Supply Chain Reality Check

Utopian visions of frictionless, knowledge-sharing, global supply chains are somewhat overstated.

There is a consensus among futurists that business is the only institution capable of providing effective global stewardship. As a result, a good deal of attention is being paid to mapping the future performance of businesses and the economies in which they operate. Academics and practitioners agree that the business landscape will be very different as companies are moving away from the traditional view of enterprises as separate, independent entities toward a more collaborative model where the emphasis is on interconnectivity. Indeed, many contend we are witnessing the creation of the DNA of future business practices. There is growing recognition that supply chains will play a crucial role, helping sustain growth and profitability by enabling companies to be ever more flexible and adaptable.

As one examines the literature on how recent technological advances in manufacturing, communications and information technology will cause supply chains to evolve, some common notions emerge. Primary among them, perhaps, is that there will be total connectivity among businesses — they will behave like living organisms, quickly assembling and disassembling, ramping up or down to continually adapt to the environment. There is also a presumption of total trust and commitment from all involved in such alliances as well as an unspoken assumption that global boundaries will be nonexistent, and all countries will foster conditions that support frictionless international trade.

Upon closer examination, however, it is clear that these predictions encompass some significant contradictions. For instance, they assume a complete sharing of information and knowledge. However, the general understanding of the future business environment also calls for competition driven by information-based strategies. So, how can information and knowledge be shared completely if they are the primary basis for competition?

Another fundamental futurist assumption is that outsourcing will increase dramatically. But even in the best scenarios, outsourcing typically leads to some loss of control and coordination and can affect an organization’s ability to design new products rapidly. That can be a problem in an era of significant and fast-paced technological advancement when rapid product and service innovation will be required to win over well-informed and very demanding customers.

Given such inconsistencies, the vision of a totally enabled supply chain seems utopian and not likely to unfold in the predicted manner — at least not in the near term.

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1 Comment On: Supply Chain Reality Check

  • Rabindranath Bhattacharya | June 28, 2014

    Dr. Rabindranth Bhattacharya, India

    I agree with the author that friction less supply chain is really not achievable in view of the increased globalization of the organisations with suppliers spread around the world. With no control over the operations which would be increasingly outsourced it is unlikely that the partners would share the knowledge and information so easily! So what is the way out?
    I feel the manufacturer in the coming decade would increasingly try to achieve the centralized profit (if all the operations are under their own control) in a decentralized situation and increase the individual profits of the partners at the same. Supply chain contracts would be redesigned in such a way that the suppliers would be induced to accept the contract to get higher profit without affecting the centralized profit. It would be win-win situation for all the parties involved and supply chain would work in a seamless fashion. Closing of supplying chain (returns management) may be one of the areas worth exploring in this regard.
    In my reserach work while doing PhD at Indian Institute of Technology, Madras I have discussed this in details in a game in chapter VII between a supplier and a manufacturer in a closed loop environment,
    Game theory I believe would be increasingly used to tackle this type of challenge in the next decade.

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