Executive Briefings

Supply Chain Saves the World 2.0

Five years ago we published a book called "Supply Chain Saves the World." The idea was that at least three existential problems facing humankind - environmental sustainability, affordable healthcare and emerging market development - could be tackled with large doses of supply chain strategy and technology. Despite the global financial crisis in 2008 and 2009, I believe we're well on track to see the results in the form of a rich, healthy world a mere 300 years after the start of the Industrial Revolution. A four-minute YouTube video clip featuring the work of global health researcher Hans Rosling tells the story as it happened since 1810 in terms of life expectancy and income.

The jumps Rosling describes in both health and wealth are mind-boggling, even if you look only at Europe and North America. More impressive, however, is the sudden shift of fortune from the Western economies, which had a near monopoly on the good life as of 1948, to the rest of the world, which has rapidly closed the gap on both dimensions. Still lagging, of course, is Africa, but even here the drum beats steadily, with the 13 January 2011 edition of The Wall Street Journal featuring a front-page story on the continent's surging consumer economy. The long view offered by Rosling's work provides a "true north" to those of us looking for something bigger than a bit more margin.

The first dimension we work toward is wealth. In doing our daily chores to lean the inventory, minimize empty miles and eliminate waste, we're steadily bringing more stuff to more people at lower costs. Market saturation drives us to innovate either with better stuff or the same stuff at lower costs. Improvement in either means more income in the aggregate. When we reach what once were "third-world" customers and make a profit doing so, everyone wins. For an exhaustive discussion of this dynamic, see C.K. Prahalad's "The Fortune at the Bottom of the Pyramid." The key, of course, is respect. Whether buying from or selling to, supply chain engagement in emerging markets creates wealth by finding partners, not victims.

The next dimension is health. Rosling's animation generally shows income moving before life expectancy as countries develop. Wealth begets health. But if the experience of the United States is any guide, paying for it seems increasingly problematic. Enter again the supply chain. I have argued that the productivity gains that run regularly in the 3-percent to 6-percent range in all other industries should be readily available in healthcare. At least from a systems engineering standpoint, this must be true. It's the same raw materials, same production assets and same distribution networks, so why not the same learning curve? Without touching policy and admitting that the demand drivers are different in healthcare, I still believe Rosling's global data shows we can crack this nut. Call it faith in supply chain over politicians.

The final dimension, and one that Rosling's data doesn't quite tackle, is environmental sustainability. "What if everyone on earth consumed like Americans?" is often asked to clearly show how we're marching toward oblivion. I don't buy that. First off, who says everyone, including Americans, wants to consume like Americans? Check out The Biggest Loser on TV sometime to see how silly that notion sounds to the wise. Second, environmental sustainability boils down to resource efficiency, and whether the resource is water, oil, biomass or whatever, we've always learned to work around the bottleneck - and there's no reason to stop now. Carbon pricing, regulatory costs and even consumer behavior are changing the equation from earth as externality to earth as partner in the course of a single lifetime. Add the carrot of money to be made with venture-backed, clean-tech start-ups or corporate redirects exemplified by the likes of General Electric and IBM, and it seems more than likely we'll find a pony in this pile, too.

Getting back to basics, however, supply chain people are doing what no one else can: spreading the wealth. Scientists and engineers may find the molecule, material or mechanism that delivers goodness, but supply chain gets it to everyone in volume. Marketers and salespeople may create and close the deal, but supply chain delivers and closes the loop. Every time you cut a day out of inventory or a mile out of the route, you're taking a step toward the healthy, wealthy world Rosling described.

If you've read all the way to this point and still haven't watched the video, allow me to provide the link again - you need to see this.

O'Marah can be reached at kevin.o'marah@gartner.com.

Source: Gartner

Five years ago we published a book called "Supply Chain Saves the World." The idea was that at least three existential problems facing humankind - environmental sustainability, affordable healthcare and emerging market development - could be tackled with large doses of supply chain strategy and technology. Despite the global financial crisis in 2008 and 2009, I believe we're well on track to see the results in the form of a rich, healthy world a mere 300 years after the start of the Industrial Revolution. A four-minute YouTube video clip featuring the work of global health researcher Hans Rosling tells the story as it happened since 1810 in terms of life expectancy and income.

The jumps Rosling describes in both health and wealth are mind-boggling, even if you look only at Europe and North America. More impressive, however, is the sudden shift of fortune from the Western economies, which had a near monopoly on the good life as of 1948, to the rest of the world, which has rapidly closed the gap on both dimensions. Still lagging, of course, is Africa, but even here the drum beats steadily, with the 13 January 2011 edition of The Wall Street Journal featuring a front-page story on the continent's surging consumer economy. The long view offered by Rosling's work provides a "true north" to those of us looking for something bigger than a bit more margin.

The first dimension we work toward is wealth. In doing our daily chores to lean the inventory, minimize empty miles and eliminate waste, we're steadily bringing more stuff to more people at lower costs. Market saturation drives us to innovate either with better stuff or the same stuff at lower costs. Improvement in either means more income in the aggregate. When we reach what once were "third-world" customers and make a profit doing so, everyone wins. For an exhaustive discussion of this dynamic, see C.K. Prahalad's "The Fortune at the Bottom of the Pyramid." The key, of course, is respect. Whether buying from or selling to, supply chain engagement in emerging markets creates wealth by finding partners, not victims.

The next dimension is health. Rosling's animation generally shows income moving before life expectancy as countries develop. Wealth begets health. But if the experience of the United States is any guide, paying for it seems increasingly problematic. Enter again the supply chain. I have argued that the productivity gains that run regularly in the 3-percent to 6-percent range in all other industries should be readily available in healthcare. At least from a systems engineering standpoint, this must be true. It's the same raw materials, same production assets and same distribution networks, so why not the same learning curve? Without touching policy and admitting that the demand drivers are different in healthcare, I still believe Rosling's global data shows we can crack this nut. Call it faith in supply chain over politicians.

The final dimension, and one that Rosling's data doesn't quite tackle, is environmental sustainability. "What if everyone on earth consumed like Americans?" is often asked to clearly show how we're marching toward oblivion. I don't buy that. First off, who says everyone, including Americans, wants to consume like Americans? Check out The Biggest Loser on TV sometime to see how silly that notion sounds to the wise. Second, environmental sustainability boils down to resource efficiency, and whether the resource is water, oil, biomass or whatever, we've always learned to work around the bottleneck - and there's no reason to stop now. Carbon pricing, regulatory costs and even consumer behavior are changing the equation from earth as externality to earth as partner in the course of a single lifetime. Add the carrot of money to be made with venture-backed, clean-tech start-ups or corporate redirects exemplified by the likes of General Electric and IBM, and it seems more than likely we'll find a pony in this pile, too.

Getting back to basics, however, supply chain people are doing what no one else can: spreading the wealth. Scientists and engineers may find the molecule, material or mechanism that delivers goodness, but supply chain gets it to everyone in volume. Marketers and salespeople may create and close the deal, but supply chain delivers and closes the loop. Every time you cut a day out of inventory or a mile out of the route, you're taking a step toward the healthy, wealthy world Rosling described.

If you've read all the way to this point and still haven't watched the video, allow me to provide the link again - you need to see this.

O'Marah can be reached at kevin.o'marah@gartner.com.

Source: Gartner