- February 11, 2016
- 1:37 pm
- John Caltagirone
- no comments
Demystifying Supply Chain Conventional Wisdom
Our center’s own John Caltagirone and Undergraduate Research Assistant, Ally Ryder, recently published an article in Supply Chain Management Review called, “Best Practices or Better Practices?” The article explores the coinage of the term “best practices” and the circumstantial nature of the supply chain industry that suggests that “better practices” maybe more fitting. Often a best practice insinuates that there is no better one that follows, that improvement no longer has to be made. Process improvement and technology are two examples of supply chain genres which often change each day based on the needs, resources available, and new ideas being introduced to the market.
Recently I stumbled upon the article “Misadventures in Supply Chain Management” by Steven A. Melnyk and Colin M. Seftel, which hovered above a similar theme of the shift in supply chain management where conventional wisdom is now being challenged. Outliers have found themselves to be more successful as they have adapted to the consistent change in the demand from customers and pushing aside traditional consensus.
The six issues that Melnyk and Seftel examine are:
- Negative Working Captial
- Economic Order Quantities
- Safety Stock
- Performance Measurement
- Standards
- Change Management
The example of using economic order quantity is the most optimal option, which measures the minimum amount of total holding costs and ordering costs. The issue with this traditional approach is that it doesn’t account for storage space for any extra inventory, perishability of goods, or shipping costs/capacity to move any inventory. Companies like Toyota, Unilever, Zara, and Phillip Cosby all have proved that to progress in their given industries it is almost better to deviate from the EOQ logic. Unilever singlehandedly shows that profit and sustainability can be done together and Toyota shows that push systems are not the most optimal, rather production system focused on pull schedules and order qualities of one succeed.
Standards and change management both suggest that adopting best practices and getting employees on board will always lead to success, but both turn out to be myths. Employees want to understand why previous methods didn’t work and why these new “best” practices are being implemented. The key word in the previous sentence is why. Often companies focus too much on what and how, but never the reasoning behind it.
Moving forward, companies focused in supply chain and beyond will have to work to redefine the traditional thoughts of supply chain management to bridge into an environment that invites continuous improvement and innovation.
Written by : Riti Patel