Power to the (supply chain) people

In most companies, the person at the top of the supply chain hierarchy calls the shots. But in light of the volatility of today's business world, perhaps it's time to consider empowering subordinates to quickly make decisions and address unfolding developments.

Professor Yossi Sheffi of the Massachusetts Institute of Technology (MIT) made that argument in his keynote address on the characteristics of resilient supply chains at the Supply Chain and Logistics Summit last month in Dallas. One of those characteristics, Dr. Sheffi said, is "distributed power"—sharing decision making with personnel at different levels of the organization.

A few companies are starting to allow lower-level executives to make decisions affecting finances and operations, Sheffi said. He cited the example of the fashion retailer Zara, whose designers saw the singer Madonna's clothing at a concert and quickly ordered the development of a fashion line based on the entertainer's apparel. They could do that because the designers were empowered to make on-the-spot decisions affecting company operations.

Similarly, Dr. Sheffi suggested, supply chain managers at lower levels in a company could have the authority to quickly make certain types of decisions. For example, a production manager who detects a shortage of a particular part could immediately switch to a substitute to avoid an interruption in manufacturing. A logistics manager who gets word of a port strike could route shipments through another gateway to maintain delivery schedules.

Although it makes sense for supply chain chiefs to set overall strategy, they should also consider allowing their subordinates to immediately take certain types of actions within clearly defined parameters. With all the upheavals witnessed last year, from the tsunami in Japan to the monsoon floods in Thailand, supply chain executives should by now recognize the importance of being prepared to handle unexpected events. And when the unexpected does happen, it's a good idea to grant the manager on the ground the authority to make those decisions that will keep the supply chain flowing.