Thinking About The Supply Chain

Nowadays the subject of supply chains is everywhere painted in terms of crisis and chaos. I think that picture is quite false. I see the future of the supply chains and supply chain professionals as tremendously bright. I said so in a few previous posts, and said why, and the response was quite positive. One respondent sent me a comment that caught my attention. “What inspired you?” He wrote. “What got you thinking along these lines?”

It was a good question, because it got me reflecting on how we in the supply chain industry generally think about our tasks at hand, and about how we frame the challenges we now face. After all, the solutions we build rest on our conceptions of the problems. If we look at the problems only in dark and constricted ways, won’t the solutions be equally limited and restrictive?

That thought put me in mind of an international supply chain conference I recently attended. After the usual presentations and pie charts, we all got together for some more casual chat. What struck me was the profound pessimism of many there. “Covid-19 may be gone, but surely Covid-20 or Covid-21 is around the corner.” “More lockdowns, harder sanctions, some kind of nuclear accident in the Ukraine are all safe bets.” “No oil, no heat and no electricity in Europe this winter!” “China is taking over!” “China is collapsing!” “America has gone mad.” “Global recession is right around the corner.” “The financial markets are doomed.” “We’re doomed.” Heads nodded gravely as we proceeded to the brie.

Now I am a Ghanaian, raised in the United Kingdom, and ingrained in every Briton is the certainty that we shall muddle through. I share that certainty. We Europeans, and we in the supply chain industry, will muddle through this winter. But it depressed me to see so few of my colleagues actively working out how we will muddle through. Supply chain is the art of providing a supply of goods to those who want and need it. It’s about how to do that better, with more efficiency and less waste. It isn’t exclusively a matter of crises and bare survival, of worse-case scenarios and disaster preparedness. Yet disaster preparedness framed their thinking, and so, inevitably, their planning. I would not say that they were planning to fail, exactly. But they were not planning to succeed, either. Only to somehow endure.

This pessimism will pass, I am sure. It’s the fruit of historical circumstances, which are always transient. But seeing this trend in how my fellow professionals were thinking got me wondering about other, more common misperceptions, that shape much of supply chain professional thinking.

Three general orientations came to mind:?holistic, optimal, and (if you’ll excuse all the syllables) narratological. —Or rather the lack thereof. ?

The Holistic ?

Supply chain consultants and specialists are often hired guns. We are typically called in only for a short time and only to provide a quick fix. Indeed, a recent?survey?of over 3,000 chief executives by the consulting firm Alix Partners found a majority of executives saying they were relying only on short-term measures. (And yet more than 75% of chief executives doubted their plans would prove effective!)

Why undertake an initiative you don’t think will work? My guess is that the chief executives were moved by the usual executive blind faith in any action, and in hopeful projections, however unlikely.

But when supply chain professionals are restricted to providing short-term patches for specific problems, eventually that builds up habits that limit their perspectives. We don’t come up with comprehensive solutions because we don’t work on a comprehensive, all-embracing scale. We aren’t being asked to. Still, in not even trying to capture that full view, we are not doing our best for our clients.

Supply chain experts can take a small part of the business process and raise it to pristine efficiency. We can tighten the process of production with such precision that the products are produced at maximum speed and quality. But what’s the point of spending money and resources on a product no one wants? Very few supply chain advisors think of their job as the task of improving a company’s competitive advantage. They see the impact on the production process, but they don’t see the business impact or the market impact.

Think of it as the supply chain equivalent of ‘first-quarter syndrome’: The CEO wants to make a profit every single quarter, so as to impress shareholders. But to make the most profit possible by the end of the year or the end of the decade, the business needs to invest immediately in machines, systems, personnel, etc. But that costs money. And on paper expenditures look like a loss. In fact it’s an investment, and the smartest possible one, long-term.?

So with supply chain. One drops a slow supplier to replace them with a faster cheaper one, but the faster one cuts corners, the more the product suffers, the more the company is saddled with lawsuits, and the more the business takes a loss. But on paper, in the short-term, things move faster and cost less. The supply chain has been ‘improved.’ An improvement that resembles the fabled operation in which the treatment was a success but the patient died.

Truly valuable supply chain experts need to continually ask, not just how will this intervention affect the problem at hand, but how it will affect the business’ competitiveness as a whole. They need to think of themselves as business consultants first, process technicians second.

