March 4, 2014 Leave a comment
This post was written by Professor Yossi Sheffi, Director, MIT CTL, for his Linkedin Influencer site. Follow Yossi’s Influencer posts here.
Supply chain management (SCM) is no longer the Rodney Dangerfield of corporate functions.
While sales and marketing wins customers, SCM keeps them with excellent service and unfailing on-shelf availability. And these qualities are becoming even more important in the age of e-commerce.
SCM’s journey from afterthought to core capability parallels the way in which the business landscape has changed over the last two to three decades.
In the early days the function was known as transportation or warehousing (these are still important activities today but are components of SCM). As a “blue collar” department it commanded relatively little respect, and was generally regarded as a cost center.
These perceptions began to change as the customer moved to the center of the business universe. It dawned on companies that they could win market share by making products that buyers yearn for, and delivering them consistently at the right time, in the right quantities, and at the right location. Enterprises such as Apple, Walmart, and Zara gained dominant market positions largely by building and operating supply chains that excel in this way.
Over the next decade or so a number of developments further boosted SCM’s stock.
- New practices. The emergence of just-in-time and make-to-order business models brought higher levels of efficiency to businesses – models that require extremely efficient supply chains to be effective.
- Globalization. As enterprises expanded internationally they came to realize that profiting from global growth is not possible without supporting supply chains. Buzz terms such as offshoring and, latterly, near-shoring, became part of the business lexicon.
- Changing world order. The rise of economic powerhouses such as China and India has underscored SCM’s role in facilitating global trade. Within these regions companies have to learn how to create supply chains that deliver goods worldwide, while western companies must adapt their supply chain know how to unfamiliar markets in developing countries.
- Market volatility. The financial meltdown that rocked world economies continues to reverberate through markets. As a buffer between companies and their customers, supply chains play a key role in helping enterprises to manage the volatility that has become the “new normal” in the business world.
- Risk management. As company operations span more countries they become exposed to a wider range of risks. Whether it is the discovery of lead paint on toys, deplorable factory conditions in sweat shops, a devastating tsunami, punitive regulations, or a military conflict, unexpected disruptions can do extensive operational and reputational damage. SCM is at the heart of efforts to mitigate and/or eliminate these risks.
- E-commerce. The explosive growth of online commerce has enhanced SCM’s position within companies. The sheer pace of change in these markets requires enterprises to be very responsive to shifts in demand. Moreover, online consumers have a low tolerance for mistakes or delays, and can injure a brand by communicating their displeasure far and wide via social media sites. The bottom line: companies that do not have efficient supply chains supporting their online operations will almost certainly stumble.
- The sustainability wave. SCM is one of the primary players in the worldwide movement to develop environmentally sustainable businesses. The physical distribution of goods is a major generator of carbon, for example.
The increasing importance of SCM has also brought a major challenge: how to ensure that there is enough talent to meet the profession’s needs today and tomorrow. In addition to lifting the demand for supply chain talent, SCM’s elevated role requires a mix of skills that is very different from what was needed a decade or more ago.
Educators such as the MIT Center for Transportation & Logistics are playing their part to build a better talent pipeline. For example, in 2015 we will launch a ground-breaking virtual classroom for the global supply chain profession.
Meanwhile, my hope is that more of our best and brightest talent will realize that designing and managing the sustainable flow of goods, information, and finance across the globe is one of the most exciting and fulfilling careers imaginable.
High finance is alluring, and manufacturing offers some attractive challenges, but SCM is where the real action is. And the creation of job titles such as Chief Supply Chain Officer shows that the profession now provides a route to the C-suite.
The Rodney Dangerfield function has come a long way, and its journey is far from over.