My Favorite Supply Chain Leader: Yossi Sheffi

This month featured bloggers were asked to write about their favorite supply chain leader and explain why they hold them in high esteem. I immediately thought about Professor Yossi Sheffi (@YossiSheffi), the Elisha Gray II Professor of Engineering Systems at the Massachusetts Institute of Technology. Although an academic may not have been the type of supply chain leader Lora Cecere (@lcecere) and her group had in mind, Sheffi is an expert in systems optimization, risk analysis, and supply chain management. His work has inspired — and continues to inspire — supply chain professionals.

Sheffi on Enterprise Resilience and Risk Management

I admired Professor Sheffi’s work long before Enterra Solutions® started to focus on the supply chain. He first came to my attention when, in 2005, he wrote The Resilient Enterprise. At the time I was very interested in the topic of resilience. In that book, he makes the clear point that resilient organizations both anticipate disruptions and actively position themselves to prevent them or mitigate their effects. Concerning Sheffi’s book, former IBM executive, Irving Wladawsky-Berger, wrote, “Professor Sheffi demonstrates how vulnerable companies are to unanticipated disruptions if they have not properly prepared for them.”[1] He continues:

“The key is for a business to focus on resilience — which he defines as the ability to bounce back from disruptions and disasters by building in redundancy and flexibility. Standardization, modular design and collaborative relationships with suppliers and other stakeholders are among the kinds of capabilities that can help create a resilient company. It is equally important to embrace a corporate culture of flexibility — with distributed decision making and communication at all levels. Talking specifically about supply chains, he observes, ‘Today’s supply chains span the globe and involve many suppliers, contract manufacturers, distributors, logistics providers, original equipment manufacturers (OEM), wholesalers, and retailers. This web of participating players creates complexities, making it difficult to realize where vulnerabilities may lie. It also creates interdependencies that exacerbate these difficulties.’  He later adds:  ‘The vulnerability of the connected world to disruption is not limited to supply chain operations; it affects any business that depends on a reliable global communications network.’"

Enterprise resilience has remained of interest to me; but, now, I’m much more focused on how it relates to supply chain risk management, which is why Sheffi's work remains relevant. Sheffi’s expertise, however, does not begin or end with supply chain risk management. For example, on the subject of S&OP, he has noted, “Instead of aiming for a single demand figure, progressive companies have turned to forecasting a range of potential outcomes. They estimate the likely range of future demand, and use the low end and high end to guide contracting terms and contingency plans.”[2]

Sheffi on Innovation

Professor Sheffi is also interested the topic of innovation. He writes, “I have seen many worthwhile ideas wither on the vine. When originality threatens the status quo or runs counter to an organization’s culture, the individual behind the idea can struggle to gain traction.”[3] He has identified six of the most common ways that companies can kill innovation. The first way is by suffering from corporate tunnel vision. What Sheffi means is that companies can kill innovation by defining themselves too narrowly. The second way to kill innovation Sheffi says is to maintain a dense corporate bureaucracy. “Here,” he writes, “the impediment to innovation is a heavy-handed bureaucracy designed to ensure that the company adheres to certain processes and controls cost. This bureaucracy morphs into a system that supports the status quo and resists fresh thinking.” His next innovation killer involves lack of leadership.

“Leaders set the tone of an organization,” Sheffi writes, “and if top managers are not comfortable with a cutting-edge, less-familiar working environment, then the whole firm is likely to follow suit.” Poor leadership is also generally responsible for the next innovation killer — lack of incentives. “A company can talk up the importance of innovation,” Sheffi asserts, “but if employees do not have appropriate incentives and rewards built into compensation systems, then the outcome is likely to be earnest words and little action.” Sheffi’s sixth innovation killer is the “not invented here” syndrome. According to Sheffi, “Some companies find outside ideas almost repugnant. A supplier comes to them with an innovative idea for a new product or process, say, and the organization sets out to discredit the proposal. Often managers worry that their bosses will think less of them because they did no come up with the idea.” Sheffi’s final innovation killer is the compulsion to clone. He explains, “This problem becomes apparent during mergers and acquisitions. A buyer might acquire a smaller company because it values the target organization’s spirit and agility. Unfortunately, as the first order of business, the buyer instills their own stifling organization on the acquired company.”

Sheffi on Additive Manufacturing

Sheffi, writes, “The additive manufacturing revolution is underway, and product supply chains lie directly in its path of creative destruction. Which ones, if any, will survive?” [4]“ He continues:

“Some supply chains will become obsolete as a result of this flexibility. For example, 3D printers in auto repair shops and retail outlets could make certain auto components on site, eliminating the need for these items to be delivered by suppliers. Many expedited shipments will not be necessary as the technology matures. When a production line goes down, for instance, the part needed to fix the problem might have to be shipped from a faraway supplier using expensive same-day delivery services. Simply printing the part in situ avoids this costly transportation option. Scenarios like these do not auger well for express delivery companies. But the news is not all bad because alternative business opportunities will open up. Delivering the raw materials that feed 3D printers is such a possibility. … Customization offers another example of how the technology will close some doors and open others in the supply chain domain.”

He concludes, “Imagine global networks of additive manufacturing machines that are attuned to local markets and can be reconfigured in real time as demand patterns change. Such a network would take supply chain agility to new levels. Or distribution centers that store and supply product blueprints rather than physical products, located ‘in the cloud’ or in server farms. … 3D printing is a disruptive technology that will destroy many traditional manufacturing models. But reports that the concept of a supply chain will die at the hands of additive manufacturing are exaggerated.”

Summary

If the supply chain field is going to change with the times, it will need big thinkers like Professor Sheffi to help professionals in the trenches rise above the fray. I think I’m fully justified in recognizing him as a supply chain leader worthy of recognition.

Footnotes
[1] Irving Wladawsky-Berger, “The Resilient Enterprise,” Irving Wladawsky-Berger Blog, 26 February 2007.
[2] David Blanchard, Supply Chain Management Best Practices, Wiley, 2010.
[3] Yossi Sheffi, “Six Ways to Kill Innovation,” Longitudes, 27 February 2015.
[4] Yossi Sheffi, “Does 3D Printing Doom the Supply Chain?” Supply Chain @ MIT, 18 July 2013.

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