Unlike other emerging fields such as nanotechnology or cloud computing, the pillars that underpin supply chains are not novel at all. Since ancient times, mankind has been transforming raw materials into products, whether it was grinding grain and adding water for a wood-fired cake or smelting iron ore to cast the first weapons.
But raw materials had to be sourced. They were grown, mined, hunted, or collected—perhaps in a land “far far away,” so there was a need for perilous sea voyages, dusty camel treks over desert dunes, arduous hikes along treacherous mountain ranges, or perhaps just a donkey cart ride to the next village. “If I can make one for myself, why not make more than one to barter or sell for other useful things?”—enter the village marketplace. Of course, in the olden days people also felt the effect of seasonality, so there were barns, stockpiles, and mounds of pickled fish.
Much may have changed since the days of the Dutch East India Company—we now talk of inventory control, distribution channels, intermodal transportation, and lean manufacturing—but the key activities that comprise supply chains are as old as time. An outsider to the field would thus be excused for wondering what the hullabaloo of the past few decades is all about. The truth is that the revolutionary developments in industry and business over the last two centuries—and indeed the last few decades—has necessitated an entirely new approach to managing these fast-paced “chains” of activities that now span continents and involve multiple players. Companies in today’s global markets recognize that it really is no longer “my product against your product,” but “my supply chain versus your supply chain.” It is a prevailing thought that a properly deployed, balanced, and strategically aligned supply chain is a competitive weapon in the battle for market share and revenue. It is the study and pursuit of this balance, alignment, efficiency, and responsiveness that has spawned supply chain engineering.
The H. Milton Stewart School of Industrial and Systems Engineering (ISyE) has had its finger on the pulse of this new field since the school’s founding in 1948. Research and courses were not restricted to manufacturing alone, as was the norm in industrial engineering at the time, and included physical distribution and material handling. Beginning in the 1960s, ISyE broadened its methodology expertise into operations research, entering the domain of transportation routing, network design, and inventory control. Through the 1970s and 1980s, a variety of ISyE research centers in material handling, logistics, and transportation were established. In 1992, the Logistics Institute was created to consolidate the wide range of logistics-related research and education efforts that have helped ISyE establish its number one ranking among industrial engineering programs.
The widespread recognition of the term “supply chain” has come primarily as a result of the globalization and outsourcing of manufacturing since the mid-1990s. Globalization accented the need for logistics strategies to deal with large and complex commercial networks. There has been an increasing trend to use the term “supply chain” to refer to strategic issues and “logistics” to refer to tactical and operational issues. This growing association of supply chain with strategy is reflected in the Council of Logistics Management’s changing its name to the Council of Supply Chain Management Professionals (CSCMP) in 2005.
CSCMP made the distinction that “logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements” while “supply chain management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.” Maintaining its relevance to industry, the Logistics Institute changed its name to the Supply Chain & Logistics Institute, reflecting the breadth and depth of ISyE’s expanding mission of developing technology and people to address the rapidly evolving engineering and management needs of the field.
However, don’t let the fact that there is a formal definition of supply chain management and an official-sounding council to govern its practice fool you into thinking there is widespread agreement in the supply chain industry. Debate rages regarding its definition, what it encompasses, and its rightful place in an organization. The discussion will most likely continue for the simple reason that supply chains vary significantly from industry to industry. Despite this grappling about technicalities, there are pertinent supply chain “truths.” First and foremost, there is no supply chain without a customer. Whether that customer is a mother of five buying groceries in a retail store, a billion-dollar airline expanding its fleet, a starving tsunami victim in need of basic necessities, or a trooper in need of ammunition on the battlefield, there is a need that must be satisfied. What sets supply chains apart is how effectively and efficiently they satisfy this need. Two other central truths are that of alignment and balance. Added to this balancing act is the concept of strategic alignment with the organization’s goals—miss this and you will find yourself walking the wrong tightrope— to the detriment of the organization.
