The role of supply chains and their ability to deliver competitive advantage has grown massively in recent years. The examples of Apple and Amazon show that corporate valuations reward supply chain efficiency.
While Apple’s place as the world’s most valuable company, is often seen through the lens of great product design and its ability to shape customer demand. Who knew they needed a tablet before the iPad arrived and created a whole new market segment? The behind-the-scenes reality is that Apple is brilliant at managing complex supply chains. Amazon, seen by analysts to have the potential to achieve a bigger market cap than even Apple, manages relationships with more than3 million suppliers. These modern corporate giants are masters at supply chain management and their valuations rightly reflect their excellence.
Both Amazon and Apple have been able to operationalize efficient SCM systems to deliver noteworthy customer experiences and gain competitive advantage. The complexity of these multi-dimensional supplier relationships and the interdependencies across multiple functions means that while data has an important role to play in Supply Chain Management (SCM), it remains fundamentally a ‘human’ activity. And as such it is often compromised by the ‘subjectivity’ that humans bring.
The ability to become more objective, and to understand and respond to the behavioral aspects of SCM, is set to become an important factor in building future-ready supply chains. Read my white paper Boost Supply Chain Management With Behavioral Decision Making to learn how agile and streamlined infrastructure that includes collaborative information sharing, intelligent systems, and analytics capabilities, enable better supply chain decision-making.
I consider two broad approaches to supply chain design that support rational and timely decision-making.
The first looks at the importance of collaboration, a big-picture approach, and sustainability. Given the number of functions involved in a supply chain, it’s imperative that managers thoroughly understand the points of functional interdependence and points of impact. To achieve this, they must be able to manage high-level cross-functional relationships effectively and at the same time build in sustainability best practices into their supply chains.
The second approach focuses on agile and dynamic supply chain planning. Given that, efficiencies in supply chain have such an impact on a business’ financial health including working capital requirements, cash flow, operating costs, and inventory, there is a clear incentive for executives to find those efficiencies. Amazon has to manage peaks in demand for products with short, seasonally driven demand. Apple has products with a long shelf life but must respond to massive surges when it launches new products.
Combining these two approaches in a supply chain decision framework can help enterprises eliminate some degree of irrationality so that they make better-informed decisions that improve performance.
Digital technology is filling some of the gaps in supply chain management and delivering new data sources that informs decisions. However, technology is only part of the solution. The companies that will be rewarded with mega valuations in future are those that can operationalize data inputs and combine them with an understanding the behavioral aspects of decision-making. Insights from behavioral science must be applied to supply chain management to create new advantage.