The Supply-Chain Management Effect

Ten years ago, supply-chain thinking was limited to the managers of a few global companies struggling to coordinate internal information and materials.1 Their early success led to an exciting boom in cross-business coordination based on supply-chain-management concepts. Today, such approaches are applied widely by managers in diverse industries and are a focus for leading business schools and consulting firms. Yet as the field has broadened and shifted over time, and as the term has been coopted and redefined by various interests, many views of supply-chain management have emerged. Some are detailed and operational; many focus on information technology. Executives are often uncertain about what falls within the field and how to use the key concepts to enhance their businesses. They want to know, “What is supply-chain management, really, for me and my company?” We have been researching that question for the past 10 years, working with executives in many different industries to understand how supply-chain management is applied in each context and how it is changing the way managers think about their businesses. (See “About the Research.”)

About the Research »

The best way to understand the impact of a long-term trend is to examine how the trend has changed the way executives view their businesses and what issues they choose to focus on. Supply-chain management has led to six major shifts in business thinking. It is those shifts that have guided and will continue to guide companies in choosing which supply-chain-management initiatives and enablers they should implement internally and with their partners. By considering the impact of the field in terms of business focus rather than programs and results, executives get a feel for how supply-chain management plays strategically in their businesses.

Supply-Chain Management

Supply-chain management addresses the fundamental business problem of supplying product to meet demand in a complex and uncertain world — from the point of view of the entire supply chain.

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References

1. For early thinking about supply-chain management, see H.L. Lee and C. Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities,” Sloan Management Review 33 (spring 1992): 65–73.

2. P. Coy, “Exploiting Uncertainty: The ‘Real-Options’ Revolution in Decision-Making,” Business Week, June 7, 1999, 124; C. Billington and A. Kuper, “Supply Chain Strategy: Real Options for Doing Business at Internet Speed,” Achieving Supply Chain Excellence Through Technology, vol. 2, Apr. 15, 2000, Montgomery Research, http://www.ascet.com.

3. A. Osterland, “Blaming ERP,” CFO Magazine, January 2000, 89–92; M. Richtel, “A Many-Tentacled Agilent Stumbles Toward Simplicity,” New York Times, Mon., Aug. 26, 2002, sec. C, p. 3; “I2 Shares Plunge After Complaint on Product,” Los Angeles Times, Wed., Feb. 28, 2001, sec. C, p. 5; and M. Heller, “Is It Fair To Blame Your Company’s Woes on Your IT Vendor?” CIO Magazine, March 29, 2001, www.cio.com.

4. M.L. Fisher, “What Is the Right Supply Chain for Your Products?” Harvard Business Review 75 (March–April 1997): 105–116.

5.H.L. Lee, “Aligning Supply Chain Strategies With Product Uncertainties,” California Management Review 44 (spring 2002): 105–119.

6. C. Koch, “It All Began With Drayer,” CIO Magazine, Aug. 1, 2002, 56–60.

7. H.L. Lee and S. Whang, “Demand Chain Excellence: A Tale of Two Retailers,” Supply Chain Management Review 5 (March–April 2001): 40–47.

8. H.L. Lee, “Ultimate Enterprise Value Creation Using Demand-Based Management,” working paper no. SGSCMF-W1-2001, Stanford Global Supply Chain Management Forum, Stanford, California, September 2001.

9. C.H. Fine, “Clockspeed: Winning Industry Control in the Age of Temporary Advantage” (Cambridge, Massachusetts: Perseus Publishing, 1999).

10. M.E. Johnson, “Supply Chain Synchronizing Through Web-Centric Product Content Management,” Achieving Supply Chain Excellence Through Technology, vol. 2, Apr. 15, 2000, Montgomery Research.

11. E. Feitzinger and H. Lee, “Mass-Customization at Hewlett-Packard: The Power of Postponement,” Harvard Business Review 75 (January–February 1997): 116–121.

12. P. Anderson and E. Anderson, “The New E-Commerce Intermediaries,” MIT Sloan Management Review 43 (summer 2002): 53–62.