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Theory of Constraints Supply Chain Management

A recent study concluded that few companies achieved any return on their supply chain project investment. More than 850 companies were surveyed, including those that had highly publicized supply chain failures. One of the authors of the study, Vinod Singhal, said, “Much of the evidence [for payoff] is anecdotal.” Robert Austin of Harvard University, says, “Only a few lucky companies can prove that they achieved any real payoff from their SCM (supply chain management) efforts.”

With all these smart people working on supply chain management initiatives, why are there so few examples of real successful SCM improvements? Why, if management spends millions of dollars on supply chain management technology, aren’t we seeing breakthrough improvements in supply chain efficiency?

There are three fundamental mistakes managers make in supply chain management:

  1. Supply Chain improvement is about efficiency
  2. Supply Chain improvement is about technology
  3. Supply Chain design is best done by the supply chain experts

The key to improve supply chain performance is to treat the supply chain as a system, where efficiency is a by-product of system performance, not a precursor to system performance. The emphasis in supply chain management must be first on performance – delivering product (and components) reliably. Only when that objective is accomplished, can managers focus on driving cost from the system.

Read the complete article and see a diagram of  on the Demand-Pull Supply Chain

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