Designing Better Supply Chains

I sat in on an interesting presentation at a recent Stanford Global Supply Chain Management Forum.  Peter Coughlan, Transformation Practice Leader at IDEO, spoke about Extreme Product Development and Innovation.  Most of his presentation was about how IDEO developed exciting new products for the world's leading companies.  Interesting enough, but then he challenged the audience to "develop an extreme supply chain".  Most of the attendees, supply chain guys and gals from hi-tech companies were silent, and I thought Peter's challenge would go unanswered.  But enough people made interesting comments that I thought I would share them with you, plus a few of my own.

We all know the "old" process for designing supply chains--determining customer needs, assessing current supply chain capabilities, developing some alternative options, testing them with optimization models, and presenting the results to management for decision.  The result is often a supply chain by committee, with everyone's favorite part of the old supply chain included in the new one.  Not much innovation or cost savings results.

Peter suggested using the basic processes IDEO uses to design innovative products to break the mold in supply chain design.  Here are his ideas on how the process should work:

1. Allow Divergence  Don't stick to all the old ideas.  Deliberately disrupt existing supply chains to see what happens and then design improvements based on the experiments.  Operate multiple supply chains that collectively better meet diverse customer needs than the traditional "one size fits all" environment.
2. Growing antennas  Visit other companies to learn about how their supply chain operates. UPS give tours to any company, including competitors.  They have one of the best supply chains in the world, but never make the Top Ten supply chains among the analysts. Go figure. Another fascinating tour is Disney World.  You think you know distribution--when was the last time you saw a truck delivering stuff to the Mouse?  Try never.  It's all underground.
3. Being Promiscuous  Feel free to steal good ideas wherever you find them.  The Internet is a great source of inspiration, with loads of interesting stuff published on supply chain innovation, primarily by the analysts.
4. Encourage Cohabitation  I bet the last time you redesigned your supply chain that 95% of the work was done by your supply chain team plus a few consultants.  What if customers, customer service, manufacturing, product design were involved in the entire process and perhaps accounted for 50% of the work?  I'll bet you would end up with a much better supply chain.
5. Behaving Like a Market  What if you ran your supply chain like the stock market?  Your people were traders, buying and using transportation, warehousing and technology capacity as needed, instead of owning all those fixed assets.  Transforming the way your people think about supply chain management is not a new idea--H-P has done it for years in procurement. Companies like FutureFreight are emerging in this space that will allow companies to forward buy their freight needs, introducing price hedging into the transportation markets.

These are only a few of the things you can do to design a better supply chain.  What other ideas do you have?

Comments

[jmobley]

If UPS has one of the best supply-chains in the world, then why is it industry customers are not selecting them (UPS-SCS) in surveys as one of the top ten supply-chain service providers?

I'm wondering what is that claim based on, considering a great many industry surveys are drawn from the experiences of industry specific customers?

UPS like many other companies has impressive commercials about doing this, that, or the other, and in fact are best at just one service.

UPS is best at one service, by far and above, their domestic package delivery ground service in the USA is their superior and best service. Everything else they engage in is a distance also-ran, not even remotely close to the level of quality and ability they display in their domestic ground service product.

Forwarders such as K&N and Panalpina are "patching" together supply-chain events better than UPS-SCS is.