The Long and the Short of It
Companies must resist the temptation to risk long-term supply chain relationships for short-term gain.
By Bud LaLonde -- Supply Chain Management Review, 11/1/2001
The year 2001, the first year of the millennium, has been anything but a banner one. On the business front, the U.S. economy continues in a down cycle despite the best efforts of Alan Greenspan. (Our friends in the high-tech sector would probably say that we're in a recession, and we've been in it for some time.) Every day there is new word of missed revenue targets, restructuring, and massive layoffs.
The Ohio State University annual survey of logistics and supply chain executives takes on new meaning when viewed within the context of this recent economic history. Now in its 33rd year, the survey provides a good indicator of how these professionals view the nature of the job today and the challenges they will face tomorrow. (Interested readers can find a summary of the latest survey at http://fisher.osu.edu/supplychain.)
This year's survey is interesting from any number of perspectives. In this column, I would like to focus on two in particular—the long- and short-term perspectives of today's logistics and supply chain professionals.
Scrambling to SurviveOnly two questions on our survey are open ended. The first asks: "If you could return to school for a period of 90 days to study a curriculum of your own choosing, what topics would you choose to study?" This is the short-term "learning needs" question, as we say in the trade. The results are presented in Exhibit 1.
These results represent a remarkable shift in just one year. Does this mean that e-commerce is going away? No. The more likely meaning is that logistics/supply chain executives are focusing on fixes for the bottom line in 2001. The collective thinking appears to be that we are scrambling to do our part to help the company make it through the downturn.
Eyeing the longer term, we asked: "Please identify the factor that will, in your judgment, most influence the growth and development of the corporate logistics function during the next decade." Exhibit 2 on the following page gives the results.
These findings are based on about 125 responses from logistics and supply chain managers, directors, and vice presidents who responded to a mail/electronic questionnaire in the summer of 2001. The sample base was drawn from the Council of Logistics Management's membership. The data are presented as a general reflection of industry trends and not with two-decimal-point accuracy. The results and analysis should be viewed accordingly.
Looked at together, what do these survey findings tell us? As noted earlier, in the short run the logistics executive is scrambling to find ways to contribute to his or her company's bottom line. Yet this effort can be a daunting one. Reducing costs while maintaining or improving customer service at a time when inventory is backing up in the channel presents a formidable challenge. To maintain collaborative relationships with supply chain partners when the forecast is yo-yoing and production schedules and vendor orders are changing from day to day is a big part of that challenge.
In It for the Long TermThe temptation to risk long-term supply chain relationships for short-term gain is strong. But that temptation should be scrupulously avoided. It's a difficult balancing act, but companies need to stay focused on longer-run objectives through this period of economic transition. This is a completely new challenge for many newly minted logistics/supply chain executives who have not managed through tough economic times. It's not a challenge that can be met solely by technology either. Yes, the customer relationship management (CRM) software now available can do many things. But it does nothing to quiet the concerns of customers who feel they are getting jerked around by their suppliers.
In the longer term, it appears that some of the bloom is off the e-commerce rose. In the year 2000 survey, respondents identified e-commerce as the number one factor (34 percent) that would influence the development of their profession over the next decade. In 2001, e-commerce received a more modest 13 percent of the response. The broader category of information technology vaulted from 6 percent in 2000 to 19 percent (first place) in 2001. This suggests that respondents a year ago were swept up in the euphoria of the dot-com explosion. In this year's survey, a back-to-basics response more accurately positions e-commerce as important but only part of a broad spectrum of information tools and technologies.
What happens next depends in no small part on the shape of the economic cycle. Two scenarios appear most likely. If the economy deepens into a longer recession, the balancing act between short-term performance and long-term objectives will become all the more difficult. If we experience a bathtub curve, with a steep decline followed by a sustained period of low economic activity, then supply chain executives will face a challenge most have never faced before: how to manage supply chains in a no-growth or slow-growth economy efficiently and effectively. With either scenario, we need to remember the inherent value of supply chain relationships. If we don't, we'll end up back where we were in 1990—and supply chain integration will be just a faded memory.
| Author Information |
| Bernard J. "Bud" LaLonde is professor emeritus of logistics at The Ohio State University. |
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