Legacies that pave the future of innovation

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By Stephen Dombroski, Director, Consumer Markets, QAD

The supply chain. Not too long ago, many people didn’t quite understand it or had even heard of it. Then, 2020 happened and the terms "supply chain" and "toilet paper" became synonymous. Now, a few years removed from the great pandemic, people have started to forget about the supply again—until a product they need is not readily available on the shelf or online.

However, with each challenge, more innovators are stepping up to the plate to solve problems and bring the supply chain into a new era. Like Marco Polo exploring the Silk Road, the supply chain has always been led by visionaries who wanted to expand on the definition of success and take chances with new ideas.

It is difficult to determine which historical innovation has been the most influential on the supply chain. For example, the inventors of the barcode, Norman Joseph Woodland and Bernard Silver, who took Morse Code and translated it into black bars that can hold unique, programmable information and allow products to be tracked.

Or there is Frederick McKinley Jones, the inventor of the refrigerated “reefer” trucks which allow perishable foods to be transported further distances than ever before. And there was Josef Schengili, one of the creators of a software system that helped pave the way for Advance Planning and Scheduling which helped manufacturers optimize production schedules to maximize customer service and maximize production efficiency.

One question to ask when observing a true historial giant in the supply chain, someone who not only created a tool but an entirely new way of thinking, is: If faced with a supply chain crisis, what “dream team” would be the best to assemble in order to brainstorm a powerful solution?

Modern distribution

The creation of the modern day supply chain and logistics is often credited to Sam Walton, creator of Walmart, a company that pushed back at other large stores and offered quality goods and services at competitively low prices. Though it wasn’t the affordability that Walton and others credit to Walmart’s success but rather the approach to replace inventory with information. In other words, Walmart takes full advantage of its digital data to stay on top of its supply chain management’s sourcing, stocking, and fulfillment. Walmart's push for informational transparency in its supply chain has allowed the company to control pricing and maintain dependable catalogs.

Fred Smith, founder of Fedex, also wanted to deliver dependable services. He saw the world automating and with this influx of automation and technology, businesses and people would need things faster. His supply chain dilemma was how to overnight deliver hundreds of thousands of packages going any number of ways. His solution: the Federal Express wheel consisting of a spoke and hub model where all planes had to land at one location.

From there, all packages were sorted to where they needed to go, and planes flew out of the central hub to single delivery destinations. Once that was determined to be successful, Smith knew there was a need for traceability in the supply chain. Therefore, to track all the packages that were coming into the central hub, the SuperTracker was created so employees had a handheld barcode scanner on them to mark the package in the system as it was picked up and delivered. Up-to-the-minute data and the management of it is essential in supply chain fulfillment.

Modern manufacturing

Manufacturing and the supply chain is a cycle. Many people think of it as a linear journey: it starts with procuring a material and ends with the production of a product. But it is more than that. It is a repetitive cycle that is actually a living and breathing thing that needs to be monitored and managed constantly, or it can quickly spin out of control. Before an order can be fulfilled, manufacturers must procure the materials to make the finished goods, and oftentimes they face problems in sourcing their materials. Certain automotive giants each knew that controlling sourcing in the supply chain was imperative, but each approached it differently.

Kiichiro Toyoda, creator of the world renowned Toyota Motor Corporation, is best known for his Toyota Production System (TPS) that made the corporation an automotive production leader. A major component to TPS is the Just in Time (JiT) principle, which cuts costs and waste by only creating what is needed at one time. Less inventory management, waste cleanup, and storage costs are required because there is no stockpiling of materials. When it works, it works well because it is cost effective and capitalizes on the most profit per car. However, when supply chains can’t deliver at a minute’s notice, there is nothing to fall back on. 

Henry Ford, of Ford Motor Company, was wary from the start of supply chain shortage issues. While Ford is most known for his moving assembly line, it is the lengths he took to fuel those production lines continuously that are most impressive. Ford not only sourced the raw materials but he bought coal mines, iron mines, and lumber forests, on top of owning the railroads and ships needed to transport the materials. Ford was always aware that a supply chain shortage could halt production, and he wanted to control as much of the chain as possible. 

