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What is intuition's role in the supply chain?
The Journal of Business Logistics (JBL), published by the Council of Supply Chain Management Professionals (CSCMP), is recognized as one of the world's leading academic supply chain journals. But sometimes it may be hard for practitioners to see how the research presented in its pages applies to what they do on a day-to-day basis. To help bridge that gap, CSCMP's Supply Chain Quarterly challenges the authors of selected JBL articles to explain the real-world applications of their academic work.
"Reconceptualizing Intuition in Supply Chain Management" by Craig R. Carter and Lutz Kaufmann of Arizona State University and Claudia M. Wagner of WHU—Otto Beisheim School of Management. This article received CSCMP's Bernard J. La Londe Best Paper Award for the most valuable paper published in the Journal of Business Logistics in 2018.
As managers, it can be tempting to believe that all of our decisions are fact-based and rational. But this is not always the case, especially when we have to operate in uncertain and time-constrained environments. For example, in pressured situations like negotiations with suppliers, supply chain managers might not have the luxury of putting the process on pause and running what-if analyses. In these circumstances, managers often make decisions based on a "hunch" or "gut feel."
In spite of this reality, there is limited research on the role intuition plays in supply chain management. In fact, there is not even a clear, consistent definition of intuition. Instead, different studies define intuition in different ways, some equating it to "experience-based" decision making, some addressing the emotional aspect of intuition, while others focus on the automatic-processing dimension. In this paper, researchers from Arizona State University and WHU—Otto Beisheim School of Management develop a more comprehensive definition of intuition that unites all three of these dimensions. They write, "we tentatively define intuition as a three-dimensional information retrieval process in which the decision maker establishes 1) connections between the current and past situations, 2) positive and negative gut feelings are evoked, 3) and a decision is made rapidly, automatically, and without much awareness." This definition was based on a review of previous researchon intuition that appeared in management, supply chain management, and psychology journals as well as in-depth interviews with supply chain experts.
The researchers used that definition to create a measurement tool for intuition that could be applied to the supplier selection process (and possibly adaptedto other supply chain management contexts as well). The measurement tool consists of a 12-question survey that measures theamount and kind of intuition used in a decision. Survey takers are asked to rate how strongly they agree with statements such as, "I made a connection between the situation at hand and similar situations in the past and decided accordingly," and "Several suppliers fulfilled the needed requirements, so I based my final decision on my gut feeling."
The article's corresponding author, Craig Carter explained to Supply Chain Quarterly Executive Editor Susan K. Lacefield what he and the rest of the research team discovered about intuition and how companies can apply their findings.
Q: What was the impetus for this research?
So, there were two broad reasons why we were interested in looking at intuition: one professional and one personal. On the professional level, my coauthor Lutz Kaufmann and I have been delving into behavioral supply chain management since 2007. Behavioral supply chain management basically involves studying the human decision making done by supply chain managers that is subject to potential heuristics (or practical methods that are not guaranteed to be optimal). There is a preponderance of research based on the idea that in economic situations, decision makers will act rationally. However, we know that this is not how decision makers actually work in the real world. This article is the latest in a series looking at supply chain decision making in the real world, which started with a paper about biases in making logistics decisions and ways to overcome them.
More specifically on a personal level, one day I decided to go backcountry skiing at one of my favorite places in the Sierra Mountains in California. I had checked the avalanche safety warnings beforehand, and they indicated that everything was okay. These warnings are based on a number of factors such as wind, amount of snow, and temperature changes. But as I was climbing up with my skis along what was my normal, standard route, I got a queasy feeling in my stomach. Now I have 40 years of experience climbing and skiing in the backcountry, and that day I decided to abandon my original plan and not go skiing there. Instead I went to the other side of the valley, to an inbounds ski resort. As I was riding up the ski lift, I looked over at the spot where I had originally intended to ski and saw that there had been a massive avalanche that would really have not been survivable. In that case, intuition definitely worked for me.
Lutz had also had similar kinds of experiences, and this motivated us to look at intuition as part of our ongoing study of behavioral supply chain management. Is intuition real, or is it just a false perception that we think existed when looking back? And if it is real, how can it be used effectively?
Q: How big a role does intuition play in supply chain decision making today?
I think it depends on the timing, whether it's a fast-thinking decision or a slow-thinking decision. Intuition is going to play a much more important role in adecision that needs to be made in the next few seconds during a negotiation. It's also important to realize that it may not be an "either/or" scenario. Key decisions are often not made either based on intuition or based on a rational, fact-based response, but instead using a combination of the two.
Q: Do you feel managers have a good sense of how much they use intuition when making decisions?
I think it plays a bigger role than most managers admit. If you take the example of a site-location decision, people often quip, "Well how many golf courses are in the area?" But there is some truth in that statement. Those types of soft factors often do come into play in making these decisions. I recently read an article about a company that was in the process of looking at a particular city for a new headquarters location. They had senior managers go to the city for a weekend to visit there. After the visit, it was decided that the city was out of contention. That was not part of any software algorithm. But the overall feeling of the place, the reality of what it would be like to live there, definitely played a role in the decision.
Q: Why did you feel there was a need for a better definition of intuition?
When you think about intuition or talk about it, the words you use are pretty fuzzy. They are synonyms like "gut feel" and "hunch." We thought those definitions are not very scientific. When we were talking to a manager, we needed to be more precise about what we were prescribing. When we dug into it, we found—as is often the case—that intuition is multidimensional. There is the gut-based dimension to it, but there is also an emotional element too, and a part that happens almost automatically or immediately. This allowed us to begin exploring what might be being used or not being used when you are following your intuition to make a decision. Was it based on experience and pattern recognition or something else?
When you are sitting in the board room, you can take the time to diagnose what the problem is and what decision to make. But you often don't have that luxury when you are in the middle of a negotiation with a supplier or a customer and multiple issues are arising at once. There's a lot going on at the same time: You have to digest the data being presented, read the emotions of your counterparts, and interpret why they are saying what they are saying and what they are not saying. In these situations, you often have to go with your gut. But it's real important to know when to hit the pause button and allow yourself to take a break and conduct further analysis. We tell managers that intuition does have a role in decision making. You should be listening to it, but not following it blindly. On the flip side, you can't always hit pause, so you need to be able to develop your skills of effectively using intuition.
Q: How should the intuition measurement scale that you developed be used?
The scale can mostly by used to identify the extent that various dimensions of intuition played a role in a supply management decision. It can be used for training purposes or after a negotiation as part of a post mortem to identify what part intuition played in the process.
Q: How do you think practitioners could apply your research?
The sky's the limit! We're making decisions every day. Even in the cases where machines are making decisions, they are not going to be making all the decisions. And even for those decisions that machines do make, humans are the ones developing the algorithms that drive those decisions and are the ones that monitor those algorithms.
Q: What do you see as the key takeaway message from your research?
I think it can be boiled down to: Don't discount the role of intuition in decision making, but don't blindly trust it either.
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