Review: Single point of Failure: The 10 Essential Laws of Supply Chain Risk Management by Gary Lynch

I make this review from an economist point of view, so I will highlight the interesting things that can be related with economics.

This is a management book, so it’s outside our area of expertise but it is a very good read. I think this book (along with many other management books) is very important for economists to see and understand how firms take decisions, how they deal with uncertainty and with the market.

Management books are not formal (in mathematical terms) but they provide valuable insights on the functioning of firms and markets, and these insights are not at all represented in economic theory. By reading management books we understand the aggressive separation between management (or business) and economics, while the first base itself on experience and reality the latter chooses to abstract from reality and workina fairy tale world.

An unification of both subjects is crucial in order to improve both(!) fields. (More on this in future posts).

Now coming back to the book, Gary Lynch exposes very well the multiple problems facing a firm (virtually every firm share those problems)  and showing that due to uncertainty we cannot have a pack of solutions for those problems, but we can have procedures to reduce risk and be prepared for the unknown, thus when face with a new problem although the solution is not available the firm should have a procedure that can deal with the problem and not be hopeless and do nothing.

The continuous exposition of the whole business environment as a chain is key to understand the risks and uncertainty surrounding firms and how to deal with that.

One very important point is the fact that the number one concern of firms is demand! And that’s very different from actual economic modeling where demand is usually regarded as given or not very important for the firm, but the most volatile variable in a firm environment is Demand! Thus is very important that us young economists take this into account and start modeling in more realistic terms the environment of a firm.

The book is full of interesting insights of the problem of firms, and how they deal with them. The ten laws are very interesting and I think they are key to every firm, but those are applied management concepts and problems so for graduate economists it will not be very interesting.

Overall a good management book, but an essential book for risk management of the value chain.

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