“What we found is that the supply chain is not going to be about buying things. It will be about managing relationships,” said Steven Melnyk, MSU professor of operations and supply chain management, during a presentation at last week’s Midwest Supply Chain Management Conference and Exposition at
The study found a significant difference in what the industry values today and what practitioners expect will be important five years from now. According to the study, the largest concerns today, in order, are avoiding disruptions, on-time delivery and leadership — evidence of a tactical approach to supply chain management, primarily driven by cost.
Concerns in the next decade will likely be intellectual property protection, process development, managing supplier relationships, trust, talent retention and raw material costs — issues better suited to a strategic supply chain model.
“The supply chain we’re now facing is strategic. … Innovation is going to be the next battlefield,” he said. “And we’ve only really just glimpsed supply chain innovation.”
While easier said than done, the MSU study suggests that companies should concentrate less on cutting cost out of their supply chain and more on creating radical innovation. In support of this, he noted that the stock of publicly traded companies identified as supply chain innovators almost always performs better than their competitors’ stock.
Examples include Wal-Mart, the streamlined retail giant that mined its then 460 terabyte database (roughly twice the size of the World Wide Web) to accurately predict that strawberry Pop Tarts and beer would be the top-selling items in Florida’s 2004 hurricane disaster zone. Apple’s iconic iPod was largely designed by its suppliers.
The study also produced a controversial suggestion for companies to accomplish the strategic model. “There are some supply network paradoxes here, and you’re going to need some talented people to sell it to management,” Melnyk said “There is something wrong with a supply chain where suppliers are going bankrupt. Innovation is more important than cutting costs. And, unfortunately, you cannot have radical innovation in a lean system. You need slack for radical innovation. … Lean is out.”
To a large degree, Melnyk explained, today’s supply chain systems are not lean at all, but fragile. “If it works right, it’s great,” he said. “But if one link is upset, it all falls apart.”
On several levels, the study suggested the largest threat to a resilient supply chain is
“What will happen when
“The green movement is going to take hold even more in the supply chain,” Melnyk said. “Packaging is going to be revolutionized or eliminated. We’re going to have to figure out ways to recycle everything. And it’s got nothing to do with being green — it’s because you’re going to have to compete for your raw materials.”
Earlier in the day, keynote speaker Christopher Olesky, president of ATEK Companies, mirrored Melnyk’s comments, suggesting that the key to supply chain success will be finding opportunity in collaboration and supplier relationships.