Magazine Winter 2010

Your Next Supply Chain

New forces and dynamics are emerging to influence the supply chain designs of the future. And even the old forces are influencing it in new ways. Interviews with David Simchi-Levi and Charles H. Fine — two of the field’s premier thinkers — suggest how to capitalize on what’s coming.

An Interview with David Simchi-Levi and Charles H. Fine Reading Time: 22 min 

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From the Editor
Looking backward, the trends that dominated supply chain management are easy to spot. As leading supply chain thinker David Simchi-Levi describes, the 1980s were all about the demands of just-in-time. In the ’90s, it was outsourcing. In the ’00s, it’s been the emergence of the Internet — which especially shaped procurement practices.

The Leading Question

What does the future of supply chain design look like?

Findings
  • There are six main forces that will influence supply chain design: globalization; rising logistics; rising risk; labor cost increases in the developing world; sustainability; and growing volatility.
  • One of the main design choices is between win-win (integral) and zero-sum (modular) architectures. An industry’s level of maturity is a key driver of the choice.

But the coming decade? Not so easy to see.

Some long-present factors, such as the sweep of globalization, will have new effects. Other factors, such as rising levels of risk, will throw greater weight — and have broader impact — than they did before. And the whole question of supply chain design will be more central to overall organizational competitiveness than it has been. As longtime visionary Charles H. Fine argues, supply chain questions become value chain questions; the whole dynamic ecosystem of a company’s suppliers, customers and stakeholders, not to mention the ecology of the industry it competes in, now must drive choices in supply chain design. Some of the choices look simple but aren’t. (Do I minimize costs, or maximize resilience?) Some of them look obvious but are subtle. (Do I create a game that’s win-win, or zero-sum?)

In the conversations on the following pages — and, in greater depth, on MIT Sloan Management Review’s Web site, dev03.mitsmr.io — Simchi-Levi and Fine, two of the world’s premier strategists on the subject, explore those questions and others. Their insights begin to provide a context for how the smartest executives will need to address his or her company’s own unique supply chain design challenges.

Those challenges in general have been under the scrutiny of Simchi-Levi and Fine, both leaders of the MIT Forum for Supply Chain Innovation, for a long time. Simchi-Levi, a professor of civil and environmental engineering and engineering systems at MIT, is also an entrepreneur and executive.

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Comments (4)
Rabindranath Bhattacharya
Dr. Rabindranath Bhattacharya, India
I apologize for a mistake in my earlier comment on the article on 13th line. You should read it as ' Realigning ..........' instead of ' Aligning.................' . This refers to the article of Pro. Narayanan and Prof. Raman of Harvard Business School published sometime back.
Rabindranath Bhattacharya
Dr. Rabindranath Bhattacharya, Chennai Business School, India 
Most of the companies in the world would not worry about their  supply chain risk, reward and trust deficit expected in the coming decade. Barring Japanese companies anywhere in the world most of the organisation executives still believe that 'status quo' is the best policy and would not like to come out of their silos fearing backlash. It's extremely difficult to maneuver  the human minds of the partners of the supply chain to align with the redesigned one. I have observed this while working in a company near Chicago where suppliers meant enemies not 'partners in progress'. The story is the same with the suppliers of auto parts to Big Three also. So do you expect smooth functioning of supply chain which is built on trust? So what is the solution? I feel ' Aligning incentives among partners in supply chain' is one of the solutions for the impending crisis to tackle hidden information. I as a General Manager used penalty as well as incentive in the contract to get a product from my supplier before time.
Eugene Marino
Having taken courses led by Professors Fine and Simchi-Levi at MIT Exec Edu I experienced first hand their knowledge, expertise and strategic thought regarding supply chain. They are premier thinkers in supply chain design and issues.  The articles were insightful and described the  challenges facing tomorrow's supply chain.  The articles  with thoughts and strategies to consider in designing a company's value chain are mandatory reading for all CEO's not just supply chain executives. 
Gene Marino
VP SCM, Princess Cruises
drskb789
This article I found most comprehensive and useful.

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