"The Supply Chain Management Effect"

Laura Lopczak and M. Eric Johnson

MIT Sloan Management Review

Spring 2003, pp. 27-34

The authors of this article argue that "Supply-chain management has led to six major shifts in business thinking. It is those shifts that have guided and will continue to guide companies in choosing which supply-chain-management initiatives and enablers they should implement internally and with their partners."

The six major shifts are:

1. From cross-functional integration to cross-enterprise too—The thinking has gone from "How do we get the various functional areas of our company to work together to supply product to our immediate customers?" to "How do we coordinate activities across companies, as well as across internal functions, to supply product to the market?";
2. From physical efficiency to market mediation—The thinking has gone from "How do we minimize the costs our company incurs in production and distribution of our products?" to "How do we minimize the costs of matching supply and demand while continuing to reduce the costs of production and distribution?";
3. From supply focus to demand focus—The thinking has gone from "How can we improve the way we supply product in order to match supply and demand better, given the demand pattern?" to "How can we get earlier demand information or affect the demand pattern to match supply and demand?";
4. From single-company product design to collaborative, concurrent product, process, and supply-chain design—The thinking has gone from "How should our company design products to minimize product cost (our cost of materials, production and distribution?" to "How should collaborators design the product, process and supply chain to minimize cost?";
5. From cost reduction to breakthrough business models—The thinking has gone from "How can we reduce our company's production and distribution costs?") to "What new supply-chain and marketing approach would lead to a breakthrough in customer value?";
6. From mass-market supply to tailored offerings—The thinking has gone from "How should we organize our company's operations to serve the mass market efficiently while offering customized products?" to "How should we organize the supply chain to serve each customer or segment uniquely and provide a tailored customer experience?"

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