Commercial supply chains are, by far, the most widely studied and prioritized supply chains, simply because they affect every aspect of our daily consumer lives. They have in common the overriding objective of making and sustaining a profit but can differ vastly in how they go about doing so. Take for example the difference between a supply chain for a retail distributor of fast-moving consumer goods and that of a high-tech electronics manufacturer.
Walmart comes quickly to mind in the retail sector. They will tell you very succinctly that they are not a series of stores spread out over the globe but rather well-defined and managed geographically dispersed supply chains. Can you question their level of success? Walmart does not manufacture anything. They are best at capturing point-of-purchase demand and then anticipating and even shaping demand through volume purchases and discount pricing.
Intel, on the other hand, boasts a high- tech electronics supply chain that is also considered a best of breed in its industry. They manufacture integrated microprocessors. Their success lies in their ability to navigate the perils of the high-tech industry, where the shelf life of a product is usurped by tomorrow’s technological advancements. Margins on new product releases must be realized and captured quickly before they become commoditized or replaced by advanced technology. The time criticality of the industry and the nature and value of raw materials and finished goods prioritize lead time and speed to market as key decision variables within the high-tech industry.
Humanitarian supply chains are typically associated with disaster-relief efforts but also include the long-term, sustained distribution of services and material aid to impoverished individuals or communities. A good example of this comes from South Africa, where donated breast milk is collected, pasteurized, and redistributed by an NGO to premature infants with no access to their mother’s own milk.
The infants’ predicament is not linked to a disaster per se, but is the result of the HIV pandemic and a lack of infrastructure and resources in the country’s public healthcare sector. Disaster or no disaster, these supply chains do not seek to make a profit— instead they seek to spend every penny to save more lives and improve quality of life. A whole different set of complexities comes into play. Resources are always scarce as demand almost always exceeds supply. Coordination, collaboration, and flexibility are absolutely necessary but difficult to achieve when lives are at stake.
In military supply chains, the word is readiness—poised to respond rapidly to low-probability, high-impact events that could occur almost anywhere and affect the security and safety of an entire world. It is understandable that these supply chains are gigantic, heavily regulated, and laden with inventory. When responding to one of these events, robustness and reliability become the key performance measures. There can be no disruption of supply to the battlefield, regardless of how many bridges get blown out or how many depots are infiltrated. Furthermore, soldiers in the field must receive their supplies when, where, and in the condition they expected, and there is very little room for error. Although military supply chains are concerned about the bottom line and cost-efficiency, a much higher priority is placed on establishing and maintaining predetermined readiness levels.
From these few examples, it is clear that successful supply chains need to be custom built to fulfill their purpose. That is why the field is termed supply chain engineering. Creating a supply chain from scratch or reengineering and optimizing an existing supply chain network to capitalize on new opportunities both require rigorous analysis and thoughtful design.
For each of these scenarios, the starting point is understanding the context. This goes far beyond understanding just the organization—which may be but one player in a vast supply chain. A deep appreciation of the dynamics of the entire supply chain is required. Who are the players, and how do their actions affect each other? What are the competing supply chains within the same industry, and what are the complementary supply chains in other industries? What is required to establish and maintain a competitive edge within the industry? Furthermore, if the supply chain has a global reach; one has to also understand how politics, trade agreements, laws, and regulations affect the supply chain.
Against this backdrop, the supply chain can be designed. Of tantamount importance is the understanding of the organization’s strategic objectives and securing the buy in of upper-level management. Misalignment is easily the most common affliction of modern supply chains. The wrong set of metrics drive the wrong behavior—often departments are individually optimized to the disadvantage of the organization as a whole. Typically these first steps are considered the more “business” side of supply chain engineering.
