Time to transform Logistics and Supply Chain thinking and practice?

In a matter of weeks, a little known economist based at the Paris School of Economics has moved from obscurity to rock star status. Thomas Picketty’s Capital (655 pages) has created a storm: Martin Wolf of the Financial Times called the book “enthralling”; The New York Times puts Capital in the Twenty-First Century in the company of Adam Smith’s Wealth of Nations and John Maynard Keynes General Theory. Justin Fox in the HBR likens it to a big river — muddy and occasionally meandering, but with a powerful current that keeps pulling you along, plus lots of interesting sights along the way. Paul Krugman likens it to a eureka moment. It is the best-selling book on Amazon. Perhaps the Logistics and Supply Chain discipline is ripe for a similar challenge.

This bulldozer of a book builds a chilling conclusion from solid research – that we are headed for a future dominated by inherited wealth; that capitalism needs to be saved from the capitalists! Competition is a myth and oligarchy is the nature of society as things are in the US and EU – with devastating consequences for democracy. As Roosevelt once argued – those with the money can curry or even buy favour and influence political decisions.

Here’s the argument: Capital produces real returns of 4 to 5 per cent and economic growth is much slower at 2 to 3 per cent (or lower). Fortunes grow faster than the economy and income from capital is invariably much less evenly distributed than income from work itself. For example, Bill Gates has earned more money from his bank balance than from the Microsoft business itself and many of present day US billionaires have inherited their wealth – a bit like the Duke of Westminster in the UK. For Picketty, this all combines to be a powerful force for increasing inequality. I found his emphasis on the fact that this all leads to oligarchy – not in places like Russia but in the USA and the EU – and that this kills competition and innovation. Picketty doesn’t use the example, but this all reads like the story of Argentina from 1914 (when it was one of the BRICS of that era) to today.

This debate adds credibility to Economics students at Manchester University who have launched a Post Crash (2008) Economics Society to challenge the single economics paradigm that has been the staple diet of many undergraduate economics courses across the UK. The dispute came to a head when Manchester University rejected a proposal by students to add a module on financial crashes.

This is not new. Economics students at the Sorbonne had voiced similar concerns back in 2000 claiming that their course was rooted in market fundamentalism and could be described as autistic. Students at Harvard and elsewhere challenged their core curriculum in the same way triggering wide ranging reactions.

Recently, Cambridge Economist Ha-Joon Chang reflected on a private dinner in London to discuss the state of economics education across the UK. Many of those present agreed that graduates are leaving University with a very narrow set of theoretical perspectives, know little about the real world and cannot communicate with non-economists. In work with students from disadvantaged backgrounds Ha Joon Chang asks them not to be content to become a man or woman with a hammer who then sees everything as a nail. He is talking about learning how to think and solve problems and not just be told that there is one best way – one-size-fits-all.

The so-called autistic single economics paradigm boils down to two core beliefs:

  • That individuals will tend to behave with financial self-interest.
  • That free markets offer the optimum way to ensure resources are efficiently distributed.

Above all, the status quo is being asked to give up on a hubristic quest for a single comprehensive model of economic life that echoes Thatchers TINA (there is no alternative) perspective.

It seems that Picketty’s arguments in Capital parallel thinking emerging with the Real Economics / Post Crash Economics position. Transformational Logistics is firmly in the camp that there is real scope to develop Logistics and Supply Chain thinking and practice within the undergraduate courses across the discipline. This is NOT just a Robin Hood debate. For example, few courses offer more than a staple diet of case studies drawn from the developed world and examples of the interchange between Big Food and Big Retail or, similar perspectives across other sectors. To borrow a phrase – this is an autistic view and there is scope to re-frame the approach around clear shifts across global economics and business operations – save capitalism from the TINA market fundamentalists!

It is high time that Logistics and Supply Chain courses check their assumptions:

  1. Global shifts up to 2050. The founding father of academic business studies, Peter Drucker described the future as demography. With global population rising from 6 to 9 billion and 75 per cent living in cities by 2050 every supply chain needs to be rethought. For example, this will mean a 75 per cent increase in food production alone. There is no supply chain that can survive “as is” through this white water change.
  2. GDP is not the sole measure of success.When Haiti was hit by an earthquake, GDP rocketed as the work of construction (NOT re-construction) kicked in. This is a massive debate. Here, we would advocate more dials on the dashboard and we concur with the conclusions of the
  3. Ethical business.Amartya Sen won the Nobel Prize for Economics for his work on the Ethical dimension in economics. This is more than CSR – which can mean a focus on a single company ignores the reality that these days supply chains compete not companies.
  4. L&SCM courses. These must reflect these fresh perspectives. I gave a talk called “the Brands new world” in several Business Schools in march and one thing was striking – the percentage of students from Emerging and Developing markets was high and many of them expressed the view that courses did not do enough to reflect the challenges they will face when they return home. This is an opportunity – not a problem.
  5. Case Studies and citations. To mangle a line from an Andrew Marvell poem – had we but world enough and time – we should review the proportion of curriculum content and papers cited that focus challenges and opportunities across emerging, developing and devastated markets.  

This is a stimulating debate and – ironically – is likely to play out with market forces delivering the verdict. When fees are driving many students to question value for money; actual content of the courses is part of the equation. Why pay for a course that ignores the majority world of emerging and developing markets?

Here’s a video of an interview with Paul Krugman

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One Response to Time to transform Logistics and Supply Chain thinking and practice?

  1. now a days supply chain management get more beneficial for business officials, we are also a part of it.

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