Below is a well-executed infographic from the Supply Chain blog, Supply Chain Opz based on David Simchi-levi’s book Operations Rules.
To elaborate on the 7 Myths:
1. Reduce costs at all cost: This strategy suggests that reducing cost is the most important objective, which is not always the case. Companies need to “balance cost with service, invest in flexibility to reduce risk, and deploy the appropriate IT infrastructure for long-term visibility and growth.”
2. Invest in flexibility: “Identifying the right trade-off between risk-mitigation strategies and cost is an important challenge.” Companies need to identify how to get flexibility either through process, system, or product design and where is right to invest.
3. Apply the same operations strategy across the board: You can’t deploy one supply chain across multiple chanels, customers and products. Each product may have different requirements and characteristics. Product characteristics have to be matched with supply chain strategies. David Simchi-Levi uses the example of Gap Inc. The company owns three separate brands: Gap, Banana Republic and Old Navy. Each of the brands has a different customer value proposition. Because of this, there is a need for multiple supply chains to fit each type of customer.
4. Deploy the latest and best Information Technology (IT): “IT investment has to be driven by business needs.” The latest technology cannot drive a change in the business because the company wants to keep up with the latest trends.
5. Ignore IT because it is just another commodity: Don’t ignore IT altogether. While previously we discussed (Myth #4) that all technology is not necessarily right for your business, sometimes when technology is combined with the right business processes for supply chain integration it can significantly improve performance.
6. Treat Corporate Social Responsibility(CSR) as charity: Many executives believe that CSR is a waste of money and time; however, in many situations “when CSR is aligned with business value, it generates a new stream of revenue or an innovative way to reduce costs.”
7. Leave Operations to the functional areas: “Operations significantly affect the firm’s revenue and profit goals precisely becuse of their ability to control costs, shorten response times, and improve customer service.” All of senior management needs to be involved with defining goals in Operations.
Read the entire first chapter of David Simchi-Levi’s book for free here:
Written by Stephanie Stein, Marketing Coordinator at OPS Rules Management Consultants