20 Nov 2000  Research & Ideas

Moving from Supply Chains to Supply Networks

Dramatic change is taking place in today's supply chain, say HBS professors Ananth Raman and Roy Shapiro, and it's up to the general manager to assemble a team that can implement the new principles and practices the change requires.

 

Editor's Note— Professors Ananth Raman and Roy Shapiro are two members of the HBS faculty team that developed the new Executive Education program, Managing the Supply Chain: The General Manager's Perspective. In this conversation with the Executive Education staff, they talk about the dramatic changes taking place in today's supply chain, as well as the far-reaching impact of information technology advancements. Outlining the program's curriculum, they explain how the participants leave the program armed with the principles and perspectives necessary to leverage their particular supply chains for competitive advantage.

EE: How is Managing the Supply Chain: The General Manager's Perspective unique from other supply chain programs offered in recent years?

Shapiro: Traditionally, the supply chain has been taught at the level of algorithms and techniques. This course is clearly about principles and perspectives, and it's aimed at the general manager. Participants acquire a set of principles and perspectives for looking at the pieces of the supply chain and understanding how to develop an approach or system that enables their supply chains to do whatever they do best in their particular context.

Moreover, in today's world, we're already beyond the point where supply chain is the right term because it denotes a linear set of linkages between firms. I'm just waiting for the time when people no longer say "supply chain" and, instead, only talk about "supply networks."

EE: Why has supply chain management become such a hot topic in recent years?

Shapiro: Changes in five factors are largely responsible for the increased attention. I'll quickly list them and then talk about each.

  • Information technology
  • Visibility of best practices
  • Consumer behavior
  • Competition
  • The importance of speed

Technology. Although people have been talking about the idea of the integrated supply chain for a long time, it's only been in the last decade or so that information technology has made it possible to bring many concepts to life. However, information technology is merely the facilitator.

Visibility of best practices. People are realizing the enormous amounts of money they've been leaving on the table in supply chain management because they have not been doing things right. So we're really talking about a need for greater understanding of supply chain economics and the visibility of successful firms.

Some firms have completely changed the competitive dynamics of their industries because of the kind of competitive advantage they've been able to gain in the supply chain. Wal-Mart, of course, is the obvious one. The impact of their ability to get products to the customer and the impact of the economics have really changed the nature of competition. Not only did others start to emulate this model, but more visible models of different ways to do things in the supply chain have also emerged.

Consumer behavior. Today, customers are much more demanding than they have ever been in business history. They have the information at their fingertips, they know exactly what they want, and they know when and how they want it.

Competition. The behavior of customers has changed the way we view competition. Companies are forced to do better because customers aren't going to stay around if they don't.

Speed. During the last decade, it's all been about competing through speed—being able to satisfy changing customer needs quickly, accurately, and efficiently.

EE: Going back to your discussion of information technology as a facilitator, can you elaborate on specific advances that have affected supply chain management?

Shapiro: Information technology has affected numerous areas. What's really changed is the technology of information flow, and that's changed the economics of information flow.

If you look at business-to-business exchanges as one form of new business-to-business models on the Internet, the whole notion is to open up a vast quantity of information that is available in real time to all players in a particular supply chain—or more accurately, supply network. So everyone can see the whole picture simultaneously—what people need, what's available, what's in inventory, what capabilities each player brings to the table, and so forth.

Raman: Our discussion of technology advancements, of course, must include the enhanced ability to process all of this data. Today's desktop PCs and even laptops are much more powerful than mainframes 20 years ago. But it's not just about processing speed. We also have the capacity to store programs in memory without having to access data from the disc.

EE: Does a clear-cut strategy exist for achieving success in supply chain management?

Raman: To provide a partial answer, we already know that success depends on a few things such as product characteristics, industry characteristics, and supply chain economics.

Shapiro: The simple answer is "No." Yet, in our study of successful supply chain managers and successful supply chains over the last decade or so, some key principles have emerged that are very important to keep in mind when implementing supply chain strategies or approaches. This course, Managing the Supply Chain: The General Manager's Perspective, is about these principles and perspectives. And it's aimed at the general manager because it's the GM's job to put together a team that can capture those principles in a way that matches the context of the particular company, industry, and supply chain.

EE: How would you summarize the program's takeaway value to participants? Or stated another way, how will this learning experience benefit them when once they return to their respective positions and organizations?

Raman: Participants will gain a deeper understanding of the opportunities for competitive advantage that are available in different supply chains—and of the challenges these opportunities present.

Shapiro: With all the technologies, opportunities now exist for people to evoke new business models...to find new ways of doing things that can change the economic or competitive balance in some industries. People need to understand what those opportunities are—and how to take advantage of them. On the other side, they also must understand what threats exist when others are taking those opportunities—and how they can counter those threats. The program is designed to help participants understand some of the issues and challenges involved in the actual "doing" part—and equip them with the principles crucial to making it all work.

EE: What central themes are developed throughout the program's curriculum? And how does each relate to the general manager's role in today's dramatically changing supply chain?

Raman: The program addresses three core themes in depth.

  • Competitive advantage from the supply chain
  • Coordination and control of the supply chain
  • Supply chain management in the new economy

The first is how you can gain competitive advantage from the supply chain. We not only look at some best-practice examples, but also examine the role of the general manager in either successfully or unsuccessfully leveraging the supply chain for competitive advantage. Second, we will get into the coordination and control of the supply chain. To help explain what coordination means, we position the supply chain manager as the conductor of the orchestra who must bring everything together at the right place and time.

Shapiro: That's a great metaphor because the entire program focus is on new ways of thinking about how the players should work together in the supply chain. Contrary to the traditional arm's-length, adversarial model where everyone is out for their own piece of the pie, this part is about how they can coordinate all their activities so that it works best for everyone.

Raman: The other part of this theme, the control aspect, is really about incentives—about how to reward people for doing what you want them to do and how to punish them for doing what you don't want them to do. Lastly, the third theme is supply chain management in the new economy. Here, we explore how to apply the principles in the new economy, which includes e-commerce and new supply chains that have been created as a result of technological change. We also discuss the changing role of intermediaries, as well as some new intermediaries.

EE: In terms of organizations represented and/or individual titles and functions, what participants are likely to benefit most from Managing the Supply Chain: The General Manager's Perspective?

Raman: As the title implies, the program is definitely intended for general managers in companies and industries who need to competitively and/or economically manage product supply in manufacturing, distribution, and retail environments. Another audience segment is the investment community.

Shapiro: Quite often, companies looking for funding compete primarily, if not totally, in the world of supply chains. And venture capitalists thinking about investing in these companies need to understand what they bring to the table.

Raman: That's very true because venture capitalists often base their evaluation of established companies on their supply chain capabilities.

Shapiro: Information technologies companies stand to derive significant value as well. But we want to point out that the program is not intended for all managers in the information technology and investment arenas. Rather, it is only for those who specialize or deal in supply chain information technologies or supply chain investments.

For more information about Managing the Supply Chain: The General Manager's Perspective, please click here.

Ananth Raman, faculty chair for the program, focuses his research on supply chain management for short lifecycle products having unpredictable demand, with particular emphasis on production, inventory control, and the role of incentives.

Roy Shapiro is Chairman of the Technology and Operations Area at HBS and concentrates his research and teaching efforts on technology and operations management, logistics, and supplier management.