Supply Chain

Tech isn’t the only supply-chain solution

Professor Steven A. Melnyk explains an underrated tool that can help smooth production snarls.
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· 5 min read

We know: it’s old news that the supply chain is a tangled mess. But that doesn’t change the fact that companies need to find a better way to manage their supply chain or potentially find themselves at a competitive disadvantage.

One emerging trend is technology-driven “customer-centric” supply-chain management. In customer-centric supply chains, organizations use customer data to drive strategic decision making. Companies like Nike, Amazon, and Johnson & Johnson are orienting their supply chains around customer data and investing heavily in supply-chain technology.

However, organizations need to be thoughtful and innovative in how they approach their supply-chain strategy because of the uncertainty and speed of supply-chain disruption according to Steven A. Melnyk, professor of supply-chain management at Michigan State University’s Broad College of Business.

In his recent work, Melnyk suggests that supply-chain management has traditionally operated on a “straight line”—the customer “talks” to marketing and the marketing department tells supply-chain managers what the market looks like. But Melnyk says that process needs to transition to a triangle format, in which the customer directly communicates with marketing and supply-chain management simultaneously through digital channels because “the supply-chain manager needs to have an accurate and clear view of what the customer(s) wants.”

CFO Brew recently spoke to Melnyk about why technology is only a part of the solution to supply-chain disruption, why influence is an underrated tool in the supply chain, and why the customer should come first.

*This interview has been lightly edited for length and clarity.

How would you describe the current supply-chain situation?

It is disrupted, and what it’s done is essentially highlighted some of the fundamental problems that we have when you have a primarily efficiency-driven supply chain. That is, for the last 20 years, we’ve been focusing on efficiency, and we’ve done a good job up until 2021.

What we found out in 2020 is that the supply chain basically couldn’t cope. We found that [disruption] was all across the supply chain, and it was made worse by the fact that we had a lack of visibility into the supply chain.

The other thing that occurred is speed. When we’re faced with these issues, we have to deal with quick decision-making. The third issue is uncertainty. And if you look around, we’ve been faced with uncertainty in terms of things that have occurred which we never expected, both from a weather perspective and from a supply-chain disruption perspective.

A lot of the weaknesses in the supply chain have been exposed, and organizations are being challenged and tasked with resolving it.

What is the role of technology in dealing with supply-chain issues?

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The technology is an enabler. What we’re also finding out is relying on the technology without other elements is dangerous.

What I mean by that is I have visibility in the supply chain, so I can see down to where a load has been developed and shipped. I may want to be able to influence that load—delay it or stop it or reroute it or do something else with it. And what’s happening is we’re starting to find out that the technology enables this, but unless we have relationships in the supply chain, you may be able to see it, but you may not be able to influence it.

And so you always find that the technology initially is used as a substitute, then we understand what’s truly going on. And then we use it as its own unique capability to help us better compete.

Let’s go into this with realistic expectations. Is technology the answer? No. Technology makes good systems better and it makes bad systems worse.

The missing part of it is the organizational part, the relationships. You’re going to make errors in an environment where things are changing rapidly. People have to make quick decisions, and if you make the quick decision, you’re going to be wrong some of the time. If you punish the errors, if you can’t differentiate between smart and dumb errors, then the technology will not be of use.

Unless you start to understand the fact that if you fix the technology by itself, and you don’t address the other pieces, the promise is going to be unkept.

For the organizations that are doing it well, it is not just about getting supplies in the door, but it’s also about managing in order to get customers what they want, correct?

The concept of the customer-driven supply chain is essential. It’s called taking organizations from straight lines to triangles. What's a straight line? Imagine that you have a customer—marketing supply chain. That’s a straight line.

Any problem with that? The answer is a lot. No. 1, it takes time for the information to get from the customer, to marketing, to supply chain. No. 2, it’s not clean information. Marketing, no matter how good they are, will always spin it.

So what I describe is the fact that we’re going from straight lines to triangles. How’s that? The customer sits talking to marketing, and they also talk directly to us. That’s pretty cool. Because I have to know from my customer: what are their real needs? If you can’t get everything, what is it we can do to help you survive?—DA

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