As the UPS Foundation Professor of Business Logistics, Ananth Raman is the voice of supply chain management at the Harvard Business School and at an executive course titled "Managing the Supply Chain: The General Manager's Perspective."
Supply Chain Management Review Editor Francis Quinn spoke with Dr. Raman about miracles and other matters at his offices on the Harvard Business School campus in Boston. Excerpts of the interview follow:
Q: You've researched and written extensively about the poor accuracy of supply chain data, calling it the "Achilles Heel" of supply chain management. How big is the problem?
A: It's a huge problem. People take data for granted. They believe that everything is fine, that the quality is there. This really comes back to hurt them when they were buying packaged software, for example. They assumed that their data were 100 percent accurate, but it wasn't. Then they wonder why the new solution isn't producing the results it should.
I'll give you one quick example to illustrate. It involves a retailer who's fairly well known for their supply chain initiatives. The company's vice president was quoted in an industry publication on all the cool stuff they were doing in supply chain. One consumer then wrote to the vice president with a copy of the article and said, "Well, it's interesting you're doing well, but I have been shopping at one of your stores for a long time and I've been trying to get this particular item, and you haven't had it in stock for six months. Given the business you're in, I expected to find this item in your store. So I hope your new supply chain system helps."
The vice president sent the letter down the ranks and the people who were responsible for managing inventory looked into their system, which showed 42 units of that particular item in the store in question. Now, obviously, the system was wrong. There was nothing available. Now they could have gone into the system and zeroed out the inventory, but that wouldn't have solved the problem. The system had updated the forecast for that product to close to zero because for the past six months, it thought there were 42 units in stock and nothing had been sold. It all goes back to data accuracy.
Q: What can supply chain professionals do to call attention to a data problem in their organization?
A: The first thing they need to do is make top management aware of the problem. Now that takes a certain amount of organizational courage because the person who brings the problem to management's attention is likely going to be blamed for it. When the problem is brought up, the first reaction is typically, You've go to be kidding me! But senior managers must create a comfort level so that people can come to them and say, our data are terrible and we need to do something about it.
Q: Is new technology-and RFID in particular--the panacea to solving the data quality problem?
A: RFID is obviously great technology, but technology is never a substitute for process discipline. RFID technology will help with data accuracy, but we shouldn't over-rely on it. For one thing, even with an advanced technology like RFID, human beings will always find a way around the system, the so-called work-arounds. Let me give you an example from retail. If I'm a check-out person and I've got 10 people waiting in line, and the customer I'm waiting on has one bottle of Diet Coke and one bottle of regular Coke, I'm going to take one of those bottles and scan it twice. I'm trying to help the company and trying to help the customer, right? Or say you're given a medium shirt as a gift, but you're actually a large. So you return it to the store and they swap it without going through the system. They're not trying to be bad; they just designed a work-around.
I don't know what the work-arounds will be with RFID tags, but human creativity will find a way. Management's job is to communicate to people that they shouldn't do these work-arounds and also make it difficult to deviate from the prescribed process through such work-arounds. That's where process management comes into play.
Q: Could you talk more about the relationship between process and technology.
A: To succeed as a supply chain professional, really as a business professional, you've got to have a deep understanding of both process and technology. You've got to be able to put the right processes in place for material and information flow and then figure out how the computer can make those processes better. In some cases, we find that companies lack well-defined processes for material and information flow in certain parts of their supply chain. For example, many retailers are very careful in defining process flows up to the store, but the process within the store is entirely ad hoc and left totally to the store manager. Not surprisingly, in our research on data inaccuracy and misplaced items, we've found substantial variation in performance among different stores within the same retail chain. This variation in performance persists from one year to the other--stores that had good data or fewer misplaced items in one year also had good data or fewer misplaced item in other years, and vice versa. Now, all of the stores in the chain had identical information technology; hence, the difference in performance was not due to technology but store processes.
Now once you have a detailed understanding of process flows, you need to apply the "softer" skills-the ability to manage a project; to look at a complex situation and simplify it while retaining its vital elements; and, most importantly, to get an organization to change. A big part of that is having the persistence to deal with setbacks. Every successful company I've worked with has experienced setbacks. The mark of a leader is whether they crumble at the setbacks or dedicate themselves to working through them.
Q: Let's focus now on education. What supply chain topics are you emphasizing at Harvard Business School and in your executive management course?
A:The focus at Harvard Business School in our MBA program and in the executive courses, is what we call the general manager's perspective. That's really been the tradition of the school and it's a perspective that our alumni have confirmed is the right one for us. You know if you ask where I find the world's best algorithm developer, you probably don't think of us. But if you're looking for people with a broad management perspective, Harvard Business School is certainly in the forefront.
Q: How do students respond to the supply chain course offerings?
A: There's substantial interest among the MBA students to take the supply chain course-and not necessarily because it is sexy, but because it's important. I like to tell my students that supply chain is not sexy, but money is sexy and supply chains let you make money and let you have impact on the business. Over the past ten years, we've seen a steady growth of interest in the subject. Just after the bubble burst around 2001 there was a slight drop off. But I think that was because the students lost faith in the Internet and Internet business models, so they had doubts about whether supply chain was also passť. But now there's tremendous interest in the supply chain management among the students.
Q: What's the biggest challenge for supply chain professionals going forward?
A: They need to become good missionaries. Let me explain by beginning with a distinction I frequently make between Bible writers and missionaries. I'm a Bible writer. You know, I get locked up in an ivory tower, I'm told to write papers, cases, whatever.
But it's much, much harder to be a missionary. And I think that today supply chain management-and maybe management overall, but certainly supply chain management-- is more in need of missionaries than Bible writers. We're constantly trying to write new Bibles that tell how things should be done what actions are right and wrong. But it's the missionary who actually has to go out and create change, often in a difficult environment. Now, it's very unfair, but when something goes wrong, it's the missionary who usually gets shot. And we are leaving the missionary very vulnerable with all the bad data, the misaligned incentives, the lack of management awareness to serious supply chain problems.
When a missionary goes out to change a supply chain-and this is where we educators need to pay attention-they need both the hard and the soft skills. Somewhat paradoxically, it's fair to say that the soft stuff is hard while the hard stuff is fairly easy. I don't mean to trivialize this by any means, but the hard things like technology, material handling systems, and algorithms are easier to deal with than things like process and behavioral change, incentive alignment, and conflicting egos in the organization. believers once they witness the miracles taking place.
Courtesy: Supply Chain Management Review: