Building the Right DNA?

Supply Chain Management processes are now 32-years old. In comparison marketing processes are over 75 years old, and accounting practices are more than a two centuries in maturity. In short, supply chain processes are evolving. Supply chain leaders are pioneers. I find this exciting.

While many companies think that there are best practices, I see it differently. I think that we need to learn from the past, to unlearn, to rethink what could be. I believe that the practices are evolving; and as a result, we need to look forward to see what the processes can become using new forms of technology and innovation. 

Figure 1. Industry Snapshots

In Figure 1, I share the current state of popular supply chain industry metrics. There are five things I have learned from this study:

1) The rhythms and cycles of each industry are VERY different. As a result, putting all industries in a spreadsheet, shaking them up, and declaring a winner is fool's play.

2) Cash-to-cash progress has been made primarily through elongating payables. It just doesn't make sense to me that companies with a lower cost of capital are pushing back terms to suppliers that are less able to borrow. I think we have never had a weaker supply base. This is a risk to the supply chain.

3) While companies have improved revenue per employee, this progress has not translated to operating margin. Companies struggle to improve operating cost. In our research, only 12% of companies can easily get to total cost information. There are some primary issues. A functional orientation without focusing on total cost impact can lead organizations in the wrong direction. In parallel, in general, outsourcing has not been effective. While an outsourcing plan can look good on an Excel spreadsheet, long supply chains across multiple parties adds costs. In addition, complexity is undermining the progress of many continuous improvement programs, and direct material procurement is still an opportunity. Less than 5% of companies are effective in the management of cost-to-serve programs. Opportunity abounds, but the focus needs to be end-to-end. Less than 2% of companies have a true end-to-end leadership focus.

4) We have not made the progress that most supply chain leaders believe on the management of inventory. Nine out of ten companies are stuck at the intersection of inventory management and inventory turns.

5) Growth is slowing, and supply chain matters more than ever.

So, what will we do about it? I am in the process of collecting interviews for my next book. The focus is on supply chain leadership. The book will publish in late 2016 and the title is Supply Chain Leadership Matters. It is a continuation of the story in Supply Chain Metrics That Matter published by Wiley in 2014. I am deep in this process of interviews right now. As I hang up the phone to finish the qualitative interviews, several factors are buzzing in my brain. Here is a short summary of what I hear from leaders.

Right DNA. Each leader is consciously building an organization with the right DNA. There is more of a focus of cultural design that fits with the business than I heard a decade ago. Defining that DNA and clarity on the mission is an important piece of the leadership journey.

Fun. Supply chain teams that win have fun. They celebrate the journey. The spirit is infectious. You can feel the energy through the phone.

Right Stuff. There is recognition that better answers come through the help with computerized processes, but that it takes the right blend of people that know the business to use the data. It takes developed brains and intuitive understanding of the business in combination with deep analytical skills. It is the right blend of people with the technologies. 

Alignment. Leaders don't ask me how to align. Instead, they tell me how they have aligned. They are good at influence management. The critical gap of supply chain alignment is between sales and operations. As shown in Figure 2, it is a missing link in most supply chains.

Figure 2. Alignment Gaps

Talent. They may not know the answers for supply chain talent, but they are searching for answers. They are digital immigrants trying to understand how to pave the path forward for the digital natives. For most, as shown in Figure 3, supply chain talent is problematic. (This is a summary chart for recent research on Supply Chain Centers of Excellence.)

Figure 3. Supply Chain Centers of Excellence Study

My take: supply chain leaders will make progress faster if we do not become complacent. Supply chain processes are young and evolving. I look forward to being able to tell the stories of the leaders that build the right DNA.

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Lora Cecere is the Founder of Supply Chain Insights. She is trying to redefine the industry analyst model to make it friendlier and more useful for supply chain leaders. Lora has written the books Supply Chain Metrics That Matter and Bricks Matter, and is currently working on her third book Supply Chain Leadership Matters. She also actively blogs on her website Supply Chain Insights, the Supply Chain Shaman. and for Forbes. When not writing or running her company, Lora is training for a triathlon, taking classes for her DBA degree in research, quilting for her new granddaughter, and actively taking ballet.