Supply Chain - The Economy's Dark Continent

Updated: Dec 22, 2019


Two years ago, I had a meeting with Reuben Sloane, Chief Supply Chain Officer of Walgreens. For years, I have followed Reuben’s work in driving supply chain management from an economic profit framework. At some point, the conversation turned to the history of supply chain management. Reuben introduced me to an article titled “The Economy’s Dark Continent,” written by Peter Drucker for Fortune Magazine in 1962. The article explained the importance of logistics and how little executive time was spent on it and related topics. In his article, Drucker characterized all of the activities necessary for bringing to market a product as “the economy’s dark continent.” In other words, it was an underbelly of the economy that few people paid attention to, despite its significant contribution and impact. Keep in mind, this was 1962.

Reuben said I might be able to find a PDF of the article on the Internet. I searched, but was unable to find the article. However, in an ironic twist in how far the economy’s dark continent has progressed, I was able to find on Amazon an original copy of the 1962 Fortune magazine, which contained the article. I ordered the copy and it was shipped to my house for free, in fairly pristine condition (it weighed in at a hefty 1.7 pounds, which given standard individual rates from one of the large carriers, would typically cost $20-$30 for delivery for the distance it traveled). A picture of the magazine is shown at the right.

When I received the magazine, I leafed through it with fascination. In another ironic twist, the Drucker article was embedded in a lengthy series-based article titled “The Revolutionists of Retail.” This article goes into detail about how retail discount chains were disrupting the traditional department store. These discounters included the likes of E. J. Korvette, Gem International, and King’s Department Stores. (Unknown to the author at the time, a man named Sam Walton was studying the discounter techniques for use at Walmart, which ironically was started in the same year, 1962).

I searched Fortune (I have been a Fortune reader since 1984) and was able to find an electronic link to the “The Revolutionists of Retailing” article on the internet (link), (without the embedded Drucker article). It is fine reading for anyone interested and a good source to provide perspective for today’s environment. This perspective offers the viewpoint that in retail and other industries, disruption is simply a normal cyclical pattern, and what we are experiencing today is just its latest incarnation.

The Drucker article also provides historical perspective for supply chain management – how far we have come, and how far we still have to go in the management of supply chains. The following paragraph from his 1962 article offers one such lesson.

"As we apply management science and data processing to segments of the distribution process it becomes even more important to make sure that distribution is seen and managed as something that crosses legal and organizational boundaries. I have a suspicion – strengthened by a good deal of the work I have seen – that high-powered operations-research “solutions” for inventories, warehousing, transportation, order handling, and so on often increase the costs of distribution. For many managers tend to try and fit operations-research into the existing legal and organizational boundaries as if these were physical facts. In straightening out one kink in the stream they may only create expensive, new turbulences some place upriver or downriver, in what may be somebody else’s job, if not “another business,” but is still part of the same distribution process and part of the cost structure of the product."

This point – made 56 years ago – highlights the continuing quest for synchronization, both within and across enterprises. And, as I point out in “The Planning- Execution Funnel,” integration – which has been a major focus for the past two decades – is not synchronization. The best supply chain software providers of today provide synchronization, not integration.

For further reference, the Council of Supply Chain Management Professionals (CSCMP) was founded in 1963, as the National Council of Physical Distribution Management (NCPDM). NCPDM changed its name to the Council of Logistics Management (CLM) in 1985, and then changed its name to CSCMP in 2005. In a sign of how far we have come in supply chain management, CSCMP last month published its 29th annual “State of Logistics” report. This report, while only focused on the United States, continues to get better and better and is an excellent source for a macro-level view of supply chains. It would be great if such data were also available for other countries and regions, particularly Europe, Japan, and China.

As an aside and as inspiration to all who think they are too old to start something big, Sam Walton started Walmart at the age of 44.

#PeterDrucker #Amazon #revolutionistsofretail #cscmp

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