Operations

There are five steps managers can take to protect their complex and vulnerable supply chains.

The country's largest corporations have hit a road bump on their way toward factoring sustainability into their transportation choices. Despite pressures from customers and investors--and the prospect of evervolatile energy costs--just 9% of Fortune 500 companies include environmental goals in their public documents. A study of those 44 companies reveals some of the best practices that can help a business go the distance, ultimately working with its partners to rethink its entire transportation infrastructure. Companies must demonstrate three distinct levels of integration before they can embed the reduction of greenhouse gas emissions into their transportation strategies: establishing a foundation (acknowledging the problem), changing internal company practices (building an environmentally aware culture) and impacting supply chain practices (such as better vehicle utilization or more efficient routing). Within these categories, the tactics need to be measured by carefully calibrated metrics that can track both environmental and financial progress. As employees begin adapting their own decision making to the new priority--by, for instance, choosing videoconferencing instead of traveling--executives should spread such success stories, reinforcing the institutional preference.

For most companies, the single largest cost category is the total spend with suppliers. However, figuring out how to identify the best areas for supply savings--and then how to measure and report them--presents major challenges. Both understatement and overstatement of supply savings gaps signal the wrong reality, leading to an overemphasis on low-yielding cost saving initiatives, misdirected corporate resources and employees being rewarded for the wrong behavior. Moreover, supply savings gaps conceal the strategic contribution suppliers can provide. In studying the supply management practices at 30 large North American and European companies, the authors identified a variety of measurement and reporting practices for supply savings. They conclude that correct measurement of supply savings is almost impossible and that there are frequently gaps between reported savings and reality. They explore why gaps exist, what practices lead to under- and overstatement of savings, the consequences of poor supply savings measurement and what can be done to recognize supply savings gaps. To overcome the measurement and reporting challenges, the authors recommend that executives do three things: Focus on the total cost of ownership; categorize the different types of savings; and hardwire savings to the budget.

Supply chains should be designed and managed to deliver one or more of six basic outcomes.

How have strategies for supply chain design changed? Two leading thinkers offer insights.

Designers at restaurants and theme parks are leading the way in thinking about how to make waiting in line more pleasant.

Even before launching the MIT Center for Collective Intelligence,Thomas Malone was tryng to imagine how work could one day be done differently. A professor at the MIT Sloan School of Management, he was a founding co-director of the Initiative on Inventing the Organizations of the 21st Century, and in general has continuously explored how "to help society take advantage of the opportunities for organizing itself in new and better ways made possible by technology." Some of those ways offer interesting paths to sustainability but the paths are to sustainability as Malone defines it, which doesn't mean a world in which everything is built to last. "It's often the case that good things are sustainable, but sometimes things are sustainable but not good," he says. "And sometimes things are good but not sustainable." In this installment of the MIT Sustainability Interview series, Malone addresses the mental models that impede management progress, the role of collective intelligence in solving climate problems, and his view of how wrong people are about what business is for. He spoke with MIT Sloan Management Review Editor-in-Chief Michael S. Hopkins.

Receiving information more frequently isn’t always helpful.

When technology changes rapidly, outsourcing looks more attractive.

Spot markets can be used to limit exposure.