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The highway to a world class supply network

supply network

Executive Summary
Organizations frequently struggle to retain alignment between all their business units and regions around the globe, often ending up with nonstandard business practices that when you add them up, they end up “swirling”. What you want is a tight integration of practices so that when you go into a meeting you make the decision, come back out and execute it. This not only saves a huge amount of time and rework, it also results in a world class supply network organization. Delivering supply chain excellence year after year through a tailored solution will guarantee increased market share and ultimately, a satisfied customer.

 

No longer regarded as a fiscal nuisance, achieving end-to-end supply chain excellence has become a top priority for many executives. Yet, even though it represents one of the most exciting opportunities to create value, satisfy customers and build market share, the supply chain remains one of the most confusing and least understood aspects of the business landscape.

It is critical that all parts of the business understand how their work processes contribute to achieving the company’s revenue, cash flow and profit goals. Since “you get what you measure”, it is important to choose both the measures and the targets wisely. As an organization matures, it should focus on input and process measures in addition to output measures. Supply chains are a balancing act between cost, service and responsiveness. Excellent supply chains set targets that use the creative tension of these seemingly conflicting measures to win in the market.

As the world becomes increasingly boundaryless, major multinational organizations are realizing they need to position themselves to capture new market opportunities, innovate to differentiate themselves from the competition, and become adept at managing social, political, geographical, and other business challenges.

Road to global excellence
Organizations frequently struggle to retain alignment between all their business units and regions around the globe, often resulting in nonstandard business practices that when added up, they end up “swirling”. A common reason being offered by regions and/or business units for such practices is that they are “special” with unique and different needs. “The answer to that,” says Jeanne Reisinger, Global Supply Chain Improvement Strategist and ex-Procter & Gamble veteran of some 32 years’ standing, “is yes, you’re always going to be special, but you don’t always have to be different.”

To overcome these barriers, you need an approach that involves the entire multifunctional leadership team committing to integrative improvement and making it a core element of the culture that is explicitly supported by training and development, promotion and pay, and recognition and rewards.

shutterstock_185865251 [Converted]An integrative improvement system will help address stumbling blocks such as these because it drives some of the standard processes required, and it provides what Jeanne calls a “super highway” to allow business processes and units to move in the same direction. “The highway has different on- and off-ramps, so if you have a business that already has fairly sophisticated processes in place, they can get on the highway further down the road. It ensures that everyone builds the base capability as they go forward. Also, as a super highway you have different lanes, so if you have a business unit that is moving really quickly, you don’t have to slow it down to wait for the others to catch up.” Once the commitment to an integrative improvement culture is made and the supportive structures are in place, the transformation can begin.

Excellent supply chains set targets that use the creative tension of these seemingly conflicting measures to win in the market.

The most important attribute of an excellent supply chain is constant focus on the customer. It starts with a deep understanding of each customer segment and their service requirements. Customer service requirements and buying behaviors are differentiated so it is clear which features are the “price of entry”, and which features allow you to “win in the market”. This knowledge must be shared broadly so every function knows their role in satisfying the customers’ needs. Supply chain capability is created to meet the requirements, resulting in customized value chain solutions. There must be constant outreach to customers to understand evolving trends so your company can lead the way as the bar is raised.

editedshutterstock_183568364 [Converted]Drive horizontal process excellence
The reason why improvement programs within a single business or functional silo often fail is that they are not inclusive — they are run by key experts, and the people that actually execute the work processes that sustain the company are left out. The improvement program needs to be structured around these work processes, and can be done either formally through a process-oriented organization structure, or informally through horizontal process teams or Implementation Task Forces.

Horizontal process excellence is all about the seamless integration of people working toward common goals.

These critical horizontal work processes take many shapes. Some are housed within a single discipline but have many handoffs with other functions. For example, the Demand Planning process is usually part of the Sales or Supply Chain discipline but has interfaces that include Sales, Marketing, Manufacturing, Procurement, Finance, Supply Chain, and the customers. The Supply Planning process is usually part of the Manufacturing or Supply Chain discipline, but has interfaces that include Demand Planning, Manufacturing, Supply Chain, Finance, Procurement, R&D, and Marketing.

Supply chain excellence is not just about excellence by the Supply Chain function, but excellence by all functions working together, focused on the customer. Collaboration and integration across functions are critical.

This collaboration and integration comes naturally when the following conditions are in place:

  • There is a formal process to share knowledge about current customer requirements and future evolving trends
  • Work is organized around the core horizontal processes that run the business and cross-functional boundaries
  • There are common measures between functions for each of the shared work processes

shutterstock_174988544 [Converted]Each company is driven by a set of operational processes that run the business. These processes range from demand and supply planning to sourcing, making and delivery. Creating a formal or informal organizational structure between the people who run these processes, allows the experts in the process to work on the process. The people, who come from multiple functions, create common goals and measures and feel a sense of ownership for the continuous improvement of their process. Horizontal process excellence is all about the seamless integration of people working toward common goals.

You’re always going to be special, but you don’t always have to be different.

These aspects, together with a continuous search for trends that will raise the bar, will help you to move from pockets of excellence (which every organization has) to broadscale excellence. That’s what makes the difference to truly having a world class supply chain network.

Disclaimer
This resource has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained herein without obtaining specific professional advice. Competitive Capabilities International (CCi) does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this resource or for any decision based on it.

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