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Supply Chains and Virtuous Circles More Than the Sum of Their Parts

Posted By Prucia Buscell, Thursday, March 4, 2010
Updated: Thursday, February 17, 2011
The route between suppliers and customers can be a labyrinthine network with calamities lurking in unexpected places. The top 10 supply chain disasters reported in Supply Chain Digest convey the possibilities. But supply chain disasters themselves are evolving.

Dan Gilmore, editor in chief of the publication, says technological meltdowns are less likely today. Most recent supply chain trouble, he says, flows from failures of strategy or execution.

"Virtuous Connections," a Strategy + Business article by Richard Verity and Chris McNally, describes how one supply chain manager untangled the Gordian knots in the sprawling maze of connections an anonymous European company used to supply 30,000 products to 10,000 customers The manager realized, the article says, that every supply chain is a set of virtuous or vicious circles. Both types of circles are complexes of events, in which each iteration of a cycle reinforces another iteration. The S+B article explains that in a supply chain, deficiencies in on area reinforce weaknesses elsewhere in the chain. Read the articlehere to learn the managerial insights and decisions that fostered success.

The best known vicious circle is hyperinflation, in which prices spiral out of control as currency loses its value. In a virtuous circle, each iteration of a cycle reinforces conditions that led to favorable results.

A finely tuned supply chain. with no lost, late or damaged products and a shortage ofirate customers,is a virtuous circle in which each link improves the next. A functioning supply chain is more than the sum of its parts, the authors showed, and the economic gains were more than those anticipated by each individual improvement. They were exponential. Improvements created tipping points that led to cost savings in parts of the network that seemed to have little to do with each other.

AMR Research published the Supply Chain Top 25 for 2009, which it identifies as iconic businesses that achieved innovational and operational excellence. What is the next supply chain disaster? It's hard to say, but some experts suggest some supply chain failures are inevitable, and theymay afflict those least prepared for change.

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