Only once you have defined the strategy and established and aligned your key performance metrics against the backdrop of the problem context does it make sense to roll up your sleeves and jump into the tactical and operational aspect. This may include network optimization, organizational realignment, decision modeling and analysis based on landed cost, and risk management or more tactical initiatives such as inventory management, transportation management, SKU rationalization, vendor sourcing, and procurement strategies. The toolset available to the supply chain engineer is vast—borrowing from industrial engineering, operations research, business, and finance—and choosing the correct tool for the job is a fine art learned through experience and exposure.
The result of the engineering process is typically a small number of alternate designs (typically one or two) for the decision maker to choose from. Each of these designs will have been thoroughly evaluated by means of simulations, pilot projects, and/or quantitative analysis to understand and predict both the operational and financial outcomes of its implementation.
Supply chain engineering is both a science and an art. It requires rigorous analysis—both quantitative and qualitative—but also intuition, experience, and creative problem solving. Similarly, it is a field that allows for specialists and generalists, strategists and implementers. One could specialize in the development and application of network optimization algorithms or become a consultant who studies the industry and the company in order to help define the problem.
Supply chain engineering is a field that gives you a wide range of career options. Within academia, there are a variety of research topics to be advanced and a multitude of young minds to educate and train. Industry offers an equally wide range. One could work for a consulting firm and get exposure to many different kinds of supply chains, be part of an internal supply chain team that designs and manages the global supply chain of a Fortune 500 company, or even be the chief supply chain engineer for a start-up company. One could work for the military, non-governmental organizations, governments, or organizations like the United Nations and the World Health Organization. In deciding on whether to embark on a supply chain engineering career, the question is not whether there is work for you in the industry you are passionate about but rather whether you are passionate about the way of thinking, the problem solving skills, and the paradigms of supply chain engineering.
For more than sixty years, ISyE has provided a leadership role in the evolution and growth of supply chain engineering. This is reflected in the evolution of the School’s undergraduate and graduate curriculum as well as faculty research and outreach. ISyE’s progress has been led by two strategic objectives:
While ISyE still offers only one BS degree in industrial engineering, the BSIE degree now includes four unique curriculum tracks for students to follow, one of which is supply chain engineering.
The number of master’s degrees offered by ISyE has grown steadily during its history, the most recent addition being the Master of Science in Supply Chain Engineering. The first twelve graduates of this professional master’s program will receive their diplomas in December 2011. Visit www.sce.gatech.edu to learn more about this program.
ISyE also offers the Executive Master’s in International Logistics & Supply Chain Strategy (EMIL-SCS), which was introduced in 2001. EMIL-SCS offers real-world, practical value through traditional course work, live cases, corporate site visits, webinars, and corporate-sponsored supply chain projects at the leading cusp of industry trends. Designed for experienced executives, the EMIL-SCS program is built around five intensive two-week residences in the United States, Europe, Asia, and Latin America. No educational experience in supply chain engineering would be complete without emphasizing the “global” component. For this reason, great effort is made to incorporate cultural, geographic, academic, and experiential diversity into both the EMIL-SCS and the MS SCE programs. Visit www.emil.gatech.edu to learn more about the EMIL-SCS program.
Notably, education and training is only one facet of ISyE’s impact on the field. An impressive group of professors and PhD candidates fervently pursue research adding to the field of supply chain engineering. Many of the faculty members are thought leaders in their own specialty, and numerous Georgia Tech publications are considered key references within supply chain engineering. But beyond the intellectual towers of academia lies industry—where the true value of all this new knowledge is put to the test.
To remain relevant, ISyE (and especially the Supply Chain & Logistics Institute) actively engages in industry discussion through participation in associations and councils. A number of research centers have been established, both in the United States and abroad, that invite industry membership and participation. ISyE’s approach to industry collaboration actively seeks to close the gap between state-of-the-art and state-of-practice issues. The world of supply chain engineering is growing daily, both in scope and significance. Through its education, research and industry outreach, the H. Milton Stewart School of Industrial and Systems Engineering is staying at the forefront of this evolution.
Industrial and Systems Engineering