1.9 End-of-Topic Case: SCM—Fad or Strategic Imperative?

Don Kagey sat exhausted in his car in YMCA's parking lot. He had just won the city-league 40-and-over racquetball tournament. Don had scarcely had time to savor his victory before workplace worries encroached on his thoughts. It was Friday evening, which meant that Don only had the weekend to decide whether or not to recommend that Med-Tec pursue SCM as a response to increasing customer demands for customized products delivered just in time. Customers were not willing to pay more for the increased service; indeed, they were relentless in their desire to "squeeze" costs out of their supply base. As Don began the drive home, he reviewed his company's situation and the month-long investigation he and his team had been through.

Don Kagey was vice president of purchasing and operations at Med-Tec, a supplier of disposable medical equipment to the hospital industry. At Don's urging, Med-Tec had spent the past two years implementing six-sigma quality and lean manufacturing. Med-Tec had also increased its use of global sourcing. The results were impressive: defects were down to 250 parts per million, productivity was up five percent, and order fulfillment times had been reduced from seven to four days. Don's management team was frazzled from the hectic pace they had maintained during the implementations.

Don's Dilemma

Despite these improvements, Med-Tec's best customer, Allegiance Corp., had just approached Don with a request for an entirely new level of delivery performance and customer service. Katie McDonald, senior purchasing manager at Allegiance, had suggested that Med-Tec look at SCM as a possible approach to improving service.

Don wasted little time in investigating SCM. He called a couple of friends whose companies faced the same challenges as Med-Tec. The first conversation was with Mark, a friend who worked for a major supplier in the auto industry. Mark was adamant that SCM was just the latest fad and that it would soon disappear from the headlines. Mark compared SCM to TQM, noting that they both had come to "mean everything and nothing at the same time." Don's second call was to Cheryl, a friend who worked as a logistics manager for a major electronics company. Cheryl's first words were, "Without doubt, SCM is one of our most important areas of emphasis. On a scale of one to ten, SCM is an eleven. It's clearly the key to our future success or failure." It seemed clear that SCM was not for every company. Don jotted down a summary note, "SCM can't succeed without top management commitment."

On Requirements and Readiness

Two days after his meeting with Katie McDonald, Don had met with his management team to communicate to them Allegiance's customer service expectations. The team had spent the next three weeks evaluating both SCM and Med-Tec's readiness to implement it successfully. The most important findings were summarized on a white board as follows:

  • At many companies, SC strategies lack specificity.

  • Two forces drive SC collaboration: the need to 1) meet customer demands & 2) reduce costs.

  • Managers involved in implementing SCM are frustrated by the lack of organizational buy-in.

  • SCM can help a company achieve the following benefits:

    • •Increased customer responsiveness •Lower cost of purchased items
    •More consistent on-time delivery •Higher product quality
    •Shorter order fulfillment lead times •Ability to handle unexpected events
    •Reduced inventory costs •Faster product innovation
    •Better asset utilization •Preferred & tailored relationships

  • Human nature is a barrier to SCM. People don't like change, and SCM requires change.

  • Poor information systems, inconsistent measurement, and conflicting objectives are barriers to SCM.

It was clear that Med-Tec could benefit from a well-designed and executed SC strategy; however, it was unclear whether Med-Tec had the commitment to make it happen. Don was inclined to move forward and cultivate a SC program. But an editorial in the Wall Street Journal entitled, "Don't Get Hammered by Management Fads" had caught his attention. Four comments had stuck in Don's mind:

  • An estimated 10,000 business books have been published worldwide over the past three years, many touting management "tools" promising to make their users incredibly successful by showing them new ways of doing business. Beware.

  • Most tools set unrealistic expectations. They overstate benefits and understate costs. Over time, employees grow fatigued as they are whipsawed from one tool to the next. As one wary store manager recently sighed to me, "If I'm told to jump on one more bandwagon, I'm jumping ship."

  • Which tools create the most pain for the least gain? It seems to be those getting the most hype.

  • Managers who jump on new-tool bandwagons presuming to boldly go where no one has gone before are doomed to repeat perilous mistakes of the past.

As Don pulled into his driveway, he asked himself, "Is SCM just a fad or is it for real?" Don desperately wanted to avoid embarking on a dead-end journey. Yet, his competitive instincts drove him to wonder whether SCM could take Med-Tec to the next level of market success.

Case Questions

  1. Is supply chain management for real? or is it just another fad? Does the answer to this question depend on how a company pursues SCM?

  2. What efforts would you make to assure that managers at Med-Tec did not treat SCM as just another flavor-of-the-month management program?

  3. Suggest a possible analysis framework Don could use to weigh the facts and determine whether or not SCM is the right thing to do.

Quick Hints on Case Analysis: The CAR Framework

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