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On Sunday, The Financial Times published “People: the strongest link in the strained supply chain,” by Andrew Hill. The opinion piece caught my attention for three reasons; First, it touches on the role of technology AND people in supply chain management within large, multinational enterprises. Second, it touches on the salience of intra- and intercompany culture with respect to how we experience supply chains in our lives. Third, it touches on how supply chain counterparties treat one another over time — a topic covered in game theory, an aspect of corporate and business strategy.
The role of technology and people
There is a strong tendency to underestimate people and overestimate computer algorithms. Yet, time and again we see that when it comes to problems in real-world supply chains, the best approach is to bet on people AND technology.
As Hill observes, “Companies may rely on machines to run supply chains in good times, but algorithms are not yet as good as people at organising the response to significant unpredicted disruption.” He also observes that there is a shortage of people with the skills that companies need during chaotic times.
This is the crux of a new invitation-only Quarterly Executive Salon Series that we are launching at REFASHIOND Ventures — how should executives think about the combination of people and technology as they attempt to solve the problems they encounter daily in their companies’ supply chain operations?
In some conversations we have had in the Supply Chain & Logistics channel on Thematiks, an expert-led executive insight exchange, these twin challenges have been a consistent underlying theme since I joined the community at its launch in July: People are hard to find and recruit, and even when they are found and recruited, competitors quickly lure them away with promises of higher pay. Technology vendors make wonderful promises that they fail to live up to.
Are there easy answers? I do not think so.
The concerns I am hearing from the top levels of large organizations through communities like Thematiks is reinforced by what I hear from front-line employees who participate in the grassroots- and bottom-up-driven communities we are building at The Worldwide Supply Chain Federation on Meetup, Slack and Clubhouse.
What seems clear to me is that, for companies that want to remain competitive in their industries, the status quo cannot continue indefinitely.
The role of intra- and intercompany culture
How supply chain and operations management is experienced by employees within their own organizations, and across the counterparties in their companies’ extended supply chain networks, is another perennial source of expressions borne out of frustration. This theme reared its head during a conversation I moderated through The Supply Chain Technology Collective, The Worldwide Supply Chain Federation’s community on Clubhouse, on Monday. Front-line employees want technology systems that “talk to one another” both within their own companies and across the supply and value chains that they depend on to meet their customers’ expectations.
For many of the people who speak up, an underlying sentiment is this: This seems to be possible in my personal life. Why is it not possible for the technology I need to get my work done?
This is why I believe the trend toward software-enabled supply chain platforms and ecosystems is only going to gain strength as time progresses. Readers of this column know this is a theme I have been exploring for some time. It is one I will continue to explore because I think there is much yet that will happen with respect to that specific issue. Yes, I think blockchain and distributed ledger technology will play an important role in this process. I also think we are yet to understand fully how to make this work in a way that greatly reduces friction, and operating cost, while accounting for financial and psychological switching costs.
As Hill observed in his article, companies’ instincts seem to be “to hoard information … and exploit suppliers, rather than explore possibilities for co-operation along the whole chain.”
This brings us to the final point Hill raises in his article.
Supply chain counterparties, and strategy and game theory
Hill makes the observation that supply chain counterparties tend to remember how they were treated by the people and organizations with whom they do business, saying, “The crisis should, though, reinforce one broad principle that makes the chain more resilient: people tend to remember who treated them right when times were hard.”
In their article, “The Right Game: Use Game Theory to Shape Strategy,” Adam M. Brandenburger and Barry N. Nalebuff observe that the language of business strategy is full of expressions borrowed from sports and the military. They state, “Business language is full of expressions borrowed from the military and from sports. Some of them are dangerously misleading. Unlike war and sports, business is not about winning and losing. Nor is it about how well you play the game. Companies can succeed spectacularly without requiring others to fail. And they can fail miserably no matter how well they play if they make the mistake of playing the wrong game.”
Game theory is a field of mathematics that studies interactions between rational decision-makers. It has been applied in a wide variety of areas, and has existed as a field of study since the 1950s according to Wikipedia’s game theory page. Obviously, for the purpose of this column, I am mainly interested in how game theory can be applied to make decisions related to supply chain and operations management within corporations, and between counterparties in the extended supply chain.
This brings us back where we started: supply chains, innovation, technology and people.
Most supply chain management programs are housed in business schools. As we prepare to grapple with a more volatile, uncertain, complex and ambiguous reality, should some of these programs instead be housed within engineering schools and departments of mathematics and computer science? Or, at a minimum should these programs be co-hosted between business schools, engineering schools, and departments of mathematics and computer science?
It’s an interesting question, don’t you think?
If you are a team working on innovations that you believe have the potential to significantly refashion global supply chains, we’d love to tell your story in FreightWaves. I am easy to reach on LinkedIn and Twitter. Alternatively, you can reach out to any member of the editorial team at FreightWaves at email@example.com.
Author’s disclosure: I am not an investor in any early-stage startups mentioned in this article, either personally or through REFASHIOND Ventures. I have no other financial relationship with any entities mentioned in this article.