Philosophy & Leadership

Supply Chain Socio-Economics?: A Deep Dive into Supply Chain Dynamics

In this bonus edition of my newsletter, I am excited to introduce and elaborate on my latest theory: Seesaw Socio-Economics?. This concept delves into the intricate and often unpredictable world of the supply chain industry and global trade, exploring how the varying interests of its participants generate economic momentum. Seesaw Socio-Economics? shines a light on the complex interactions among the players in this multi-billion dollar industry and examines what happens when things go awry due to its siloed nature.

What is Supply Chain Socio-Economics??

At its core, Supply Chain Socio-Economics??is the study of the economic dynamics generated by the conflicting interests of the various participants in the supply chain and global trade sectors. The supply chain industry is complex and often opaque by nature. I developed the theory of Seesaw Socio-Economics? to clarify how different players within this industry interact, mainly when their objectives are at odds.

Imagine a metaphorical fulcrum and lever: as long as there are two participants or "riders," they engage in a delicate balancing act, each trying to leverage their position to achieve their desired outcomes. However, the balance on this seesaw is rarely, if ever, perfect. Instead, the constant tipping of the scales—toward one party or the other—drives the economic momentum within the supply chain.

Who are the Riders?

The "riders" on this lever are the various links in the supply chain, each with its distinct interests and objectives. These include:

• Customers
• Suppliers
• Shippers
• Customs Clearance Agents
• Truckers
• All other entities involved from point A to Z in the supply chain process

Each entity operates with its priorities, often diverging significantly from its counterparts. Whether upstream or downstream in the supply chain, these players are engaged in a constant push-and-pull dynamic, with each party striving to maximize its benefits, sometimes at the expense of the others.

This divergence of interests creates a scenario where the seesaw is rarely balanced. In fact, within the framework of Seesaw Socio-Economics?, equilibrium is not the goal, nor is it often desirable. Instead, the imbalance—the constant shifting of weight and influence—drives the supply chain forward.

The Paradox of Parity

In Supply Chain Socio-Economics?, parity—or a perfectly balanced seesaw—is not a sign of stability or success. Instead, it often indicates a stagnant state with little to no business movement. This stagnation can lead to inefficiency, disruption, and even chaos within the supply chain. Equilibrium is achievable through imbalance in three areas:

1. Compromise
2. Concessions
3. Abandonment

Compromise

There are back-and-forth negotiations between these different parties until a compromise is made. That compromise is usually one-sided, with one party giving up a little bit more than the other, yet is agreeable to both parties. Still, the compromise creates a seesaw imbalance.

Concessions

It’s almost as if one side compromises, but it is not as favorable. One side feels they are giving things up and giving in to the other side's needs. They may be exhausted from the negotiations or the leverage the other side may have over them. It ends up with an outcome that is less favorable terms-wise than a compromise.

Abandonment

Termination or abandonment occurs when two groups try to work together but can’t, so they go to a different supplier, customer, or manufacturer. They choose to get off the metaphorical seesaw with that rider. In doing so, the seesaw slants to one side entirely since the other side is empty.

Supply Chain Ups and Downs - The Book

Want to know more about Supply Chain Socio-Economics?? My book Supply Chain Ups and Downs discusses this and many other topics. Order your copy here.