What are the wise lessons in supply chain management?
Supply chains have been around since the start of civilisation, but in recent decades various international scientific studies have revealed important new insights into this relatively young discipline. Here, Supply Chain Movement provides an overview of the key supply chain thinkers that the editors have met in person over the years.
By Martijn Lofvers and Marieke Lenstra
Supply chain management is a relatively young discipline. The term was used in 1982 by Keith Oliver, a British logistics consultant from Booz Allen Hamilton, in an interview with The Financial Times. Two years later Eli Goldratt published The Goal, one of the bestselling management books of all time. In that novel, he describes the bottleneck theory or the ‘Theory of Constraints’, which entails identifying the weakest link and adjusting the other steps in the production process to enable that constraint to operate at maximum effectiveness. Goldratt was followed by various researchers who provided new insights into this area. Martin Christopher, a British professor from Cranfield University, was one of the first to realise that the real competition is between supply chains rather than between companies. One important and innovative point he made in 1992 was that information can be a substitute for inventory.
Charles Fine is a professor of strategy and supply chain management at MIT’s Sloan School of Management in Boston and is known for his bestseller Clockspeed (1998). Fine thought up the so-called double helix which looks like a figure of eight on its side. His theory is that all companies proceed along the double helix of product development in a horizontal market towards the vertical integration of related products. The second loop is where the mighty giant emerges, such as IBM at the start of the eighties. Dinosaurs are big and dangerous but also very slow. When the meteorite hit, it altered the situation and the dinosaurs were unable to adapt. IBM was a ‘dinosaur’ that Microsoft could compete against successfully, although Microsoft itself is now at risk of turning into a dangerously large entity with a vertically integrated product portfolio of operating systems, software, network services and hardware.
Professor Hau Lee from Stanford University is primarily known for his matrix of four different types of supply chain based on the uncertainty of supply and demand. He has also fine-tuned theories relating to bullwhip effects. When asked during an interview with Supply Chain Media in 2010 why bullwhip effects were still relevant despite all the attention they had received in recent years, he replied: “For two reasons: firstly, because the world is changing with new and emerging industries and economies. This creates more populations which causes disruption in the level of demand and hence creates new bullwhips. In addition, disruptions are caused by external events such as a tsunami, 9/11 or an earthquake. Such incidents create panic among companies, causing them to forget everything they have learnt and revert to their old habits. Companies need to be retrained. We’re kidding ourselves if we think that the battle against bullwhip effects will ever cease.”
This article was first published in Supply Chain Movement Q3 – 2015