontiers issue #15. Read all articles in this issue.
The MIT Center for Transportation & Logistics is creating a taxonomy that will classify supply chains according to the characteristics of the businesses they support. Just as humans and whales are both classified as mammals, even disparate businesses in different industries can share features that put them in the same ‘family’ of supply chains.
The work, part of CTL’s Supply Chain 2020 project (SC2020), will help researchers to map the evolution of supply chains over the next decade or so. “We will use a variety of characteristics to construct the taxonomy,” said CTL Research Associate Edgar Blanco, who is creating the new classification.
During the June 2006 meeting of the SC2020 Industry Advisory Council at the UPS Healthcare Facility in Louisville, KY, Blanco took the opportunity to ask companies about how they would characterize their supply chains. A telecom company identified traits that it shares with UPS, even though the two organizations compete in very different markets. An Internet network router bears a striking resemblance to the UPS Louisville sorting hub, in that moving bits of data is like moving packages. Both enterprises are driven by service guarantees such as meeting tight delivery windows. And they share certain organizational features including sprawling IT infrastructures and the ability to re-route traffic to maintain network resiliency.
Council members suggested several groupings as the basis for the supply chain taxonomy. Here are some examples:
Customers
Customer-related characteristics encompass different value propositions. For example, customers of equipment manufacturer Caterpillar require 100% uptime, whereas those of retailer Zara look for constantly changing fashion apparel choices. The demand for after-market and reverse logistics services can also characterize a group of supply chains. Another possible feature of the customer category is disconnects between enterprises and customers. For instance, in this group, buyers may demand minimal inventories and short lead times from sellers that are restricted by long manufacturing lead times.
Inter-Company Relationships
The way companies relate to other enterprises can be used to classify supply chains. Whether relationships with suppliers are collaborative is one common feature. Some supply chains can be described in terms of collaborative relationships with competitors; an example is a joint project between Boeing, Raytheon and Lockheed Martin to create a next-generation missile system for the U.S. government. Other shared traits include “push” or “pull” information flows between organizations and risk sharing. An example of the latter is how Blockbuster Video’s revenue sharing arrangement with Hollywood studios helped to boost profits for both parties.
Product Features
The properties of products can be used to define a taxonomical group. Council members suggested the level of intellectual property content, obsolescence rate, and intrinsic value as possible product descriptors. Enterprises in this group could also be defined according to the physical versus service-based nature of the goods they make and the length of the design cycle.
CTL researchers have considered some existing taxonomies for the purposes of the new classification system, but have found them inadequate for the SC2020 project. An obvious method is to categorize companies according to industry type. “This is a useful way to think about the commonalities and differences, but it assumes that companies in the same industry will have industry-specific supply chain features, which is not currently the case and will not be the case in the future,” Blanco said. Another classification deemed as inappropriate is where companies have positioned the push/pull boundary; whether they are based on a build-to-order or make-to-stock model, for example. Again, this option is too limited, in that it focuses on a single facet of operations. “The new taxonomy needs to be as wide-ranging as possible to allow for a rich analysis of the future,” said Blanco.
For further information on CTL’s supply chain taxonomy project, please contact Edgar Blanco.