Monday, August 23, 2010

It Works in Theory, But…

image How many times have you heard that – I bet it is more than a few! Latest, I heard it a few weeks back in my discussions with an industry executive on the subject of aligning supply chain strategy to their business strategy. I was discussing a concept from my book on supply chain strategy that corporations must explicitly design supply chain processes to deliver directly toward the goals of business strategy. For example, if price-leadership is your goal, then you should be designing your supply chain to squeeze cost out which would mean initiatives like reducing shipping expenses through optimized shipment planning, load utilization, reducing miles; or increasing warehouse efficiencies through better labor scheduling, wave planning, stocking efficiencies, etc. Contrast this with a business strategy that is based on product differentiation – in which case, your supply chain should be focused on product design, mass-customization, product-quality, and so on. Similarly, if your business strategy is based on customer-service, the supply chain must enable customer centric capabilities such as order fulfillment, tracking, visibility during manufacturing and transit, etc.
And then, I was hit with: It works in theory, but … Unfortunately, this was not the first time and I am certain won’t be the last either. Almost any time, the process involves an optimization engine, mathematical programming, or some complex statistical modeling – anything that is hard to understand and appears like a back-box – I have heard the excuse. Though I am not sure how is this any different from driving a car that has ABS, differential-drive, or air-bags – which are pretty standard equipment but that does not mean that we understand exactly how they work!
This time, though, I was surprised to hear it, because it came from a corporation that is considered a pioneer in its industry.
I understand the sentiment: Corporate leaders everywhere are becoming more cost-aware and to that extent, less willing to go with new or unproven concepts, irrespective of their validity in theory. But is that really the role of leaders in a corporation? I don’t believe so. If that was the case, we would not have almost any of the innovations in management that we take for granted.
  • Before six-sigma became a staple corporate diet, it was merely a statistical theory.
  • Before SPC (statistical process control) became a standard method for controlling quality, it was merely a statistical theory.
  • Before linear programming became fashionable in solving supply chain problems using the constraints of available material and resources, it was merely a mathematical theory.
  • Before time-series analysis became a standard in demand forecasting, it was merely a theory……
In fact, the list goes on. There is merely anything that we can point to – that was not a mere theory before becoming a reality. That is just the way of progress, the way of human evolution. And to think someone can deny that basic, fundamental, logical, way to grow, evolve, make progress – it is just unthinkable.
The role of a corporate leader, specially in the companies that are pioneers in their industry, is not to play so safe that anything new on the horizon remains an anathema until it is history, but rather judiciously select those theories that have promise and would allow them to continue to be pioneers.
If everyone waited on another to prove a theory before adopting it, won’t we still be living in the trees!
© Vivek Sehgal, 2010, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

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