Unfortunately, to keep up with modern technology and cut costs, Ford Motor Company did start outsourcing production of car computer chips to Taiwan, and they now are experiencing a shortage that has impacted production. Conversely, Tesla, headed by Elon Musk, saw this supply chain shortage risk and immediately brought production of computer chips in-house with their Gigafactory. While it was an up-front cost to gamble, Tesla has what few other manufacturer’s have: control over chip production to ensure realistic timelines and full control over programming.

Reimagine current supply chain materials

One of the best ways to stay ahead of a supply chain crisis is to not focus on what is inaccessible, but rather what resources are readily available. The people who excel the most don’t stop there, they then take what they have and imagine it in new ways. In the 1920s, a journalist asked Thomas Edison how it felt to fail 1,000 times in his attempt to invent the incandescent lightbulb. Edison replied, “I didn't fail 1,000 times, the lightbulb was an invention with 1,000 steps.”

That’s what Ray Kroc pushed for at McDonald’s, the company he purchased from the McDonald’s brothers in 1961 and then globally expanded and ran as CEO until 1973. Kroc is most known for his influence on McDonald’s efficient assembly line, allowing the food to be pieced together faster step by step and with machine assistance than could ever be done by one chef creating a meal from start to finish. 

Kroc was obsessed with consistency. He pushed to standardize the menu which helped create brand continuity for the customer and internal company control over supply management. By making and pricing all of the burgers the same at each location, the continuity made predicting profit, overhead, and supply orders easier for the company. Customers want the same product regardless of which restaurant they are visiting.

Kroc went as far as standardizing suppliers: the same type of potato had to be used for all french fries. This guaranteed the same experience whether you were in Chicago or Timbuktu. McDondald’s returned to this philosophy during COVID when it created a limited menu. This ensured that the fast food giant only promised customers what it could depend on receiving in its supply chains at all major locations. 

Perhaps the greatest push for innovation that happened under Kroc’s leadership was the invention of the Big Mac in 1967. To compete with Burger King’s new Whopper, one of the largest burgers on the market at the time, an owner of a Pennsylvania McDonald’s, Jim Delligatti, created the Big Mac. A year after its creation, Kroc added the Big Mac to all McDonald’s menus. 

Why is this such an accomplishment? McDonald’s Big Mac took the same ingredients readily available at all locations to create the stacked burger. Unlike the competition, no larger items or new ingredients delayed fulfillment in supply chain shortages. Not only did this allow for the new product to be introduced quickly, but no additional or unexpected costs were incurred. McDonald’s approach to repurpose what was already in their supply chain is what other companies can challenge themselves to do.

Think outside the buttons

While some companies utilize what they have in different ways for new products, other companies are allowing the customer to be the one to think outside the box, or rather the buttons. In 2007, Steve Jobs launched the first iPhone with its characteristic touchscreen because he thought that buttons limited what could be accomplished. And while it was not the first touchscreen phone on the market, it had a longer battery life, more capabilities, and—most importantly—it was customizable.

With each iPhone, users have more power over what functions, apps, and layout their phone has. By not boxing the user in, they will never run out of options and have less need to look elsewhere for a different product. One screen that can be customized also saves on production costs and sourcing since new materials are not needed for one person’s iPhone versus another’s.

Giants of the future supply chain

These individuals faced true challenges to their brands and not only overcame them, but they also created systems and processes that others had to adopt in order to stay relevant and competitive. These lessons in maximizing creativity, creating product dependability, and controlling the supply chain have brought the modern supply chain to where it is today. 

However, the reality is that companies cannot rely on those thought leaders to assist with supply chain problems today. Instead, these giants should inspire business leaders to create the next big idea, just like they once inspired their own people. Great ideas have to start somewhere, and a great starting point is in in-house supply chain management systems. New challenges will arise and new ideas will be needed to overcome them. Something perceived as a small fix may become standard practice in years to come. 

One uniting catalyst to all these supply chain giants is that they had to take a risk. Many of these ideas that led to success could have easily led to failure. These pioneers realized that and stared fear in the face to take a chance. Franklin Roosevelt once said: “We have nothing to fear but fear itself.” He was correct. When someone takes a chance with a new idea, yes, failure is a possibility—but so is success. Where would we be today if the inventors of the wheel yielded to fear?

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