Deep Dive #1: Supply Chain Investigation
The term “supply chain management” was first uttered by Keith Oliver, a management consultant, during an interview with Financial Times journalist Arnold Kransdorff in 19821. Yet ideas on how to rationalise production processes were formed much earlier. In 1911, Fredrick Taylor, a mechanical engineer, wrote The Principles of Scientific Management. Taylor’s paper focused on the
importance of extracting maximum efficiency from a workforce and its operations.
Taylor witnessed “the great loss which the whole country is suffering through inefficiency in almost all of our daily acts”. In his opinion, the remedy was to be found in the systematic management of production, rather than “some unusual or extraordinary man”. Such sentiments ring true today. Companies with well-managed supply chains can benefit from results which are “truly astounding”.
The UN Global Compact – the world’s largest corporate sustainability initiative – supports such a view: “when done right, a global supply chain can deliver significant benefits to companies in the form of reduced costs and enhanced profitability and shareholder value. It can also contribute to much-needed economic and social development, resulting in higher standards of living for millions of people”.
Yet challenges have arisen from today’s global complexity. Poorly managed supply chains can jeopardise the future of a business. Mismanaged, and “companies leave themselves open to significant operational and reputational risks. Impacts to people and environment can also be substantial and severe”. Examples of companies that have suffered from supply chain issues are
numerous and include:
– Boeing: the aircraft manufacturer embraced outsourcing in an effort to reduce costs and lower the production time of the 787 Dreamliner. A poorly managed supply chain had the opposite effect: costs soared and deadlines overran. Company engineers blamed low quality components sourced from suppliers. Some estimates indicated that 5,000 nuts and bolts
needed to be reinstalled.
– European Horsemeat: in 2013, a scandal erupted after foods advertised as beef were found to contain undeclared horse meat. A number of UK supermarkets were implicated and 10 million suspect burgers were taken off the shelves. Complex supply chains and a lack of traceability were given as reasons for the scale of this “food fraud”.
– Rana Plaza: the collapse of commercial buildings in the Rana Plaza complex in Bangladesh in 2013 killed 1,134 people. An investigation into the collapse revealed “the uncomfortable truth that these tragedies are the almost inevitable result of a highly disaggregated sourcing model which has become the basis of global supply chains”.
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