Project Business Management
SERIES ARTICLE
By Oliver F. Lehmann
Munich, Germany
“The only profit center is a customer whose check has not bounced.”
– Peter F. Drucker
Summary
In many aspects, project managers working with Project Supply Chains (PSNs) can learn lessons from Supply Chain Management (SCM) in manufacturing and other industries. This corporate function has developed a high degree of maturity in the last decades, that can make it a role model for project management.
However, the differences should also be considered.
Modern Supply Chains
It was a coincidence in my professional life that I was a witness of the beginning of modern supply chain management. In the late 20th century, a major change in manufacturing took place, whose consequences became fully visible only decades later.
Before that time, manufacturing was mostly performed inside the protective walls of the own organization. Here and there, external vendors were used as a “verlängerte Werkbank”[1], providing additional production capacity and skills.
Several revolutionary developments, at least for that time, dramatically changed the way production was done:
- After studying Japanese methods, in particular the Toyota Production System, Western production managers learned how to become more productive with limited internal resources by outsourcing more work to contractors. In contrast to the Verlängerte Werkbank, which solely outsourced shop floor work, System Suppliers also took over responsibility for organizational and commercial tasks. They became prime contractors managing an often large number of subcontractors over different tiers for the customer.
- Essentially based on Ford’s Q1 quality management system, the ISO 9000 series of standards[2] for quality management and quality systems was developed. It expanded the rather narrow standard developed by Ford to an open family of norms that could be applied by all industries and across all application areas.
These standards allowed different organizations such as firms, agencies, and associations to put together a network of quality systems in a supply chain. While each of these organizations may differ in their actual implementation of the quality system, they all are based on the same founding principles and therefore compatible.
- Electronic Data Interchange (EDI) enabled an undisrupted stream of communications between customer, direct suppliers, subcontractors, and so on. They used data structure and transfer protocols such as Odette, Edifact, and XML to ensure all contract partners spoke the same language, at least in a digital field. Its introduction was highly controversial by that time. It allowed a customer to trigger production processes at subcontractors, with whom they had no direct business relationship, just skipping the prime contractor in between.
- National borders became permeable. An example is the European Economic Area, which includes 28 countries of the EU[3], plus Norway, Iceland, and Liechtenstein. The easiness of crossing borders inside the area led to the creation of millions of new jobs, particularly in manufacturing and supporting industries.[4]
- Supply chain management (SCM) as a now well understood business discipline evolved. Today, it includes consulting, literature, education, research, standards, and certifications. In addition, the discipline has special software at hand, online services such as digital markets that bring together customers and contractors, and a lot of other supporting offerings. It is mature, and if help is needed, it is likely that this is available somewhere, typically against money.
Supply chains today are engineered and managed in a way that is almost as stringent as internal production management. As multi-tier meta organizations, they are set up in a way that places key players at strategically important nodes and delegates responsibility to them to manage the players that have more distance to the final customer. The intention to make the feasible over long durations and run them as smoothly ad efficiently as possible gives an incentive to all players to maintain a cooperative approach based on good faith and mutual empathy.
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Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.
How to cite this article: Lehmann, O.F. (2019). Supply Chains Versus Project Supply Networks. PM World Journal, Vol. VIII, Issue X, November. Available online at https://pmworldlibrary.net/wp-content/uploads/2019/11/pmwj87-Nov2019-Lehmann-supply-chains-versus-project-supply-networks.pdf
About the Author
Oliver F. Lehmann
Munich, Germany
Oliver F. Lehmann, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich.
He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and served five years as the President of the PMI Southern Germany Chapter until April 2018. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.
Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at oliver@oliverlehmann.com.
Oliver Lehmann is the author of “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and of “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018.
To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/
[1] German for “extended work bench”
[2] An interesting contemporary comparison of Ford Q1 and ISO 9000 can be found at TQM Magazine (Stephens, 1997)
[3] The British Brexit, the exit from the EU may lead to the United Kingdom getting excluded from the EEA, which would then have 27 EU countries as members.
[4] One may also note the foundation of the World Trade Organization, a multilateral agreement of 165 countries, which also eased cross-border business, however not with the same impact as the EEA.
