MIT Sloan Management Review

By understanding the variety and interconnectedness of supply-chain risks, managers can tailor balanced, effective risk-reduction strategies. The authors show how smart companies use “stress testing” to identify parts of the supply chain that might break in the event of a natural disaster, terrorist strike or other upheaval. They then explain a variety of ways that supply-chain partners can collaboratively prepare for and effectively manage risk.

Contrary to a common assumption, companies can use a variety of techniques to reduce costs, not just in the design phase, but throughout the product life cycle. The authors suggest that companies competing aggressively on costs could learn from Olympus Optical. In a field study, they observed how the company’s consumer-products division applies cost-management techniques in an integrated way, with the outputs of some techniques acting as inputs to others and leading to continuous cost reductions.

Many merging companies make the mistake of integrating too much, too soon. In certain cases, a more selective approach is the best way to realize the deal’s anticipated value. The authors recommend analyzing what the “investment thesis” was in the first place: Was it to acquire a company as part of “active investing,” to grow scope, to grow scale — or for a combination of those three reasons? The best way to integrate depends on that original goal, as demonstrated by numerous enterprises that have integrated successfully while using very different approaches.

Toyota has developed interorganizational processes that facilitate the transfer of both explicit and tacit knowledge. With Toyota‘s help, its suppliers have fine-tuned their operations until, compared with their work for Toyota‘s rivals, they have 14% higher output per worker, 25% lower inventories and 50% fewer defects. The authors contend that knowledge sharing with partners can make any company more competitive.

For managers seeking to abandon follow-the-pack IT investment, the author offers the example of Inditex Group, a clothing manufacturer in northwestern Spain, best known for its Zara stores. Inditex demonstrates that a company can select, adopt and leverage IT while spending very little on it. He lays out five general principles that underlie Inditex”s remarkable success with targeted technology spending.

An economy’s capacity to innovate determines its capacity to thrive. A company’s capacity to innovate determines its capacity to survive. The expected life span of a Fortune 500 corporation is only 40 to 50 years, and that life expectancy is getting shorter. Intel Corp. chairman Andy Grove had it right: “Only the paranoid survive.”
For years, [...]

Sellers, unlike their customers, can see the forest for the trees in an industry. Drawing on examples from Hilti, Algorithmics, McCain Foods and others, the authors describe three strategies for putting that unique view to use and discuss how these strategies can be implemented.

As executives acquire more experience with outsourcing, they are discovering its strategic potential. By working with partners on core activities, companies are able to gain the expertise needed to transform themselves. The author illustrates this approach to change with examples from TiVo, bookstore chain Family Christian Stores, BP, and U.K. agency National Savings and Investments.

Few organizations understand the benefits of having tactical planners, who use computer models to optimize the supply chain, in close communication with the senior managers who formulate strategy. The author outlines a planning approach that ensures that critical supply-chain details inform a company’s business strategy and that supply-chain management aligns with the strategic direction.

Outsourcing is shaping the future of human resources. But outsourcing any business activity creates potential risks as well as benefits. The authors outline six key factors for companies to consider when assessing the pros and cons of HR business-process outsourcing and trying to determine when to outsource and when not to. A look at the landmark deal between BP and Exult illustrates those factors at work.