Outcome-Driven Supply Chains

The supply chains of tomorrow must deliver varying degrees of six outcomes — the traditional cost-related benefit plus responsiveness, security, sustainability, resilience and innovation — depending on key customers’ needs.

Image courtesy of Wal-mart.

When properly designed and operated, the traditional supply chain has offered customers three primary benefits — reduced cost, faster delivery and improved quality. But managers are increasingly recognizing that these advantages, while necessary, are not always sufficient in the modern business world. A new paradigm is emerging of a more sophisticated supply chain — one that also serves as a vehicle for developing and sustaining competitive advantage under a variety of performance objectives.

The Leading Question

How can supply chains be designed and managed not only for reduced cost but also for multiple outcomes?

Findings

How can supply chains be designed and managed not only for reduced cost but also for multiple outcomes?

  • There are six basic outcomes, each with a corresponding set of specific design traits.
  • Outcomes should be blended, where feasible, without overfocusing on any single one.
  • Supply chains’ design and management should be tailored to particular operating conditions.

In academic terms, we could say that while the old supply chain was strategically decoupled and price driven, the new supply chain is strategically coupled and value driven. More simply put, the supply chain should be designed and managed to deliver specific outcomes. So concluded participants in the Supply Chain Management 2010 and Beyond research initiative, a four-year set of surveys and workshops on which this article is based.

We believe that supply chains should provide one or more of six basic outcomes: “cost,” responsiveness, security, sustainability, resilience and innovation.

About the Research

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References

1. T. Hill, “Manufacturing Strategy: Text and Cases,” 3rd ed. (McGraw Hill Higher Education, 2000).

2. D. Tapscott and A. Williams, “Wikinomics: How Mass Collaboration Changes Everything” (New York: Penguin Group USA, 2008).

3. A.G. Lafley and R. Charan, “The Game-Changer: How You Can Drive Revenue and Profit Growth With Innovation” (New York: Crown Business Publishing, 2008).

4. H.L. Lee, “The Triple-A Supply Chain,” Harvard Business Review 82, no. 10 (October 2004): 102-111.

5. V.E. Narayanan and A. Raman, “Aligning Incentives in Supply Chains,” Harvard Business Review 82, no. 11 (November 2004): 94-102.

i. W. McDonough and M. Braungart, “Cradle to Cradle: Remaking the Way We Make Things” (New York: North Point Press, 2002).

ii. C. Markides, “Strategic Innovation,” Sloan Management Review 38, no. 3 (spring 1997): 8-23; and C. Markides, “Strategic Innovation in Established Companies,” Sloan Management Review 39, no. 3 (spring 1998): 31-42.

1 Comment On: Outcome-Driven Supply Chains

  • jconnor | December 28, 2009

    timely…

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