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Top 5 Reasons for Supply Chain Expertise

Artwork for MSSCMA blog post - March 2016

Artwork for MSSCMA blog post - March 2016

Companies need people who can manage complex supply chains, now more than ever. Here's why.

Naren Agrawal, Benjamin and Mae Swig Professor

Ten years ago, if you flipped through the pages of popular management magazines and journals, chances are that there were few articles discussing the importance of supply chain management (SCM). In the last decade, however, in publication after publication, a stunning number of senior executives have identified SCM as critical to their companies’ competitive and financial performance.

This is true for not only product-based industries – computers and electronics, retail, automobiles, consumer products, and the like– amazingly, it is also true for service-focused companies like Google.

Yes, even Google!

While it may be primarily known for its search engine, what enables Google to be Google is the meticulous planning and coordination of the vast infrastructure of assets in its data centers and energy-producing facilities. The diversity of Google’s supply chain is truly impressive, noted its Vice President of Worldwide Operations, Jim Miller, in a recent presentation at the Leavey School of Business at Santa Clara University.

Indeed, corporate and venture investments in systems, infrastructure, people and planning solutions related to the supply chain function have exploded during this period. So what explains this phenomenal growth in focus and interest in supply chain excellence across industries? Here are the top five reasons:

1. Changing customer attitudes

Today’s customer is not the same as that of 10 years ago. Whether we speak of end consumers like you and me, or an enterprise buyer, today’s customer wants to spend a lot less time on the purchasing decision, cares a lot more about information about the product, and, has access to a lot more information prior to the purchase.

The net result: companies have to think very differently about how to deliver value to their customers. For example, online retailers like Amazon are giving a serious run for their money to brick-and-mortar retailers. However, the economics, challenges, design and management of the supply chain for Amazon are a world apart from that for the traditional brick-and-mortar stores. Not surprisingly, SCM is a core competence for Amazon.

2. Customization (segment of one) and multi-dimensional competition

Gone are the days when customers were satisfied with the black Ford Model T. Consumers today are used to customized solutions tailored just for them. What’s more, consumers will not settle for just low price, or just high quality, at the expense of the other. Consumers expect low prices, high quality, and high service, and many other attributes, all at the same time.

In light of this relentless focus on customized solutions and rising consumer expectations, companies have had to enhance their supply chain competencies. From technology companies like American Power Conversion selling complex infrastructure systems and PC manufacturers like Dell, to consumer goods companies like MyMuseli (customized cereals) and Zazzle (personalized gifts), customization has enabled many companies to distinguish themselves in their markets and earn healthy margins. A key pre-requisite? Razor sharp focus on supply chain excellence.

3. Product proliferation

The relentless drive to offer relevant value to all consumers has led to an explosion in the size of product portfolios that companies offer.

Try simple, back-of-the-envelope calculations to determine the number of variants that Dell offers for a single model of its laptop, or Timbuk2 offers for its messenger bags. The answer will surprise you – it is in billions!! Yet, these companies can produce and deliver a specific configuration to their customers in a matter of days. How can they do this? You would be right if your answer included supply chain excellence.

4. Short product life cycles

Not only do companies want to compete by offering a lot of products, uniquely customized for their customers, they do so by introducing new products at a dizzying pace. A newly purchased laptop is already outdated in about three months by a newer model that is faster, cheaper and better. This rapid pace at which new products are introduced places unprecedented burdens on how companies design, manage and coordinate their supply chains.

5. Globalization

Today, companies design products in one part of the world, source raw materials in another, manufacture or assemble finished products in yet another part, and sell to customers in an entirely different geography. What’s more, when products fail, they are serviced by repair facilities in yet another location, without compromising user experience.

And you may want to think again if you believe that companies can rest once such a network is designed. Indeed, this structure must constantly evolve as operating conditions evolve. This complex maze of facilities not only creates a serious management challenge, it also exposes companies to financial, political, and natural risks that are irrelevant in a fully domestic supply chain.

Given these developments, companies are eager to recruit individuals who understand these complexities, which is good news for those who are interested in exciting careers in supply chain management.

In just three years (2010-2013), growth in employer demand for supply chain and logistics management managers outpaced demand for all management positions by an average of 7.65% nationally (research by the Education Advisory Board).

According to the Bureau of Labor Statistics:

  • The number of roles for operations research analysts is projected to grow 27% from 2012 to 2022.
  • Employment of logisticians is projected to grow 22% over the same period, and
  • Jobs for purchasing managers, buyers and purchasing agents, now numbering a half-million, will grow 4% between 2012 and 2022.

To respond to such trends, faculty at Santa Clara University’s Leavey School of Business have collaborated with several Silicon Valley companies to develop the only MS in Supply Chain Management and Analytics program in northern California, which launches this summer. We expect our graduates to be in high demand by firms whose supply chains extend around the world.

Naren Agrawal is the Benjamin and Mae Swig Professor of Operations Management & Information Systems in the Leavey School of Business at Santa Clara University. His expertise is in the areas of supply chain management, service supply chain management, and manufacturing competitiveness. He is co-editor of the book, "Retail Supply Chain Management," and serves on the editorial review board of Production and Operations Management.


Feb 2, 2016