Supply Chain Forum Links Managers and Scholars

You stop at your local gas station on the way home and while you fill the tank, you pick up a quart of milk and a cartridge for your computer printer. This is not a far-fetched scenario, according to Hau Lee, professor of industrial engineering and engineering management at the School of Engineering and professor of operations management (by courtesy) at the Business School.

Computer hardware, once sold primarily through dealers, today is marketed through mass outlets such as Price Club and Kmart. Increasingly, customers are purchasing hardware by phone or over the Internet. In the future, they even may buy small parts at their local gas station minimart. This shift in sales channels is a subject that interests Lee, an expert in the field of supply chain management.

Supply chain management covers a broad landscape, dealing with the management of materials, information, and financial flows in a network of suppliers, manufacturers, distributors, and customers. It involves materials flowing through the chain to customers as well as the reverse system of product returns, servicing, recycling, and disposal. Lee covers that landscape not only in his own research but also as the director of Stanford's Forum on Global Supply Chain Management, which last June drew 80 academics and working managers to the campus for its fifth annual symposium.

The Forum is an initiative of the Stanford Integrated Manufacturing Association (SIMA), a consortium of industrial partners and academics who conduct research and develop teaching programs in areas that affect manufacturing. A wide range of industries takes part in the Forum -- electronics, automobile manufacturing, fast food, and apparel -- and faculty is drawn from Stanford's schools of business and engineering. Academics include the Business School's Charles Holloway, the Kleiner, Perkins, Caufield and Byers Professor of Management; Rajiv Lal, professor of marketing and management science; Paddy Padmanabhan, associate professor of marketing; Evan Porteus, the Sanwa Bank Professor of Management Science; and Seungjin Whang, associate professor of operations, information, and technology. The School of Engineering is represented by professors Philip Barkan, Warren Hausman, Kos Ishii, and Lee.

"Participation in the Forum gives us a great way to learn about problems faced by industry," says Lee. "The industries that participate describe their mistakes and the lessons they learned. It is valuable for academics and industry leaders to explore these issues together."

One topic of mutual concern is how companies change the way they do business because of changes in their supply chain process.

A major area of change, says Lee, is postponement -- not completing the assembly or manufacture of a product in the factory but rather "allowing someone downstream who knows the customer better to put the final touches on it. If you build it at the factory and the customer doesn't like it, you may waste time and money." Postponement may also save money on customs fees and duties by allowing a product to be classified as unfinished when it enters a country. Doing some assembly once it has been imported may also satisfy laws that require products to be assembled locally.

Another change lies in the increasing globalization of business. Today, many products are truly international -- created from parts or materials assembled from several different countries. Communication systems that support the World Wide Web and e-mail enable many firms to operate 24-hour supply chains that span the time zones. "When Singapore goes to bed, you can continue working through the U.S. part of the chain," says Lee.

This winter, Lee is experimenting with a new graduate course in the engineering school on global coordination of supply chain management. Working with faculty members at universities in Hong Kong and the Netherlands, students simulate the production of a product in the United States for the Chinese market. The project includes international communications links and possible site visits. "This course is being run as an experiment because we have a lot to learn in this area," says Lee, "but I hope eventually to expand it -- and possibly offer it to Business School students."

In addition to the annual meeting, the Forum on Global Supply Chain Management sponsors several workshops annually. This year's topics include logistics and manufacturing information systems.

"Industries are experimenting with all kinds of innovations in supply chain management," says Lee. "At Stanford, we look at the factors that drive successes and failures of these innovations." Among the subjects the group is considering are: how the optimal allocation of inventory and capacity can be determined in a supply chain, and what kind of incentive systems can induce a decentralized controlled supply chain to perform effectively. Currently, some of the Forum's research findings are being introduced into Boeing, Hewlett-Packard, and IBM.

-- Cathy Castillo
photo by Steve Gladfelter

The flow of materials and goods in a shifting global economy is the subject of study by engineering professor Hau Lee. Lee is the director of Stanford's Forum on Global Supply Chain Management -- a consortium of industrial leaders and academics. "It is valuable for academics and industry leaders to explore issues together."