Some notes for a brief presentation I'll be doing at our SCMMS department meeting on Friday on applying supply chain concepts to public policy issues:
1) Prominence of finance/econ concepts (e.g., proper incentives) in public policy discussions--management concepts (e.g., working effectively in teams) also fairly prominent--SC concepts not now prominent--can we advance them?
2) Example--current controversy in different states--NJ, Ohio, Wisconsin, etc. over government employee unions, collective bargaining, etc.--
i) prominence of arguments about bad incentives of high job security, lockstep compensation--finance/econ influence;
ii) prominence of arguments about the role of internal motivation and teamwork, not just economic incentives--management influence;
iii) SC concepts are not currently prominent in the back-and-forth on unions;
iv) One way to apply SC concepts to the debate on employee representation--
a) The firm is the purchaser, employees are suppliers;
b) Collective bargaining by employees is like a firm facing suppliers who all combine to fix prices--highly undesirable from the purchasing point of view;
c) Expecting or requiring one's employees to be completely unrepresented is like expecting or requiring one's suppliers to be completely unrepresented--firm may be able to get a lower price, but problems with establishing long-term cooperation, trust with a one-sided relationship in which procurement imposes nonrepresentation on the supplier;
d) Putting the two SC points together--neither collective bargaining for suppliers nor imposing lack of representation for suppliers makes sense. Better would be a setup in which firms and government agencies would deal on price with individual representatives--agents, like the agents for baseball players--for employees who choose to retain them. That would parallel the way most purchasers deal with suppliers.
e) Different SC arguments can be made to support different positions on unions, just as different finance/econ and management arguments can be made. The point is not that there is one right SC answer but that SC offers a valuable new lens for thinking about the employee representation issue.
2) Second example--current controversy nationally over health care--six options from left to right--Medicare for all/Canada vs. public option vs. government subsidies for private insurance plus mandates (Obama, Romney) vs. current system vs. voucherization (Ryan) vs. marketizing health care by withdrawing government subsidies.
i) economic concepts central to the debate--also strong presence of moral arguments about health care as a non-market good--some role of management concepts, such as culture--e.g., discussions of how health care providers in Minnesota do not bill as heavily as health care providers in Miami--again, SC concepts are not prominent currently;
ii) One way to relate SC to the health care debate:
a) Think of the government as a firm, of individuals as multiple purchasing agents within the firm, and of health care providers as suppliers of different kinds of widgets. The policy issue--what role if any should the firm take in subsidizing or centrally controlling purchasing?
b) One SC point--It would be foolish for the firm to subsdize "purchasing insurance" offered by suppliers or by insurance company middlemen under which employees would prepay for widget purchases--such insurance will jack up costs to the firm because purchasers will face no budget constraint or a minimal one when they buy;
c) Extending the earlier point--far from subsidizing "purchasing insurance" for ordinary purchases of widgets, the firm might want to ban its employees from buying it from suppliers;
d) Now assume there are possible disruptions in widget supplies that are disastrous to the part of the firm a purchaser is acting for--these possible disastrous disruptions are comparable to catastrophic medical expenses for an individual;
e) What should the firm do about possible disruptions in widget supplies that will be disastrous to parts of the firm? One SC reply--there is a case for centralizing disruption insurance firm-wide rather than having the individual purchasers all get their own. The individual purchasers will insure to protect their own function against disaster, which may not be in accord with the firm's interest.
f) One SC bottom-line on health care policy, based on the preceding points: Remove any government support for ordinary health care expenses and create a government catastrophic insurance program.
g) SC concepts could be used to generate different policy conclusions on health care. Again, the idea is to advance SC as a good new lens for people discussing public policy to employ, not to claim that there is one correct SC answer. Just as policy advocates now use economic concepts to argue for both liberal and conservative health care policies, SC concepts can be the basis for both liberal and conservative arguments.
