A new Harvard Business Review article lays out some striking research out of MIT about the role of Supply Chain Management within the broader economy.
Written by Mercedes Delgado and Karen Mills, the study seeks to better define what constitutes the “Supply Chain” part of the economy, and what doesn’t.
To better define Supply Chain Management’s place in the broader economy, and the role it plays in terms of innovation.
The researchers define “Supply Chain” industries as any industries that sell upstream to businesses and government entities. It excludes industries selling direct to consumer (B2C). It’s a bit of a curious definition – what about the B2C companies with strong supply chain and distribution networks? – but we’ll roll with it.
In short, the research assigns some numbers to two facts that every Supply Chain professional knows: the sector is full of opportunity for professionals. It’s also a hotbed for innovation which has a tendency to filter into other sectors of the economy.
The MIT researchers studied the historical role that these Supply Chain companies have played in American innovation. For example, Intel’s semiconductors and Microsoft’s enterprise software are innovations with their roots in the supply chain – supplying to companies – that are almost unparalleled in terms of their downstream effect on the overall economy, as well as the daily experience of the average person.
The researchers make an interesting point: compared to “B2C” industries, Supply Chain industry innovations have a tendency to reverberate and cascade throughout the wider economy as they filter from suppliers, to the companies they supply, and finally to the consumer.
Technologies like cloud computing –which is now sold to 90% of industries – have their roots in the Supply Chain, which helps them diffuse across industries as they spread downstream and become integral to the economy. In Delgado and Mills’ estimation, this “trickling down” gives these innovations a multiplying effect that isn’t found in more consumer-facing industries.
Put aside the fact that the most successful consumer-facing companies of the past several decades have been tremendously innovative (Apple and Amazon, for example) – in part because of their Supply Chain practices – and it’s an intriguing idea. The fact is, Supply Chain management drives innovation, and the people who drive that innovation have some of the brightest job prospects out of anyone in the economy.
People in Supply Chain are more likely to be in STEM (Science, Technology, Engineering and Math) than the wider economy. They’re also better compensated – perhaps as an indirect result of their contributions to innovation.
Here are a few of the most interesting – and exciting – top-level stats from the research:
- In the U.S. – which the study examined – 44 million jobs are in Supply Chain, or 37% of the overall economy.
- The average wage of Supply Chain-related jobs was much higher than average, at $61,700 – compared to $39,200 for non-Supply Chain jobs.
- 4% of Supply Chain jobs were STEM-related jobs – considered a predictor of innovation – compared to only 2.1% of non-Supply Chain jobs.
- 6% of new patents in the U.S. evolve from the Supply Chain sector.
The researchers chart another interesting distinction and trend in Supply Chain’s future, towards the importance of Supply Chain Services from traditional manufacturing. Supply Chain services jobs – including logistics, engineering, IT, cloud computing, procurement and others – have grown massively to encompass 80% of jobs in the sector, but most still consider Supply Chain to mean traditional manufacturing jobs such as metal stamping or injection molding operators.
Supply Chain Services workers have the highest STEM intensity out of everyone in the economy (19%), which also coincides with the highest wages ($80,800 a year, on average). This tracks with a trend in the wider economy towards services and away from traditional manufacturing, and shows what we know to be the case: despite panic about automation, Supply Chain professionals who can innovate are in very high demand.
Whether you agree or disagree with Mills and Delgado’s definitions and findings, it’s clear to anyone paying attention that the Supply Chain is a force-multiplier for innovation to the economy. It’s truer now than it’s ever been, and people who are able to harness and drive that innovation have some of the brightest job prospects in tomorrow’s economy.
Do you agree with the authors’ definition of Supply Chain? Is it too broad, not broad enough, or is it right on the money?
We’re curious to hear anything else you might have to add about the importance of Supply Chain for innovation in the wider economy!