But the usual narrow focus on specific problems and processes alone misdirects our attention. A shallow supply chain analysis overlooks the domino-like consequences of the intervention, and the full contexts in which the processes take place.

We need to see things more holistically—to see the supply chain process in terms of what I call elsewhere the multiple ‘Levels’ of the supply chain: the physical level, the digital level, the financial level, the legal level, the political level, the cultural level, the irrational level, the level of resilience. I eventually boiled them down to six, but the key is to realize that supply chains are deeply multifaceted phenomena, interacting with the business as a whole and the market in multiple ways. ?

The Optimal

The task of the supply chain expert is simple: to improve efficiency and profit, and to reduce waste and costs. To that end, we optimize. We strive to make the processes we handle as good as they can be.

However, not all supply chain experts are sensitive to the conflicts of optimizations, or the contexts of optimizations. Nor to the somewhat activist stance that wide-ranging optimization requires.

The first can be seen by a simple illustration. One is hired to optimize the manufacturing process. Manufacturing is ecstatic. They want to make a higher quality product too. But to do so they need better equipment, better source materials, better quality control—all of which costs more money. One is also hired to optimize the procurement process. Procurement is happy. Finally, someone has arrived who can cut all the fat out of money pits like Manufacturing.

You can’t do both. You can’t maximize the efficiency of both processes. You need to see and strike a balance such that the efficiency of both departments is maximally enhanced in a way that does not damage the other. Paradoxically, not maximizing each component of the process may be the best solution, maximizing the results overall. But how to see that “sweet spot”? It requires nuance; again, a more holistic perspective.

The contexts of optimization require a similar approach. And international firms ask the consultant to maximize worker productivity. One draws up a clear and reasonable plan. But one set of workers are German, intoxicated with the German cult of efficiency; one are Italian, breaking off at noon for a three-hour lunch (before my Italian colleagues respond this is purely illustrative!); and the third are revolutionary Salvadorans sporting tattoos of Marx and Trotsky. One size does not fit all.?It might well fit all with sufficient customization. But that requires a more nuanced customization.

As for a more ‘activist’ stance, no, I do not mean adopting those same Marxist tattoos. What I mean is that complete operational excellence involves optimizing the complete operation. Supply chain may be the core component, but management, sales, branding, marketing, corporate culture, regulatory compliance—all these elements require continual improvement. The supply chain expert can succeed more easily if the company as a whole, in every branch, moves towards a greater excellence and efficiency. Rare is the situation in which the supply chain consultant has so great a?degree of carte blanche as to implement such changes, but one can always evangelize. A rising tide lifts all boats, and the more each part of a company internalizes the goal of optimization, the more easy it is for that company’s supply chain to flourish as well.

The Narrative ?

This is my favorite. Time and again I encounter novice chain analysts who view the supply chain as a dead machine rather than a living process—as an abstract series of steps like a self-executing computer program. Their presentations abound in Excel charts, Powerpoint diagrams, cascades of numbers, all of which provide wonderfully useful data about the productive process, and all of which completely overlook the personal element.

But the personal element is the process, the real process. Products are made because people make them. Even in the most automated machine-intensive processes, there are always people providing oversight, making adjustments, making corporate decisions at the top, and buying the product at the end.

Production is a story, and the supply chain expert who can see it as an ensemble of rich and complex characters carrying out a series of human actions in time, characters who never quite act according to plan, as opposed to abstract economic puppets flawlessly carrying out directives every time, has a massive advantage over the number crunchers. That insight is what drove me to write my first novel, Devil In The Chain, tracing the lived, emotional experience of the leaders and employees of a company facing the challenge of a threatened supply chain to their business survival. Can elements like these be qualified and presented in chart form? Not easily, and sometimes not at all.

But it is the factor that makes the crucial difference, just as it is currently making a crucial difference in the lives and labors of the colleagues I mentioned earlier. If our mindset is permeated with the expectation of disaster, if our presumption is that of a hostile environment and impossible conditions, we will not make the recommendations that lead to our clients’ flourishing. We will not see the best solutions, or even look for them, for that kind of thinking requires a role: the heroic thinking of a Thomas Edison, a Henry Ford, a Soichiro Honda, a Steve Jobs. It requires a leadership and workforce that sees its effort in terms of high drama, even moral struggle.

The existential supply chain is a subject I have only begun to explore. But it’s already yielded insights into how best to optimize business results that conventional approaches have not.

But that is for another post.