Entry Date:
April 1, 2008

Global SCALE (Supply Chain and Logistics Excellence) Risk Initiative

Principal Investigator Yossi Sheffi

Co-investigator Bruce Arntzen

Project Start Date March 2008

MIT's Center for Transportation and Logistics (MIT-CTL) announced the creation of the MIT Global SCALE Network, an international alliance of leading research and education centers dedicated to the development of supply chain and logistics excellence through innovation.

The Global SCALE (Supply Chain and Logistics Excellence) Network spans North America, Latin America and Europe, with plans to expand into Asia and Africa. The network currently includes the MIT Center for Transportation & Logistics (MIT-CTL) in Cambridge, Mass.; the Zaragoza Logistics Center (ZLC) in Zaragoza, Spain; and the Center for Latin-American Logistics Innovation (CLI) in Bogotá, Colombia.

The network will allow faculty, researchers, students and affiliated companies from all three centers to pool their expertise and collaborate on projects that will create supply chain and logistics innovations with global applications and help companies to compete in an increasingly complex business environment.

The network will also enhance supply chain and logistics education at each center. Graduate students at MIT-CTL, ZLC and CLI will not only benefit from the shared knowledge created through this collaboration, but will also participate in the network's global research projects and take part in an educational exchange, traveling to other network centers and learning alongside other network students.

The Global SCALE Network will build on the already successful, five-year partnership between MIT-CTL and the Zaragoza Logistics Center. The ZLC was established in 2003 by MIT-CTL, the University of Zaragoza, the government of Aragón, industry partners, and the PLAZA logistics park in Zaragoza. This collaboration has resulted in the creation of a highly-regarded supply chain masters program at the ZLC, and continues to play a key role in the economic growth of the Aragon region in Spain and the success of PLAZA, the largest logistics park in Europe.

The other network member--CLI--was launched just two months ago through a $19 million agreement between MIT-CTL and Colombia-based logistics company LOGyCA to create the leading research and education center for supply chain and logistics in Latin America. The center is located in LOGyCA's 5-acre Bogotá headquarters, which boasts one of the most robust supply chain technology infrastructures in the region, offering virtual and real environments in which to test, adapt and develop supply chain technologies.

Phase 1 is a worldwide study of the effect of regional experiences and cultural differences on people’s attitudes and behaviors toward supply chain risks and risk management. Almost all supply networks now span multiple continents and geographic regions. We suspect that the significant differences in people’s experiences and attitudes about risk significantly impact how such supply chains must be managed. Phase 1 begins with a survey conducted simultaneously by research teams in 12 countries around the world. The survey targets supply chain, finance, and business managers in manufacturing, retail, and distribution companies. After the survey is completed, students and researchers in each region will follow up on interesting findings with in-depth interviews of the respondents to better understand the impacts on supply chain management.

Phase 2 will leverage the results of Phase 1 to identify and examine mismatches across multinational supply chains in their attitudes toward supply chain risk, including the awareness, prioritization, and tolerance of risks. Such mismatches create significant challenges for multinational corporations. However, we believe that such mismatches can be identified and that actions can be taken to manage these supply chain risks more effectively. From an advisory team of participating companies, we will select several test examples of real supply chains with real people, products, and orders. We will use these to study how different attitudes, priorities, and practices around supply chain risks affect the performance of the supply chain and impact how such supply chains and relationships must be managed.

Phase 3 will build on the learnings of Phases 1 and 2 to identify and quantitatively model opportunities for multinational supply chains to manage risks more efficiently. We expect to find cases of “uneven mitigation” and “non-optimal mitigation.” In uneven mitigation (parallel nodes in a network), corporate risk mitigation resources are unevenly applied across multinational supply chains. For example, because two equally important supply points are in different regions and cultures, they are allocated risk prevention resources that differ dramatically. In non-optimal mitigation (serial nodes in a network), the application of resources is far from optimal to achieve the greatest (or most efficient) risk reduction. For example, an expensive risk prevention measure may be applied at a downstream location instead of a less expensive measure being applied upstream.

How does the survey work?

Phase 1 is a survey of the risk experiences and attitudes of supply chain, business, and financial managers in manufacturing, retail, and distribution companies. Small teams of researchers in 12 different countries of the world are gathering data through an online survey. This survey asks respondents questions about their risk experiences, what disruptions they have seen, the opinions of risk management approaches, and their backgrounds: age, gender, languages spoken, country, industry, and size of company. We will look for explanatory correlations (if any) between the respondents’ attitudes or opinions about supply chain risks and their regional and cultural information.

What are the key benefits?

Most supply chains today are multinational with buyers and sellers often coming from different cultural backgrounds. As supply chains have become increasingly efficient and “just-in-time,” there is an ever-increasing dependence on close cooperation between trading partners. What occurs, however, if such partners hold different attitudes and priorities around supply chain risk and performance? Frustration, angst, and tension come from these mismatches unless they are realized and properly managed. This study will help companies to:

(*) Understand how trading partners in different regions and cultures think and act differently when it comes to supply chain risks
(*) Identify which cultural differences impact the supply chain performance and what methods some companies have evolved to manage such supply chains