A new agenda for the supply chain

Of all the levers that drive a company's overall financial performance and shareholder value, supply chain development utilization is perhaps the lowest. I and two other authors of The New Supply Chain Agenda, Reuben Slone and Tom Mentzer, strongly support this view.

Because the supply chain plays an increasingly important role in ensuring the financial health of enterprises, more and more companies are beginning to include supply chain executives as part of the senior management. This status means that supply chain executives have to convey knowledge about the supply chain through the "education" of the CEO and the board of directors (so that management can better understand the main body of the enterprise supply chain and its important role in the creation of organizational profits. ) to reflect his value. In those companies that continue to grow, the supply chain is no longer just a simple functional unit, but a key strategic role.

In our book, we propose five elements that form the basis of the new supply chain agenda. On the one hand, this is not a new concept, but as a key driver in improving supply chains and enhancing shareholder value, it resonates continuously across management, so every element is experiencing a rebirth.

Element 1: Talent. Today's supply chain executives are challenged with cross-functional and cross-enterprise processes.

Element 2: Technology. The key here is to make sure you have selected the right supply chain technology and implemented it successfully.

Element 3: Internal collaboration. The successful operation of the supply chain is inseparable from the close cooperation between various departments within the enterprise. At the same time, companies need to develop a clear vision of how all departments should work together to achieve supply chain excellence.

Element 4: External Cooperation. Focus on how each business can achieve breakthroughs by collaborating with suppliers and customers.

Element 5: Manage supply chain change. Because of its cross-functional, cross-enterprise nature, implementing supply chain solutions can be much more difficult than implementing solutions within other functions.

Talent: Selecting the Right Candidate

Supply chain executives need expertise in a variety of areas, such as transportation, warehousing, inventory management, and production planning. However, the supply chain process has extended to each terminal, even to the outside of the enterprise, including the relationship with suppliers and customers on a global scale. Leading companies already see the supply chain executive as the person necessary to coordinate the relationship between the various endpoints, even though he does not fully control the supply chain. As it involves cross-functional, cross-enterprise collaboration, senior supply chain executives must possess several specialized skills.

Only when a company has a set of criteria for identifying talent can it find the top talent. Top talent has five characteristics: international perspective, systematic way of thinking, influential leadership, professional technical knowledge and excellent business skills.

Technology: Solving Key Problems

As mentioned earlier, selecting and implementing the most appropriate supply chain technology is critical to the successful operation of a supply chain. So, how do you know this new technology is best for your business? Here are seven key questions.

First, which company has also implemented this technology, have you communicated about it?

How to deal with it: If you haven't even done this, stop the project until you have consulted a practitioner.

Second, are you implementing a cross-functional change management communication plan that is tailored to the specifics of the individual employee and each function?

How to respond: Ask to see a written plan with details such as dates, assignment of responsibilities, and timing.

Third, does this simplify work in the supply chain, or the other way around?

How to deal with it: If it gets complicated, you want to make sure you have a clear training plan and ROI requirements, the latter of which is backed by people who do the real work.

Fourth, do you have a plan to maintain the cross-functional transformation after it has been initially achieved?

How to deal with it: If you haven't already, write it down, assign tasks to individuals, and let them do their part.

Fifth, what is the business case to support this project's revenue generation?

How to respond: Make sure the benefits are quantified and made known to senior management.

Sixth, in addition to the original support case, is there a better solution?

How to deal with it: If the original rate of return cannot stand the test, it means that the project is very problematic. Stop it first for further evaluation.

Seventh, can the need for technology be eliminated by reducing non-value-added supply chain operations?

How to deal with it: Before launching automation, eliminate waste through process optimization, otherwise you are "automatically" generating waste.

Internal Collaboration: Focusing on Meeting Customer Needs

In every business there is a situation where each function operates independently. When it hinders the development of the supply chain, it becomes a hassle. In fact, the key to formulating a supply chain strategy is to figure out how far this siloed situation can only go "individually" to ensure the smooth operation of the supply chain.

A complete supply chain begins with product design. When a new product is designed and launched, four cross-functional "troubles" ensue: too much scrapped inventory, too much product complexity, too short-sightedness, and inefficient demand management. The fragmentation of each function will greatly reduce the ability of enterprises to deal with these four problems.

From some advanced companies, we have seen that the benefits of achieving internal collaboration far outweigh the pain of the challenges. In fact, it is this kind of difficulty that ensures that successful companies can successfully overcome many obstacles to cooperation, so as to improve themselves, and eventually become a "member" of the "Global First-Class Enterprise Club".

External cooperation: to achieve mutual improvement

The next key factor is external cooperation, including cooperation with suppliers and customers to improve together. This is easier said than done. We summarize three stages of partnership formation.

Phase 1: This stage begins with both parties' awareness of the potential for cooperation, which requires both parties to have a certain understanding of the supply chain. Second, executive-level support and encouragement are also common factors that foster early-stage partnerships. In the end, the beginning of the collaboration depends on whether both parties acknowledge the time and effort it will consume.

Phase 2: Enterprises in this stage will have a supply chain strategy in which cooperation is one of the core elements. Both parties trust each other and share data and strategies. And, they developed a common plan to keep the project on track despite changes in the people involved.

Phase 3: In this stage, both parties jointly establish core performance indicators and measure performance as a whole. In this final stage of maturity, both parties agree to share equally the fruits of their joint efforts. In our experience, companies that reach the third stage have higher order fulfillment rates, less inventory, and lower costs, so they are more profitable.

Managing supply chain change

Completing supply chain transformation to maximize shareholder value requires careful attention to the entire project process and management of change. Supply chain professionals often find it difficult for them to do this because of lack of equipment. This is partly because they fail to apply project and change management principles systematically, and partly because they are too busy to do the "right" things.

Many supply chain executives tell us that in the beginning, they didn't have the time to get it right, only to end up in a vicious cycle of trying to fix this instinctively avoided problem. Moreover, in this active business environment, people often change jobs, and all personnel changes will hinder the normal completion of tasks. This also means that the successful implementation of a supply chain project requires not only a good supply chain executive, but the participation of the entire senior management. Enterprises need to ensure that the underlying problems are solved, the scope of the project should be rationally defined, and the risks should be considered very carefully.

Original excerpt from The New Supply Chain Agenda by Dr. J. Paul Dittmann in World Trade Magazine with permission. Copyright is registered by BNP Media. Translated by Feng Anqi.

Dr. J. Paul Dittmann teaches at the University of Tennessee and is the co-author of The New Supply Chain Agenda along with Reuben Slone (Executive Vice President of Supply Chain at OfficeMax, an office supply retailer) and John T. Mentzer.