Global Supply Chains: When Uncertainty is a Certain Factor

This is an excerpt of the original article. It was written for the March-April 2014 edition of Supply Chain Management Review. The full article is available to current subscribers.

March-April 2014

Retailers and distributors alike have attempted to solve their inventory challenges by using forecasting tools to determine what to buy and when to buy it. A better approach is to change the flow of inventory by reducing cycle times, more effective inventory positioning, and synchronizing supply chains based on the variability of demand.

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The future ain’t what it used to be.” That somewhat nonsensical quote from the former New York Yankee baseball player Yogi Berra was the whimsical, yet apropos tagline for the MIT Supply Chain 2020 (SC2020) Project. I managed the project’s launch in 2004, and it continues today, focusing on what excellent supply chains would look like 10 to 15 years in the future.

Having come from a largely consulting background prior to joining MIT’s Center for Transportation & Logistics, I initially thought that successful supply chains in the future would leverage best practice trends that I had been seeing over the past five to 10 years, such as Just-in-Time (JIT) and lean operations as well as supply chain visibility and collaboration. After peeking into the future for a while, I realized these trends were based upon where the world had been recently moving, not necessarily on where it might be in the future. And, these so-called best practices might be rendered useless. I came to realize that my own view of the future “wasn’t what it used to be;” hence, the genesis of the SC2020 Project tagline.

The MIT team decided to approach the project using a Scenario Planning methodology, rather than try to do the impossible and predict the state of the world 10 to 15 years out. Our interests moved to identifying reasonable scenarios for the future, such as the worlds that supply chains might be operating in as well as the uncertainties around them. The six major factors that we feel will most affect future supply chains are: 1) the aging of developed countries; 2) oil prices; 3) a power shift toward the East; 4) trading bloc formation; 5) globalized Green Laws; and 6) pervasive technologies.

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