Flow: How the Best Supply Chains Thrive

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(as of Nov 26,2022 23:03:40 UTC – Details)

From the Publisher

Flow offers an important framework and solutions for remedying the rampant delays and bottlenecks that exist in global supply chains

This book describes the concept of flow, which evokes physical properties that exist in nature, such as the flow of electricity, the flow of materials, and the flow of time. In terms of process optimization, flow encompasses the integration of end-to-end supply chains and the movement toward relocation of global supply bases to nearshore/onshore geographies. Achieving flow is essential for organizations seeking to improve their supply chain performance in a time of increasing disruption.

This book highlights the high-level effectiveness of business strategies that use predictions based on the sequence of world events, global supply chains, and data by exchanged smart technologies. By broadly applying physical laws to the global supply chain, Rob Handfield and Tom Linton explore the impact of supply chain physics on global market policies, such as tariffs, factory location, pandemic response, supply base geographies, and outsourcing.

The authors provide specific recommendations on what to do to improve supply chain flows, and include important insights for managers with examples from companies such as Biogen, General Motors, Siemens, and Flex with regard to their response to the pandemic. Flow is an important resource not only for procurement and supply chain management professionals, but for any manager concerned with enterprise-level success.

About the Authors

Rob Handfield, PhD is the Bank of America University Distinguished Professor of Supply Chain Management at North Carolina State University and Executive Director of the Supply Chain Resource Cooperative.

Tom Linton is a globally recognized thought leader, author, and former Chief Supply Chain Officer and Chief Procurement Officer. He is currently a senior advisor at McKinsey and Company, as well as executive advisory board member at supply chain software leaders Resilinc and Project 44.

Table of Contents

Preface

1. Supply Chain Flows and Immunity

2. Time, Velocity, and Immunity

3. Thermodynamics and Evolutionary Flow

4. Compression: The Localization of Supply Chains

5. Freedom of Flow: The Adoption of Digital Dexterity

6. Electrical Current

7. Future Supply Chain Flows

Notes

Index

Excerpt from the Preface

Supply Chains can be defined as material in motion. Material in motion is cash in motion. Move it fast and you improve cash flow. Slow it down, and it consumes cash or becomes inventory. Speed it up, and you make customers happier, drive revenue and improve margins.

What if we thought differently about this movement? What if there were underlying laws that govern good movement versus bad? Can the physics of supply chains be defined and supported by universal truths?

These were some of the questions Rob Handfield and I wrestled with after publishing our first book, The LIVING Supply Chain, in 2016. In that book, we took a distinctly biological point of view. We drew parallels to nature as a way of discussing what a good supply chain looks like. We thought: Is there also a basis in physics?

The lake I live on in Georgia is more like a pond in size. Yet this small body of water is a waterfowl magnet when the seasons change and birds of all shapes and sizes work their way south or north.

This movement is electric at certain times of the day. It has a rhythm to its flow. Canadian geese and ducks take off and land in a V formation, often telegraphing their coming and going with wonks and quacks in a symphony of sound. Although high in number at times, they never to seem to collide, or have any confusion about where they are going or who to follow. They seem to signal and move in such ways to allow them to land and take off safely.

There are exceptions. Every so often either a predatory eagle or freakish weather limits their movement. They fly point-to-point, searching constantly for food and driven by instincts, environment or inherited genes, all of which science does not yet fully understand. They have purpose. Their movement is orchestrated and never wasted.

We can learn from birds many things about how things should move. After all, the internet of things has enabled the new movement of things through the access of information from any source, anywhere, at any time. Objects can now signal their presence and other objects can sense it. This data can move globally via the cloud and back to other devices aimed at using it.

That is why we are focusing this book on flow. It is through efficient movement or flow that supply chains thrive. To obtain optimum efficiency, supply chains need to be released from control and allowed to move as freely as possible.

In both the animate and inanimate world, we are surrounded by examples of what great supply chains should look like. They are not complex, highly-controlled systems, but fast, agile, fluid systems that sense, respond and navigate their way autonomously.

