Supply chain management duties seem easier to describe than to do. One way to master them is to understand the workings of the brains behind them.
Why is it that despite the best intentions of partners in a supply chain, synchronizing various elements, negotiating, communicating and executing all seem so tedious? We can find some answers in how our brains work.
Strategic buyers and suppliers must be on the same page in order to be coordinated and promote flow in the supply chain. Psychological research shows that when suppliers are under time pressure to share knowledge with strategic customers, they either work faster or avoid risks.1 Such coping mechanisms may have deleterious effects on the buyer’s willingness to share knowledge and exchange information. That is, the supplier’s response to pressure is felt by the buyer.
The point is emotions are contagious. Recent studies show that when people experience emotions such as anxiety, these emotions can be automatically “transferred” to people they are interacting with. Anxious suppliers will create anxious buyer brains.
Within the brain, nerve cells called “mirror neurons” automatically represent what another person is feeling.2, 3 That is, they mirror the other person’s emotion even before he or she “perceives” that emotion. If buyers sense this anxiety in suppliers then, their mirror neurons will activate and they will start to feel the supplier’s anxiety as their own.
In a supply chain where there may not be direct perception of supplier anxiety, this anxiety can still be transferred down the line to the buyer through mirror neuron mechanisms. Even when there is no direct perception, this can occur. For this reason, when suppliers feel as if they are under time pressure, they need to be sensitive to the mirror neuron activation in buyers.
The Challenge of Change
With dramatically changing markets and evolving customer needs, supply chains are prone to volatility. While change in general is challenging to a company, because of the multiple systems involved in supply chains, managers are often especially vigilant about a domino effect when there is any change. For this reason, understanding the organizational psychology and brain science of change can be helpful in improving supply chain management.
The human brain is generally averse to change. When the brain deals with change, it is thrown into a state of chaos that we call “cognitive dissonance.” Simply thinking about change does not induce this dissonance—dissonance is induced by new actions. 4 A brain region known as the anterior cingulate cortex is actually responsible for detection of internal conflicts (such as the conflicts between doing things the old versus the new way). This conflict detector interacts with short-term memory, which reminds the brain of the new strategy and actions that need to be taken. If short-term memory does not actively feed the brain’s action centers the new plan, the brain will default to the old way of doing things—not because people deliberately want to thwart new plans but because we are wired for habits—a process known as conditioning. This is especially true when people are under stress.5
Managers working within a supply chain should be sensitive to the brain’s propensity to go back to older ways of doing things. This can slow things down when there are new strategies. From the brain science, managers can let affected individuals know the new way will be uncomfortable at first because the brain goes into a state of dissonance; to overcome this discomfort, strategies must be acted upon.
To maintain this new action, studies show that people have the greatest chance of being committed to a new action if they receive constant reminders and ongoing communication (spoken aloud).
Another way is to emphasize the differences between the old and new ways and not simply emphasize the new way of doing things.6 One specific example where this may apply in supply chains is in the context of lean transformations. A recent study shows that commitment and communication significantly influence worker perceptions during lean transformations. 7
Managing amidst Turbulence
A recent article emphasized the importance of understanding how supply chains are affected during turbulent times.8 Turbulence impacts the brain significantly and understanding this impact may significantly improve how managers interact with people in the supply chain.
During turbulent times, the anxiety center in the human brain activates significantly in part because of the tremendous uncertainty associated with volatility.9 People become more reactive and as a result, they may catastrophize what is happening during turbulent situations. That is, their thinking is distorted. 10
Since we know that thinking can be profoundly distorted during turbulent times, managers must often learn to work with teams to help them reappraise situations differently from their impulsive inclinations.11 Studies have shown that the brain is capable of learning how to act through fear despite being fearful. 12 Uncertainty during turbulent times also makes the brain expect negative things at a greater rate than if things were more certain. For this reason, if supply chains are prone to high levels of uncertainty, managers should seek to help people in the supply chain identify areas of distorted perception and unnecessary panic, in part by explaining that the brain is prone to overestimating how bad things will be when uncertainty exists. They should also seek to clarify things that are certain wherever possible.
Conclusion: Understanding brain science can help managers help their supply chains operate more effectively.
Srini Pillay, M.D., is CEO of NeuroBusiness Group (www.neurobusinessgroup.com) and assistant clinical professor of psychiatry at Harvard Medical School and invited faculty at Harvard Business School. He is also author of Your Brain and Business: The Neuroscience of Great Leaders (FT Press, 2011).