Published 19. Dec. 2016
Supply Chain Ascending
Today, 50% of supply chain executives have already fought their way to the boardroom. It's a 180-degree turn from a decade ago. What's changed?
“Globalization has been happening around the world in the last five to 15 years and it’s driven supply chain to the top of management agenda,” says Vice-President for Supply Chain Innovation at EFESO Consulting and Cranfield University School of Management’s Visiting Professor in International Supply Chain Management Alan Waller, OBE.
Supply chain, traditionally, is just a function within the organization that’s important, but not so that it regularly finds its way on the CEO’s table, “Supply chain is long and complex. There’s the supply chains of many businesses, the customers’, and then the customers’ customer upstream and the suppliers’ supplier downstream. That’s a very complex line of supply chains that the management has to make sense of.”
Supply Chain Management on the Rise
Complexity in a function isn’t something that the board will be interested in as evidenced by a 2005 Gartner research where more than 50% of the supply chain function was outside the enterprise, “But the researches are showing an interesting progression in the supply chain’s role in the boardroom. Today, 50% of supply chain leaders are on the board of their business units and that’s twice as high as the previous research, which was five years ago. I’m expecting the percentage to increase in the next research.”
Supply chain today is increasingly being seen as more than just a function, but a very important function and a driver of success for the business. But why?
Harvard Business Review’s analysis shows that 40% of investments are wasted due to lack of integration between the functional and business strategies, “So, what we have to do is make sure that the supply chain strategy is driven by the business strategy. We also have to look at supply chain capabilities and thinking as business growth drivers. I’ll give the company I’ve worked with in Indonesia as an example. So, it’s in a developing market with a very complex geographical environment and a large population. How to meet its growing spending power? The research revealed that strategic change in such an environment is quite difficult that only 50% are getting the strategic change right, just 3% of the projects are being delivered on time, and 7% are being abandoned completely. There’s no work distribution and there’s performance mediocrity, making the success rate fall to a low 60% on average.”
Three Optimization and Overall Success Essentials
Get the Board Involved – For Professor Waller it’s all about the supply chain’s interaction with other senior board members, “Marketing, IT, and Finance are the three functions that should be implicitly and explicitly involved in supply chain for it to change. Those and the CEO. Leadership from the top should be about embracing supply chain thinking across the board and bringing people and technical issues forward. They should know what the research reveals, that technical issues are stoppers and people issues dominate. The CEO and the board need to take on the responsibility for change. There are a lot of examples of businesses going down because of the CEO’s lack of supply chain understanding.”
Focus on the Last and First Miles – Last and first mile solutions are more important than ever says Jeroen Gehlen, who worked for TNT in the last 20 years and founded several logistic startups since, “Today is all about knowledge and prediction of the future demands of customers. The checkout process of a web shop is not the last interaction with the customer. It’s the last mile where customer needs are met and customer satisfaction is generated or lost. Today, logistic companies focus on optimization their first and last mile costs that count for more then 50% of the total transportation costs. The receiver is often forgotten. This has to change quickly and logistics startups are filling the gaps created by the traditional transportation companies. Exponential disruption is ahead in this area where the delivery driver count for the majority of the last mile costs. Self-driving delivery vehicles will have a massive impact here in the next 3-5 years.”
Choose Quality Suppliers and Solutions – Bravida CPO’s Lars Korduner thinks that supply chains should have preferred suppliers and IT solutions in place that can be developed for the next generation, “If you’e in installation, for example, and not logistics, you need distributors that can help with what you’re not an expert of. Second, you need to have the right IT Solutions in place, so you know what’s next and build on it. Digital transformation offers both opportunities and challenges, so you need to first start, then start smart by seeing which type of stand alone solution is right for your process.”
The interviews were from the 600Minutes Supply Chain and Procurement event in Sweden on the 28th of September 2016.