7 Myths of Supply Chain Management

In the fast-paced business environment, people need to make a decision quickly so many of them rely heavily on what they learn from the experiences of others. This shortcut technique can be applied conveniently but the result is often not guaranteed. This article will examine these logics, the 7 myths of supply chain management, and explain why you should avoid them.

While doing the research for the book "Operations Rules: Delivering Customer Value Through Flexible Operations", Professor David Simchi-Levi of MIT found that there is certain kind of barriers that prevent companies from achieving better performance. These barriers are the basic principles that make lots of sense but often yield less than desirable results. These "myths" are presented in this infographic and will be explained more in the following section.

1. Reduce Costs at All Costs
There are 2 basic ways to increase revenue, increase sales or reduce cost. To increase sales, you need to create value for products or services but adding the value is hard and requires lots of knowledge. That is why cutting costs using supplier negotiation, which is a very intuitive way of thinking, is a very popular strategy anywhere in the world.

However, cutting the cost can hurt both customers and companies. For example, when a company like Toyota chose to cut costs during the product design stage, the result is a faulty car and the legendary lean manufacturing can't save them from this catastrophe. 

2. Invest in Maximum Flexibility
Many companies create a manufacturing facility that can produce many different product families in the hope that they can increase the product mix and improve customer service quickly. Is this strategy expensive? To answer real quick, yes, a flexible plant is expensive due to a higher set-up time required and lower machine utilization. Are there any other ways to increase flexibility without investing too much money?

3. Apply the Same Strategy Across the Board
Can Dell use the "Built-to-Order" strategy with a low inventory level to attract customers at retail stores? The answer is no because these customers purchase something cheaper that they can bring back home on the same day. This customer segment doesn't see "product customization" as the value. That's why now Dell develops the different supply chain strategies for different customer segments.

Another example is that initiative like six sigma shouldn't be implemented across the supply chain because it doesn't work in some industry.

4. Deploy the Latest, Greatest IT
In 2000, Nike invested $400 million in the newest supply chain system project. Anyway, there were lots of problems during the implementation stage and the consequence was $100 million in lost sales.

5. Ignore IT, It's Just Another Commodity
Professor Simchi-Levi explained further that, the implementation of mature technology in conjunction with international business process improvement always delivers better results. BTW, a bit more mature technology is less expensive too!

6. Treat CSR as a Charity
Corporate Social Responsibility is definitely not a charity but a solid strategy. For example, the cosmetics company, The Body Shop, develops the "Against Animal Testing" campaign to attract new customers and it works! Social and environmental issues are a new way supply chain practitioners can help the company to create value.

7. Leave Operations to Functional Areas
Supply Chain Management can definitely create value. Considering how companies like Amazon and Walmart create value through operation management strategies.

Is there any other myth that should be discussed and debunked

- Simchi-Levi, D. (2010). Operations rules: delivering customer value through flexible operations. Mit Press.

- Simchi-Levi, David. (2011). Seven Myths to Beat Before They Beat You: Flexible Operations. IESE Insight. 59-66. 10.15581/002.ART-1895.

- Graves, S. C., & Tomlin, B. T. (2003). Process flexibility in supply chains. Management Science, 49(7), 907-919.

- CHAIN, S. (2001). Supply Chain versus Supply Chain: The Hype & The Reality.

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Last review and update: July 5, 2022
About the Author and Editor:
Ben Benjabutr is the author and editor of Supply Chain Opz. He holds an M.Sc. in Logistics Management with 10+ years of experience. You can contact him via e-mail or Twitter.