TLI

Logistics, Supply Chain Systems, and Enterprise Transformation

By Chelsea (Chip) C. White III, ISyE Chaired Professor in Transportation and Logistics and Executive Director of TLI

In two other articles in this issue, Bill Rouse describes an exciting, newly emerging initiative, the enterprise systems initiative; and Bill Kessler presents an excellent example of how one large aerospace firm went through an extensive organizational transformation in response to a need for improved internal coordination. The intent of this article is to address two related questions: How is this new initiative connected to some of the core activities within ISyE, specifically, logistics, and supply chain analysis and management and their inextricably linked mathematical and optimization-based underpinnings; and how may the enterprise systems initiative be synergistic with these core activities? Let me begin with some background comments.

I suspect that as the enterprise systems initiative moves ahead, there will be much interest in understanding the exogenous forces that cause many, if not all, firms in an industry to pursue similar transformations at roughly the same time. Examples of the impact of these industry level forces include the downsizing and outsourcing in durable goods manufacturing that has been occurring in the last decade and the shift from vertically to virtually integrated firms that occurred in the computer industry in the mid-1980s.

One may claim, as I do, that the forces that are leading durable goods manufacturing to downsize and outsource are causing concomitant service industries, such as the freight transportation industry, to become more vertically integrated. Thus, as the auto industry outsources its freight transportation needs, transportation companies, e.g., trucking, rail, and shipping, are expanding their core competency set to include logistics, and more recently, supply chain management and design. In fact, in the auto assembly industry, we are witnessing off-shore in-bound transportation providers, which move auto parts from suppliers to assembly plants, with interest in acquiring first-tier suppliers and offering to move parts in-plant, directly to the assembly line.

Other examples of this transformation are the growth of supply chain solutions and services at firms in the transportation sector such as UPS, FedEx, J. B. Hunt, Schneider, and CNF. Thus, firm level transformations occurring in the manufacturing sector of the economy are causing, and are likely to continue to cause, firm level transformations within the service sector.

In response to these industry level dynamics, the TLI and related leadership have responded with two initiatives: John Langley's Supply Chain Executive Forum (SCEF), as described in yet another article in this issue, and John Vande Vate's Executive Master's in International Logistics (EMIL), where the "international" in the latter initiative is related to the forces supporting globalization, two of which are improved communications and improved freight transportation systems. Both initiatives represent an evolutionary expansion, with no diminution, of the aforementioned ISyE core activities. I might add that TLI-Asia Pacific, headed up by former ISyE Chair John Jarvis in Singapore, provides us with opportunities to better understand the implications of doing business and designing, managing, and analyzing supply chains in Asia Pacific. Both SCEF and EMIL represent an effort to segue toward the enterprise level from that part of the firm responsible for transportation, logistics, and supply chain analysis and management; and as such, a strong link with the emerging enterprise systems activity can be mutually supportive with the aforementioned core activities of the School. Furthermore, the enterprise transformation initiative potentially brings the ISyE faculty into closer contact with other disciplines and helps to provide a context for understanding the broader implications of our contributions.

There are, of course, forces that may not affect the fundamental structure of the firm but will affect the design and management of the firm's supply chains. Examples include the growth of a superior supplier base off-shore and any new information technology that creates a higher level of asset visibility in the supply chain. And the fundamental tools and techniques used for analysis are likely to be different from those used by disciplines outside of ISyE that are involved with the enterprise transformation initiative. Thus, the core ISyE activities in logistics and supply chain analysis and management, and the underlying mathematical and optimization-based approaches to problem solving, will represent a distinct, complementary activity vis-à-vis the exciting, new enterprise transformation initiative.



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