McKinsey Looks at Supply Chain Complexity

The McKinsey guys just published the results of a survey on supply chain management that has some interesting, albeit expected (at least by us!), conclusions.

Supply chains are increasingly global and complex, as companies aspire to support a variety of strategies, such as entering new markets, increasing speed to customers, and lowering costs. In this survey, we asked operations and other senior executives from around the world about their companies’ supply chain strategies, the factors that influence those strategies, and the ways their companies act on these factors. We also explored how well executives think their companies are meeting their goals, how they manage their supply chains, and the challenges involved in running a global supply chain.

Guess what, supply chains are becoming more complex!

The results show that supply chain risk is rising sharply. Executives point to the greater complexity of products and services, higher energy prices, and increasing financial volatility as top factors influencing their supply chain strategies.

Really!  Let's see... outsourcing an ocean or two away, translating knowledge into different languages and cultures, communicating across time zones, intellectual property... I can think of a few reasons.  So what's being done about it?

Relatively few respondents, however, say that their companies are translating the importance they place on these factors into corporate action.

Should I hazard a guess that this is driven by a reliance on traditional accounting methods?  What is risk?  What is knowledge?  How does that compare with the hourly cost of a pair of hands?  Inquiring minds want to know, especially since it doesn't show up on the P&L or balance sheet... until it's too late.  So since these guys have their heads buried in their P&L's, what happens?

Nor do executives express confidence that their companies are meeting the top strategic goals: reducing costs, improving customer service, and getting products to market faster. In addition, for all the public attention paid to environmental concerns, including global warming, executives report that such issues have little influence on supply chain strategies.

No kidding.  Maybe if they turned off their computers and actually followed their physical supply chain for a few days (or months... some are pretty damn long!), they'd get a sense of what's going on in the real world. 

Comments

[Jason Morin]

"Maybe if they turned off their computers and actually followed their physical supply chain for a few days (or months... some are pretty damn long!), they'd get a sense of what's going on in the real world."

So true. It amazes me how many people spend an entire career in supply chain (my field) and never make an effort to spend time on the front lines and get their hands dirty. Just spend a day picking an order in a warehouse or making a delivery with a truck driver. The learning from those experiences are invaluable and last a life time.

Unfortunately I don't have any training in lean nor have I ever worked for a truly lean company. But I absorb as much as I can (such as reading great blogs like this). Is what you're describing in your last paragraph "genchi genbutsu"?