The Bull on Wall Street

March 1, 2003
Forget share price. It's supply chain costs that count.

He wasn’t sure he wanted to say it, but he said it anyway: “The stock market is one of the greatest impediments to supply chain management.”

That’s Tom Speh talking — associate dean at Miami University’s Richard T. Farmer School of Business. He’s also the current president of the Council of Logistics Management (CLM), so he speaks from experience — and frustration.

I heard him vent at a recent meeting of the Greater Cleveland CLM Roundtable. His topic was the fact and fiction about supply chain management. The fiction, he believes, is that there is such a thing today as a viable supply chain manager.

“How can I better invest in sophisticated software and take the time to develop relationships when I'm constantly being beaten to gruel by the stock market?” he asks. “Look at all those presidents and CEOs who have to justify what’s going on every three months and explain why their earnings are off by a penny.”

Indeed, if there is a true supply chain manager alive today, he or she is involved in several chains, and he or she is being strategic and judicious about the relationships on which to focus.

Those supply chains could be in different industries and, therefore, behave differently. Could a supply chain manager for an electronics firm make the transition to retail chain management without a hitch?

Members of Home Depot’s board thought so when they selected Robert L. Nardelli as the company’s CEO. Before making the move two years ago, Nardelli was a manufacturing star at General Electric’s Power Systems unit. Since Nardelli came to Home Depot, share prices have fallen by half and sales are down. A Business Week commentary said Home Depot’s woes stem from Nardelli’s efforts to force manufacturing-like processes onto retailing.

“In his GE days, he was able to shave inventory even as he pushed managers to move products out the door quicker,” states BW’s analyst. “But his efforts to do the same at Home Depot have simply slowed orders, leaving stores out of stock in such key areas as electronics.”

A true supply chain manager wouldn’t let that happen because a true supply chain manager is also a relationship manager. Tom Speh says he hasn’t met one of those in real life. So he’s trying to create them while their minds are still unspoiled by the distractions of Wall Street. Speh says today’s students are the future’s supply chain managers. They’re taking courses in relationship management, organizational behavior and teamwork, in addition to supply chain management. The result?

“In 20 years, maybe we’ll have effectively trained people coming out of colleges, schooled in different ways of thinking on how we do business,” he says. “ If we want to make supply chain management work, companies are going to have to start thinking about that kind of education.”

In the meantime, we’ll have to rely on the enlightened use of technology to help today’s supply chains survive until then. If a report by Forrester Research is accurate, industries are headed in the right direction. It predicts U.S. firms will spend $35 billion over the next five years to improve business processes that monitor, manage and optimize extended supply chains. “This means the end of investments in narrowly focused functional supply chain management apps and concentration on process improvement initiatives that target the entire product life cycle,” the report concludes, “from decision through manufacturing and distribution all the way to aftermarket service.”

Maybe that’ll bring out the bulls on Wall Street.

Tom Andel, chief editor, [email protected]