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Perceptions in Supply Chain Management

A rhino sees the world from its point of view, which includes a cone (its own horn) in everything it sees! A recent study finds similar perceptual influence to be a cause of failure of Supply Chain Management (SCM) solutions.

SCM is of course, the management of flow of goods from supplier to transporter to production department to sales and eventually to customer. The objective of SCM is to reduce overall costs by introducing effective coordination and cooperation across echelons. Several sophisticated analytical tools and optimization software solutions exist in the marketplace and academic journals to help organizations meet this objective. However, this research submits that each department lives in its own Departmental Thought World (DTW) and views reality differently, and accordingly the managers input biased data into tools/models, thereby rendering the tools useless.

The study relies on empirical evidence by interviewing senior management of different departments in two market-leading companies in Iceland and India. In the first instance the study interviewed staff from marketing, logistics and manufacturing on capacity, quality, availability, productivity and effectiveness. The study finds that different departments have certain perceptions ingrained that pass on. The study also found that departments attribute failures to other departments. In the second instance, the researchers interviewed managers of different departments regarding inventory related costs. While different departments agreed on cost drivers, they substantially disagreed on relative importance or quantification of these cost drivers.

Dr. Niranjan of the Shailesh J. Mehta School of Management, IIT Bombay is the lead researcher of the study. He admits that this work merely identifies the problem of DTW and does not in detail provide any solution, which he says would be the focus of future work. Some tentative solutions include alignment of incentives (key performance indicators) based on organisational outcomes instead of departmental outcomes, cross-functional experience along with communication between departments, and informal communication.

However, this study is extremely important as it is seminal and original. The study sensitizes solution providers and consultants to the important effect of DTW and could lead to further research on how to reduce it to make SCM solutions more effective.

Image with permission from: http://www.selcukerdem.com/

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