Will Supply Chains become Supply Circles?

A recent article published by McKinsey & Company posed a new concept for supply chain management practitioners to think about as we start 2013.

The article states:  “Many of the activities that affect resource productivity and sustainability—such as acquiring and transporting raw materials, assembling parts used in the manufacturing process, and using and disposing of final products—take place outside the walls of manufacturers’ facilities. Although companies do not have exclusive control over these activities, they can exercise their influence to increase the productivity of their supply chains.

To that end, companies could transform their supply chains into supply circles. Whereas the phrase “supply chain” may evoke an image in which materials are collected in one place and ultimately disposed of in another, the phrase “supply circles” emphasizes that materials can be looped back into the production process after they have fulfilled their utility over the life of a product.”

The authors then state that a company should consider not only what materials it is using and how much, but the environmental impact including how much energy is consumed in production.  This methodology clearly is focused on identifying the sustainability opportunities, but the authors also suggest that it will identify potential cost savings as well.

When I teach supply chain concepts in several courses at the Illinois Institute of Technology, I pose the concept of the end –to –end process as a pipe rather than a chain.  I like the pipe analogy because to me it represents seamlessness which is what I think companies are trying to achieve in the supply management area.  But the “circle” takes it a step further and includes the principle of sustainability as part of the supply process.

You can access the McKinsey article through the McKinsey Quarterly which is their newsletter.  The title of the article is Manufacturing Resource Productivity.