Supply Chain Reality Check

There is a consensus among futurists that business is the only institution capable of providing effective global stewardship. As a result, a good deal of attention is being paid to mapping the future performance of businesses and the economies in which they operate. Academics and practitioners agree that the business landscape will be very different as companies are moving away from the traditional view of enterprises as separate, independent entities toward a more collaborative model where the emphasis is on interconnectivity. Indeed, many contend we are witnessing the creation of the DNA of future business practices. There is growing recognition that supply chains will play a crucial role, helping sustain growth and profitability by enabling companies to be ever more flexible and adaptable.

As one examines the literature on how recent technological advances in manufacturing, communications and information technology will cause supply chains to evolve, some common notions emerge. Primary among them, perhaps, is that there will be total connectivity among businesses — they will behave like living organisms, quickly assembling and disassembling, ramping up or down to continually adapt to the environment. There is also a presumption of total trust and commitment from all involved in such alliances as well as an unspoken assumption that global boundaries will be nonexistent, and all countries will foster conditions that support frictionless international trade.

Upon closer examination, however, it is clear that these predictions encompass some significant contradictions. For instance, they assume a complete sharing of information and knowledge. However, the general understanding of the future business environment also calls for competition driven by information-based strategies. So, how can information and knowledge be shared completely if they are the primary basis for competition?

Another fundamental futurist assumption is that outsourcing will increase dramatically. But even in the best scenarios, outsourcing typically leads to some loss of control and coordination and can affect an organization’s ability to design new products rapidly. That can be a problem in an era of significant and fast-paced technological advancement when rapid product and service innovation will be required to win over well-informed and very demanding customers.

Given such inconsistencies, the vision of a totally enabled supply chain seems utopian and not likely to unfold in the predicted manner — at least not in the near term. The forces driving changes in supply chains will gain momentum rapidly, but the impact will be counteracted by friction between the numerous moving parts that will make up these new structures.

For one thing, the operation of supply chains will remain deliberate and not spontaneous. It is unlikely, in the current global environment at least, that countries will eliminate trade boundaries and allow goods and information to flow freely. On the contrary, there is a growing concern that with the recent rise in terrorism and resulting international tensions and instability, there may be increasing restrictions on the movement of people, products and information.

Additionally, since supply chains are created and managed by people, such systems will always suffer from inherent friction. It is difficult to imagine a supply chain that will share risks and rewards objectively among its constituents. Based on past experience we have seen that it is difficult enough for organizations to align internal departments let alone across a supply chain.

To be sure, advances in technology and communications will continue to enable organizational capabilities that were unthinkable just a few years ago. Although that will certainly allow supply chains to run more efficiently, they will still be driven in the foreseeable future by local objectives and actions that may not necessarily be globally aligned.