The Danger of Yesterday’s Logic
By Hannah Kain, ALOM President and CEO
I am daily reminded of the management saying that is attributed to Peter Drucker: “The greatest danger in times of turbulence is not the turbulence. It is to act with yesterday’s logic.”[1] Supply chains are subjected to extreme turbulence. During the COVID freight crisis, logistics prices, and most specifically the price of container shipments between China and the U.S., were seen as symbolic of the crisis. In fact, many indices were based or heavily biased towards incorporating this price factor.
As we all know, prices for container shipments have since dropped significantly. Unfortunately, the reliance on container freight prices as a measurement of supply chain stress has given many the false impression that we are now “back to normal” with supply chain issues. I hear it all the time: The supply chain crisis is a thing of the past. When I mention it to fellow supply chain professionals, I am met with incredulity, chuckles, and raised eyebrows.
There is no normal: Supply chain have shifted and become more complex year for year – especially during the past decade. Complexity has gone up tremendously. We have reliance on global trade that is being disrupted by wars or severe trade restrictions. We have disparate legislation and pressures for ESG, data privacy, security, and many other obligations. We also have more and unforeseeable demand fluctuations. Planning has become a real challenge.
Then we have the inventory clean up from the disruptions over the last years. This is admittedly a temporary phenomenon – but still: It is real.
Physicians will tell you about supply shortages of critical prescription medications with patients fully or partially prevented from functioning normally because of lack of medication availability. Low-income families in the U.S. will tell you they cannot afford to buy sufficient food because of shortage induced record price inflation. Poor families in other countries will tell you that they are almost entirely unable to buy food. Hunger has increased dramatically over the last years. Industrial suppliers will tell you that single critical part shortages are still holding up their deliveries. CFOs will tell you about having to write off inventory when they are not discussing the cost of cash and currency fluctuations. None of us feel that we are managing a supply chain landscape that looked the same five or ten years ago.
This is not your mother’s supply chain. The change IS the new normal. Therefore, the indices need to change to reflect the rate of change and not – honestly – one random measure that went out of whack for a couple of years! It simply lulls executives, who are not deeply involved in supply chain issues, into believing they can take their eyes off that ball!
The best supply chain leaders are busy reshaping their supply chains: Nearsourcing, identifying and mitigating risks, forming strategic relationships, bringing talent up through the ranks.
Our thinking must adjust to reflect the new and constantly changing reality. As leaders, our constant focus must be on agility and ability to adjust not just our tactical actions, but also our talent management and our strategy. Drucker was right again.
[1] Peter Drucker’s actual quote according to the Drucker Institute was “A time of turbulence is a dangerous time, but its greatest danger is a temptation to deny reality”. But, the attributed quote simply sounds better.