MIT Sloan Management Review

Although executives understand the difference between efficiency and responsiveness, many are confused about when to apply each strategy. In recent years, companies have been caught in the bind in which Dell Inc. found itself in 2008, when it needed to transform its supply chain to serve new customers in new channels. The question was: how to do that? Dell decided to create multiple supply chains, configured so that the company could reduce complexity and benefit from economies of scale.

Logistics clusters are local networks of businesses that provide a wide array of services, including transportation carriers, warehousing companies, and freight forwarders. Logistics clusters address several challenges that economies face, including the need for good jobs. In addition to helping companies navigate global supply networks, logistics clusters are contributing to the efficiency of global supply chains and, in the process, increasing international trade and global trade flows.

What does it mean to “deliver customer value through flexible operations”?

David Simchi-Levi, professor of engineering systems at MIT, explained his ideas in a recent webinar.

Complex supply chains with many agents are more prone to problems, and on occasion, to spectacular collapse. Examples from the last few years include the subprime mortgage crisis; the failure of the Peanut Corporation of America; and dioxin-contaminated Irish pork. Without a doubt, today’s complex supply chains are vulnerable to opportunistic behavior leading to sometimes catastrophic failure. But there are five steps managers can take to protect their companies.

Niche manufacturers often seek out mass-market distribution as a way to increase sales. But is that always wise?

Not according to professors Andrew R. Thomas, of the University of Akron, and Timothy J. Wilkinson, of Montana State University Billings.�

Let's start off the year right with the winter 2010 issue of MIT Sloan Management Review.

Highlights in the new issue include a special report on the strategic design of supply chains.

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. The supply chain should be designed and managed to deliver one or more of six basic outcomes: cost, responsiveness, security, sustainability, resilience and innovation.

Even corporations with clear environmental aims fail to go the distance when it comes to their supply chains. But lessons from a small group of Fortune 500 companies can give them the direction they need.

When customers collaborate with suppliers they can build trust, reduce relational stress, and increase innovation-related activities.

Accurate measurement of cost savings in the supply chain is easier said than done. But learning how to address the measurement and reporting challenges can make businesses more profitable and more competitive.

How have strategies for supply chain design changed in recent years? What are the forces most profoundly shaping them now? What kinds of models have emerged for companies to consider, choose among or learn from?

In this pair of twinned interviews, MIT professor and entrepreneur David Simchi-Levi and MIT professor Charles Fine — two of the world’s leading thinkers on supply chain and value chain design — offer answers to those questions and others.

We're putting the finishing touches on the winter issue of MIT Sloan Management Review, which we'll publish in early January. Today we're posting an element from our special report on supply chains, about Outcome-Driven Supply Chains. In it, Steven A. Melnyk, Edward W. Davis, Robert E.

Knowledge sharing between partners has more upsides than downsides, provided that the right kind of knowledge goes back and forth.

Dual accountability between a buyer and its strategic suppliers, through tools such as a Two-Way Scorecard, is a new and tangible approach to improving supply chain relationships.

Increasing length, complexity and interdependence in supply chain contracts is resulting in more critical and costly supply disruptions, yet despite that risk, commodity procurement is mainly handled via long-term, fixed-price contracts containing naive terms and clauses in the case of breach. The risk of these breaches is very real.

As companies rely increasingly on external suppliers, there is an emerging and compelling need for “maestros”

An organization’s ability to recover from disruption quickly can be improved by building redundancy and flexibility into its supply chain. While investing in redundancy represents a pure cost increase, investing in flexibility yields many additional benefits for day-to-day operations.

The purchasing function can go beyond mere cost cutting by rote. It can add value by driving innovation and superior long-term cost performance.

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.

During the e-boom of the 1990s, academics, consultants, executives and investors alike claimed that e-procurement, and its increasingly central role in supply-chain management, would revolutionize how future business-to-business practices would take place: Efficiencies would be improved and procurement costs reduced; the flow of information along the supply chain enhanced; strategic