When a supply chain is firing on all cylinders — moving products, information and money on schedule — it goes largely unnoticed, at least to the average consumer. You expect to find the supplies you need at the grocery store, and to receive your latest Amazon order within five business days.
But getting a product from the manufacturer to your doorstep involves a complex chain of contracts, transportation, customs, inventory control, planning and demand forecasting, among other steps. When parts and demand for a product come from around the world, the supply chain becomes an intricate network.
“A supply chain that can deliver around the globe on time at low cost takes years to build,” says Yossi Sheffi, director of MIT’s Center for Transportation and Logistics (CTL). “It brings real competitive advantage [to a company], and that’s why supply chains are important and becoming more so.”
In 2008, in response to the increasingly global nature of business, Sheffi and his colleagues at CTL set up the MIT Global SCALE (Supply Chain and Logistics Excellence) Network. This international supply chain management program now encompasses four centers around the world: MIT-CTL, in Cambridge, with 30 to 35 students; the Zaragoza Logistics Center in Spain, also with 30 to 35 students; the Center for Latin American Logistics Innovation in Colombia, with 12 to 15 certificate students; and most recently, the Malaysia Institute for Supply Chain Innovation (MISI).
Each center fosters relationships between students, faculty and businesses, teaching students to run successful supply chains for companies such as Walmart, BASF and Starbucks. Students come from across the world, and most have a background in either engineering or economics, as well as several years of business experience.
Faculty members from MIT oversee each center — traveling back and forth between them — but each is managed and run by local faculty recruited and trained by CTL. Students in the program can earn master’s degrees and PhDs from the center where they study. Recent graduates have gone on to work for Apple, Amazon, UPS and FedEx, among others.
Sheffi says the programs reinforce the “power of systems thinking” for students — a general understanding of all the facets affecting a supply chain, including technology, logistics, legal frameworks, local culture and human relationships.
Flexibility is a big advantage in supply chain management, and Sheffi uses Dell as an example of how a top-performing company can quickly fall behind when it fails to anticipate a shift in the market. In the 1990s, the personal-computer maker developed a build-to-order system in which various computer parts were assembled at the last minute, tailored to a customer’s preferences, and shipped out one by one. At the time, the model was a success, and Dell was recognized as “the best operations manager in the world” according to most observers, Sheffi says.
However, the climate changed: Fuel prices went up, making it more cost-effective to ship computers in bulk; computer prices dropped, making it more affordable to store computers instead of building them to order; and the market matured and the rate of innovation slowed down, reducing inventory-carrying costs. This gave retail chains with big warehouses an advantage over custom shops such as Dell. As a result, Dell had to dramatically revamp its model. Sheffi says Dell is a cautionary tale for up-and-coming supply chain managers.
“It’s not like you can come to a company and be a hero and build something great for all times,” Sheffi says, “because what’s great today is not going to be great a year from now. You have to keep moving.”
Sheffi sees the Global SCALE Network as a vast, interconnected resource of supply chain knowledge. People at each center work with one another on research projects that aim to improve supply chain efficiency, and each center has developed its own expertise in certain aspects of supply chain management. For example, researchers in Spain are looking for ways to improve the delivery of anti-malarial medication and other health products to developing countries. And in Colombia, students and faculty are evaluating improvements in regional transportation systems that may improve supply chains for Latin American businesses.
Sheffi says research projects for the Malaysian center are still in development; MISI was inaugurated in March in Shah Alam, 15 miles from Kuala Lumpur, the capital and economic center of Malaysia. MISI will open its doors to its first master’s students in fall 2012, and Sheffi says the program is already attracting interest from local industry.
“Asia is by and large a booming economy, and the infrastructure is lagging behind the growth in the economy,” Sheffi says. “Malaysia is investing in a lot of big ports and enlarging several airports. So it’s clear that we will have a lot of projects to work on.”
It’s all about culture
Sheffi expects the Malaysian center will not only attract students and business from Southeast Asia, but also from China, India and the Middle East. MISI completes Sheffi’s vision of a network of MIT-derived supply chain experts that spans the globe.
He and his colleagues are currently tapping into this network to assess cultural perspectives toward supply chain risk management. A study has been underway for several months; so far, researchers are finding that supply chain priorities are different depending on where one is in the world. These findings could help managers understand different philosophies throughout their global supply chain.
“You cannot take what works in the United States and just implement it in Korea,” Sheffi says. “If you want to distribute your product in Korea, you have to understand how this is done [from a cultural perspective].”
Sheffi says this cultural understanding, along with a systems approach to management, helps students find employment after graduation with many of the supply chain giants, such as Walmart, Amazon, UPS, Siemens or Toyota.
“Apple is currently considered to have the best supply chain in the world,” Sheffi says, “and last year they hired 20 percent of the graduating class at MIT-CTL.”