An Accelerated Master’s Degree: Supply Chain Management in One Book

Topics: Supply Chain
BP 8

Photo by Stuck in Customs

There have been plenty of books recently published on the concept of Deliberate Practice, which essentially says that it takes 10,000 hours of a certain kind of practice (called ‘deliberate’) to gain expertise in something.   It makes sense that the majority of what you want to learn in any discipline is going to be experiential (or gained through practice).  But in order to better understand your experiences, you want to have some kind of framework of what to expect.  You want to develop a theory structure.

Books are what give you this theory structure, and certainly the quality of the theory structure you begin with impacts the amount of deliberate practice you need to become an ‘expert.’  So it’s important to choose the right books, as they will provide the base infrastructure upon which you will layer your experiences.  You’re looking for books that concisely capture the overriding concepts of a particular discipline.

And in any discipline, at least one fairly well defined, there doesn’t need to be that many books to accomplish this.  I would generally say that 3 books or fewer, for each discipline, will give you a proper theory structure.

With that in mind, let’s look at Supply Chain Management… 

The concept of Supply Chain Management has been around since at least 1850, when the first recorded attempts were made to centralize purchasing departments.  Although it wasn’t until after the Japanese started to produce at quality levels previously unheard of (see the semiconductor and automotive industries of the 1980′s) that Supply Chain Management really started gaining mainstream popularity in the U.S.

In its simplest form, Supply Chain Management can be described as the science of “Systems and Constraints.”  It’s often discussed in terms of bottlenecks, as Supply Chain is constantly trying to find ways to remove successive bottlenecks (or constraints) within systems.  Supply Chain is a way to increase efficiency and to increase quality by managing flows (of all kinds – materials, services, etc.).

And what I’m saying is that the crux of this discipline can be learned in only one book, and that book is The Goal. Yes, it’s a business fable.  But it’s an easy read, and it serves its purpose: it explains the balancing act between inventory, throughput, and operational expense.  Better said, it shows the continuous struggle that Supply Chain Management wages to remove bottlenecks.

Certainly there are other concepts that abound within Supply Chain in addition to the idea of Systems and Constraints.  And in order to develop a sound theoretical understanding of the core concepts of Supply Chain, you’ll want to understand the following mental models:

  • Quality Control: To be efficient, you want to establish proper levels of quality control.  It’s a mathematical exercise in which you are constantly trying to push the defect rate lower and lower.
  • Batching: To be effective, you need to be able to dispose of things in fairly large chunks.  Time is the prime example, but this also applies to any fairly routine, low-value process along the supply chain.
  • Margin of Safety: This concept is generally employed in the world of finance (or really, investing), but it’s also a key concept in understanding inventory levels.  It almost always makes sense to have a certain level of safety stock.
  • Cost-Benefit Analysis: In Supply Chain, this concept is heavily involved in sourcing.  The number of relationships you develop with suppliers, and how durable they are, will have a large impact on speed through the Supply Chain.  You have to weigh the cost of establishing durable relationships with the benefit of having that relationship.
  • Homeostasis: Although borrowed from Biology, this concept is heavily involved in Supply Chain.  So many ‘things’ are flowing through an organization – materials, services, money, information – from suppliers through to end customers.  And it’s a constant balancing act; balancing the costs and benefits of utilizing resources to balance this flow.
  • Pareto Principle: Borrowed from Italian economist Vilfredo Pareto, this concept is found all over the place.  It states that roughly 80% of the effects come from 20% of the causes, so it’s often called the “80/20 rule.” The actual numbers don’t matter so much; the idea that a vital few can cause most of the effect does matter.  I’ve seen this as a 95/5 distribution, a 90/10 distribution, etc.  Don’t get hung up on the “80/20” part.  This distribution is often present in Supply Chain in relation to the dollar volume of inventory: more effort is placed on controls for high dollar volume inventory items than for low dollar volume inventory items.
  • Opportunity Cost: This concept is everywhere.   You are always considering alternatives with each decision along the Supply Chain.

Supply Chain Management combines aspects of Engineering, Project Management and Logistics.  It has a fairly long history, but Edwards Deming’s efforts to train the Japanese in 1950 really brought it into prominence.  Make an effort to understand the theory, and it will accelerate your ability to understand the discipline.  Supply Chain is a discipline that can be grasped fairly quickly if you’re careful about the material you subject yourself to, and the first item I would recommend getting a hold of is The Goal.