I interviewed Morgan Swink who discussed The State of Supply Chain Innovation.
It’s nice to speak with you today, Morgan. I’m looking forward to hearing your views on the state of supply chain innovation. Can you first provide a brief background of yourself?
Sure, I’m a professor at TCU—that’s Texas Christian University—in Fort Worth, Texas. I’ve been there for about five years. I spent over a decade at Michigan State University and Indiana University before that. I’ve been a professor for about 25 years, mainly researching in areas in supply chain innovation and integration. I started out in engineering and worked for Texas Instruments for ten years as well.
I’m a professor at TCU, but in addition, I’m also the executive director of our supply and value chain center, which is the entrepreneurial arm of our supply chain program at TCU. We work with businesses around the Dallas-Fort Worth area and partner with them, set up conferences and events, and do things like that.
Great. Can you talk about the state of supply chain innovation?
We have a conference coming up next week, actually, that the theme is supply chain innovation. As a part of that, we’ve invited some companies who are recent award winners. The Council of Supply Chain Management Professionals gives a supply chain innovation award every year—they’ve done that for ten years now. I’m the chair of the committee that grants that award and have been on that committee for a number of years. We’ve had a chance to review, in depth, about 60 innovations over the past ten years that were finalists in the competition and, in the larger frame, about four hundred different submissions of innovations.
Through analyzing some of that and being part of that process, I’ve gotten a pretty good handle on what companies are doing. It’s really interesting. Innovation in the supply chain space really runs the gamut from a lot of companies who are implementing solutions developed by third-party providers, consultants, or technology companies to what I would consider, to be a lot more innovative, and that is companies actually developing technology solutions or organizational solutions or, even more interesting, new business models internally. I would consider those kinds of things to be the most innovative, and I have a couple examples I can share with you on that.
In general, supply chain innovations tend to be focused around new ways to handle, source, make, and deliver new product introductions or new packaging of products, or they tend to be around new customer service systems or new production systems or new delivery systems. Many times technology solutions apply to those, and those could be information technologies, collaboration technologies, or specific process-oriented technologies, like robots, et cetera.
In terms of the state of innovation itself, I think there’s a big transition underway right now. In the past and historically—as I long as I can remember, at least—most of supply chain innovation—if you want to even use that term—has been very short-term focused; it’s been very cost-focused. Supply chain managers and executives are constantly under pressure to deliver year-on-year cost reductions—3 to 5 percent, typically—so, they’re always looking for these incremental improvements. Now we’re starting to see a shift—at least in some of the leaders—toward more of a top-line way of thinking, where supply chain is not only about managing costs and efficiency and quality and reliable delivery, but it’s actually starting to emerge as a competitive weapon and a way to drive revenue growth through some new supply chain-enabled business models.
I can give you a couple examples of that, but, in general, that’s where we are with innovation, and I do see this as a profession in supply chain and within certain industries, especially, you see this change of thinking from very much internal cost-efficiency focus to more of—the cost is always going to be there, it’s still there, but also more of a growth opportunity in supply chain as a competitive weapon.
You mentioned some examples. What are some good examples you think would be interesting?
A couple of quick ones that come from past award winners of CSCMP’s award, a couple of years ago, the award went to Mercy Health Systems. Mercy Health Systems is a hospital network; they have about 40 hospitals. They’re based in St. Louis, but their 40 hospitals are located all around the Midwest. It’s an interesting story—they’re going to be speaking at our conference.
They started out with the traditional internal focus. The way the corporation was run, most of the hospitals were very independent. It was operated very much as a holding company, so each of the hospitals ran its own operations, had its own supply chain, leadership, and managed most of its own internal operations and purchasing and supply management activities independently.
What started out as kind of an incremental quality-improvement program, where they were really focusing on specifically how to reduce errors and improve the quality of care within their hospitals kind of evolved to a larger focus on best practices in procurement and purchasing and then a sharing of those practices across the hospitals until, finally, Mercy saw so much progress that the corporate office decided to consolidate all supply chain operations and management of supply chain into a corporate office.
Eventually, they created a whole new business unit, which is called Mercy ROI. This new business unit handles all the supply chain operations and internal operational excellence programs for the 40-hospital network. They’ve gotten so good at it that now it’s become a new business for them, and they sell hospital supply chain services to other health care networks. This is a great example of how some, initially, small, internally focused innovations can grow a competence and a capability that can actually turn into a new business opportunity. It turns out this Mercy ROI business unit is the fourth most profitable business unit within their entire corporation. It’s just a really good example of the power of supply chain and the potential of it driving business growth, as well as reducing cost.
Another example we’re going to have presented at the conference is this past year’s winner, the 2014 winner was Flextronics. Many of your readers may be familiar with Flextronics; they’re one of the largest contract manufacturers in the world and about a $20-billion company. They started out in electronics manufacturing, but they do a lot of contract manufacturing for many different industries now.
Traditionally, their bread and butter has been to take product designs from original equipment manufacturers or big developers and then just produce the items that the developers order from them. They produce a lot of the final assembly for computers and all kinds of electronic goods. What they’ve done now with their supply chain capabilities, they’ve gotten so good at managing supply chain that they’ve built an incubator, a new product and prototyping and development incubator in California so, now, they have a whole new market they can sell services to: mainly startup firms and small- to midsize firms that don’t have their internal R and D capability.
They’ve built this really fantastic facility that has 3D printing and lots of other rapid prototyping technologies. Plus, they will set up an R and D space in their facility for a startup or client company to come in, and they will host a design team to work together with Flextronics engineers and supply chain mangers to not only help flesh out their product design and create rapid prototypes, but to concurrently do process design and design for supply chain kinds of things so these products come out with not only a fantastic functional design and high-quality performance, but also very producible form.
Again, this is another example of a company that’s taking its supply chain expertise and applying that into a new market in a new way to create new business opportunities.
Thanks, Morgan, for sharing today.
You’re welcome. Happy to share with you.
About Morgan Swink
Professor at TCU