Supply Chain Management (SCM) is vital to business strategy, but several myths, misconceptions and outright lies that are perceived as truths are ultimately ruining businesses.

“Those businesses practicing based on these myths are doomed to fail,” warns Steven Melnyk, Professor of Operations and SCM at America’s Michigan State University, and Colin Seftel, trainer and consultant with PSQ. The SCM ‘MythBusters’ teamed up at the recent 37th annual SAPICS conference to give supply chain professionals a stimulating overview of these destructive business fables.

SCM ‘myths’ appear to work or were appropriate at a certain point in time, but might not be fitting in today’s business environment. And although SCM is under much pressure to innovate, this will only happen once these popular fables are dispelled.

Myth: Negative working capital is okay
Quite the opposite. Suppliers should not be financing your company. Paying suppliers as late as possible while still collecting cash from customers is not on, notes Seftel. “The money you save on extending supplier payments, you ultimately lose again because you don’t have the benefit of supplier expertise and being a preferred customer that might save you both time and money.”

Myth: Standardising is good for business
Not so, explains Seftel. It’s one thing for the supply chain to follow best practice but a very different matter if it’s merely following the lowest, most common denominator that is the easiest to identify, he says. “Today’s marketplace is based on differentiation and not homogeneity. When a standard becomes widely accepted it deters much-needed innovation and reduces the impact of the supply chain.”

Performance Management is about control
“Performance Measurement is a good idea, but we use it incorrectly,” warns Seftel. “It shouldn’t be used as control, but as communication. We currently do it after the fact, at a point where the person has little or no opportunity to change things. This makes Performance Management punitive instead of a tool to help a person reach their own and the organisation’s goals.”

A far as change management is concerned, showing someone a ‘better’ way of doing things simply isn’t enough. People must be shown that current ways don’t work. “Change management focuses only on implementing new methods, not on breaking old habits and discrediting the way of doing things,” says Melnyk.

He believes that companies must look outside the proverbial box. “Compare your company with others, in industries different to your own. Automotive guru Henry Ford, for instance, learned about automotive assembly by looking at the disassembly line of a butchery plant!” “Ultimately, you’re going to need leadership, not management. Managers work within cultures whereas leaders work on cultures,” ends Melnyk.