Author Michael Lewis captures a poignant moment during the draft preceding the 2002 Major League Baseball season. The scene was the conference room of the Oakland Athletics. The A’s had just completed an amazing season, posting 102 wins, while carrying the second lowest team payroll in the major leagues.MLB Logo.jpg

 

They were about to embark on a season in which they would post 103 wins, far outpacing their competitors who were carrying much, much higher operating expenses (read: payrolls).

 

Management at the A’s had taken a path far, far different from strategies and tactics employed by the vast majority if their opponents. So far afield, in fact, that they were frequently openly ridiculed in the trade press and in the management offices of their competitors.

 

As we pick up the scene, the draft is at the thirty-fifth pick of the first round. The A’s head of player recruitment is sitting alongside the speakerphone:

As the thirty-fifth pick approaches, Erik once again leans into the speakerphone. If he leaned in just a bit more closely he might hear phones around the league clicking off, so that people could laugh without being heard. For they do laugh. They will make fun of what the A's are about to do; and there will be a lesson in that. The inability to envision a certain kind of person doing a certain kind of thing because you've never seen someone who looks like him do it before is not just a vice. It's a luxury. What begins as a failure of the imagination ends as a market inefficiency: when you rule out an entire class of people from doing a lob simply by their appearance, you are less likely to find the best person for the job. [1]

 

Which would you rather manage?

What was true about personnel selection with the A's is equally true in the matter of selecting strategies and tactics--for, for the Oakland A's, the selection of player personnel was intimately related to their strategy and tactics for achieving wins.

 

I am often amazed at how many executives and managers are reluctant to try new approaches to managing their companies and supply chains. Even when radical new approaches to management of organizations and supply chains have demonstrated over and over the ability to significantly improve customer service levels (read: “wins”), while driving inventory levels lower—usually, significantly lower.

 

So, imagine yourself at the end of another year.

 

Which organization would you rather take credit for managing?

  • The Texas Rangers, who finished their year 31 games out of first place, after spending about $107 million for their “inventory” of players?
    or
  • The Oakland Athletics, who finished first in their division, and spent just under $42 million for their “inventory” of players?

I can tell you this: I’d rather be trying to explain to senior management how I managed to be at the top of my division while spending less than half what my big-spending competitor was spending, than trying to explain to senior manager how I spent $107 million while losing ground to my “smarter” competitors.

 

Everyone’s doing it now

Today, virtually every Major League Baseball team plays some form of “moneyball.” The teams that led the way had the early advantages.

 

But, the executives and managers of that run-producing “supply chain” called the Oakland A’s had to be willing to endure the laughter and sneers of their competitors while they took up their position on the cutting edge of their industry.

 

Lewis brings two more keen insights as to what keeps executives and managers from making improvements by adopting fresh new strategies and tactics early. Here, Michael Lewis quotes Pete Palmer, an engineer at Raytheon, who had become a keen observer of baseball managers’ tendency to make irrational decisions: “Managers tend to pick a strategy that is least likely to fail rather than pick a strategy that is most efficient," said Palmer. "The pain of looking bad is worse than the gain of making the best move.” [2]

 

Then, Lewis finds himself quoting Dick Cramer, a research scientist for the pharmaceutical company then called SmithKline French (now GlaxoSmithKline): “'Baseball is a soap opera that lends itself to probabilistic thinking,' is how Dick Cramer described the pleasure [of winning against old-school thinking]." [3]

 

So, are you managing your organization and supply chain based on the fresh new insights made available through demand-driven MRP and demand-drive supply chains, or are you still finding day-by-day adventure managing a “soap opera” with no shortage of drama?

 

Let us know about your rationale for managing your company and your supply chain. We’re interested in hearing your comments.

 

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[1] Lewis, Michael. Moneyball: The Art of Winning an Unfair Game. New York: W.W. Norton, 2003.

[2] Lewis, ibid.

[3] Lewis, ibid.

 

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