The lesson for business is enormous. Today, weaponized with a set of digital tools, it is possible to achieve new levels of efficiency, if we are not supply “chained“ and held hostage by processes designed for an analog world. We are living in a world operating in real time, with devices at the edge of the network getting smarter each year. With the emergence of 5G, the internet of things will drive the movement of things to be orchestrated like a formation of geese, a school of fish or the tributaries that feed a river. If we look at our existing supply chain world with these optics, we can compress the time it takes to move things. Moreover, we can reduce the cost of doing things, and improve financial outcomes throughout the supply chains that move things. We believe it will be common to see a 2X improvement in supply chain performance when principles of flow are applied with digital tools. When material is moving, cash is moving. Speed it up, and free cash flow, revenue increase, and the cost embedded in friction and resistance is removed. Flow is how the movement of things will unleash the next evolution in supply chain management.

This book was written during a period of upheaval. We began work almost immediately after publishing our first book, The LIVING Supply Chain, when we were inspired to think about the physical flows in nature and how this applies to supply chains. When our first book came out, we were in the initial stages of the massive trade war between the U.S. and China. Something was going on that was not business as usual, and which appeared to be some other shift in the current. Tom Linton spoke at North Carolina State (NC State) University’s Supply Chain Resource Cooperative meeting in December 2019, where we further explored the decline of globalization, and we the possible move toward a localized supply chain world.

Of course, in January 2020, the world economy began to implode rapidly. The coronavirus strains in Wuhan spread quickly, and then moved into Italy, Spain, New York and the rest of the world. In less than four weeks, the economy shifted from a high point in February 2020 to a global economic shutdown, which dragged on for many months. As we write this preface in September 2021, the virus is still raging in India, Latin America and Europe, and the variants are multiplying. It seems like the pandemic will be with us for another few years at least, making the world a very different place.

In writing this book, we took inspiration from a famous physicist, Dr. Adrian Bejan, who offered some unique insights that we integrated into a set of principles related to supply chain flows. In the spirit of the constructal law of physics, we discovered that the natural flow of time and events is not all that difficult to predict. This led us to the idea of exploring the nature of supply chain flows – and ultimately, to the underlying vision of creating supply chains that are not so much resilient, but immune to shifts in their ecosystem.

In The LIVING Supply Chain, we addressed the biological attributes of supply chains, and how the essential elements of ecosystems could be used to understand how supply chains operate. In this book, we considered the attributes of supply chains using the physical principals of flow. This theme runs throughout the book, suggesting that there is indeed a natural flow to events in the global supply chain.

Is this book for you?

Like our previous book, this book relies on multiple case examples, academic theories and various references related to physical flows, movement, speed and other relationships that apply. We tried to keep the discussion very practical and focused on the physical properties of supply chains.

The book is targeted at anyone who is curious about how supply chains function, and why it is so important that they flow. If supply chains do not flow – and they did not in 2020 – huge problems emerge including product shortages, medical emergencies and economic shutdowns. We also explore the future of how supply chains are evolving in a post-pandemic world. As we noted earlier, we hope our discussion will help people to think differently about how to manage global supply chains in the new era.

There is a lot of press proclaiming the “new digital age” of blockchain, internet of things, artificial intelligence and an “Industry 4.0” world. But the reality is that many supply chains struggle to flow well, and instead are often constrained by many factors. This book is for the rest of us, who live in the real world of daily supply chain management work. As we note in one of our chapters, the best supply chain managers are the ones who tinker with our supply chain propositions and recognize them as truths, but then interpret them and innovate to drive something new. Some of us get lucky and land in a company such as Amazon or Apple. Amazon has a business model that functions with pretty much anything going through it. Apple is blessed with incredible products and a place where spending on new ideas is a part of daily life. But most of us do not work in these places. People also dream of launching a start-up and having an IPO that makes them multi-millionaires, forgetting that more than 50% of start-ups fail in the first five years, and even fewer make it to the IPO level.[1]But this book is about supply chains for the rest of us, who are not blessed with unbelievable amounts of capital, and who put on their boots every day and trudge off to the mine. They are the ones who can take the observations we offer here and start to tinker with them to develop truly innovative supply chains.

As a matter of course, physics provides a number of simple and important laws that are undeniable, irrefutable, and which determine the performance of matter based on stringent formulas and equations. We have couched these physical flows in terms of measures such as speed, distance, electricity and other phenomena. We have pulled from our own experiences working with companies such as Flex, Honda, Apple, Gilead Science, Biogen, Caterpillar, IBM and others.