Alignment Key to Driving Excellence
Most organizations are locked into functional silos driven by functional metrics. The problem? Functional excellence does not drive supply chain resilience or agility. Instead, it throws the supply chain out of balance, decreasing results on a balanced scorecard of growth, margin, inventory turns, customer service, and ROIC (Return on Invested Capital).
Stuck in a rut, supply chain leaders try to punch their way through a set of conflicting metrics and priorities daily. One of the alignment gaps that is growing and is unfortunate is the gap between procurement and manufacturing. The gap of 48% between manufacturing and procurement in Figure 1 is the highest seen in studies across the decade. The reason? The metrics defining success in manufacturing and procurement need to align, and the gaps get worse with rising supply variability.
Figure 1. Current Organizational Alignment
A Need for A Supply Chain Reset
Most organizations do not realize that they are out of balance. They operate daily within their ruts, not realizing that their views of excellence sub-optimize performance. Planners and customer service are caught between the alignment cracks trying to improve reliability in a dysfunctional organization. As a result, as shown in Figure 2, performance suffers.
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So, if you think you know the definition of manufacturing excellence, consider putting it in the lens of optimizing the processes of make, source, deliver and plan together while balancing the trade-offs. Unfortunately, only 23% are clear on business strategy (which is paramount to drive alignment).
Also, could you look at the poor rating of customer service? The larger the gaps in the organization, the greater the issues in customer service. While most organizations talk the talk about customer-centric supply chains, they don't walk the walk by delivering reliable results to customers. Reliable results do not happen by driving functional metrics in functional silos.
If you have not checked it out,?here is my latest report. In this report, I call for a supply chain reset: a need to redefine supply chain thinking. The goal is to improve the resilience of metrics performance in times of high demand and supply variability. For most, this requires the unlearning of traditional supply-centric concepts. The most critical element for organizations that rated themselves as “working well” during the pandemic phases was organizational alignment—hopefully, a call to action for all.
My goal is for me to give to you and for you to give to the community. Let me explain if you fill out one of my surveys on LinkedIn; I will share the research results in front of the paywall (I believe that supply chain research should be readily available and not locked behind a paywall.) (If you would like to participate in a current research study, we would love your help and participation in the contract manufacturing study.?We are trying to assess the value of a network in managing contract manufacturing.) When I use the research, I keep the information on the respondent–name, company, title, and individual comments–confidential. I only share the results in aggregate.
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1 年Your insights on the growing gap between procurement and manufacturing teams are extremely relevant in today's unpredictable supply chain environment. It's refreshing to see research that isn't hidden behind a firewall.
I help Risk & Resilience Managers build unique knowledge to become a top 1% Resilience Engineer, with innovative but proven Resilience Strategies | Master Risk, Resilience, Antifragility & Complexity
1 年Thanks for sharing Lora Cecere ! The Problem is local optimization. This very seldom helps the organization. But organizations foster local optimization due to wrong Perfomance Indicators. If they get a holistic view, they can overcome this Problem. This is where strategy should be strong.
Excellent article. To survive supply chains must be aligned to have any hope at resilience!
Operations Director EMEA bij WellPet, LLC
1 年The Supply Chain Function grows in importance, but lacks tools in most organizations to control this growing complexity. Investments are not always present to support growing complexity, while data sharing across departments is hindering practical developments on basic understanding. This is bigger than Procurement and Manufacturing, but is on all silo-functional driven organizations (where Sales is underestimating to deliver higher (until it no longer is higher), manufacturing looks at optimizing production output, ... ) In my opinion, companies are still organized in Business Units, where the Business Unit is no longer held accountable for Production Costs (or feels it has no meaningful impact). Growing complexity also adds the need for higher understanding, thinking and logic, putting further strain on the human component of Supply Chain Organizations.
CEO & Co-Founder at Pull Logic | Next-Gen AI Agents for Optimizing Inventory in Heavy Equipment Manufacturing Industry
1 年Excellent article and very much resonates with what we are doing at Pull Logic. Our company is based on research out of Georgia Tech and Dr. Benoit Montreuil, and one of our customers is aligning their inventory mix and quantities at all supply chain nodes as well as their finished goods manufacturing plan to our "Product Availability" concepts. What is unique with our approach is that we are able to capture a rich demand signal based on what customers are seeking, how long they'll wait, what substitutes they find acceptable, other criteria, and then work backwards from there to align the organization and breaking through some of the silos that Lora mentions. We are seeing dramatic improvements in inventory levels, revenue, and customer satisfaction. Please contact me at [email protected] to learn more.