How to Transform an Organization into a Supply Chain Centric Model: It Starts and Ends with People. Why Not Use Pay-For-Skill?

Unleashing the Power of People in Supply Chain Transformation

Transforming an organization into a supply chain-centric model is more than just implementing best practices and technological solutions. It starts and ends with people. As a supply chain professional, you may already be familiar with strategies such as conducting thorough spend analysis, rationalizing suppliers, and institutionalizing comprehensive sourcing methodologies. However, one crucial element is often overlooked: investing in people.

Breaking Down Silos: A Cultural Shift

For years, many purchasing professionals have been rewarded for bureaucratic and tactical behaviors, leading to a culture of risk aversion with well-defined and limited roles. These professionals often work in silos, focusing on specific materials or services and becoming "experts" in these narrow areas without real connection to operations. This is not their choice but a reflection of the organization's culture and expectations.

To break down these silos and foster a culture of collaboration and innovation, retraining supply chain professionals is essential. Developing the capability to lead cross-functional teams in sourcing and process improvement activities such as Lean and Lean Six Sigma is a critical first step. Achieving at least a green belt in process improvement approaches can help professionals reinvent themselves as total product experts rather than just material experts.

Becoming Total Product Experts

Understanding the Voice of the Customer (VOC) is crucial for any supply chain professional. To truly grasp what is important to customers, professionals must strive to become experts in the entire industry, not just a narrow material. This requires a dedication to understanding and working closely with operations. Performance reviews should be tied to how well professionals predict market trends in their industry and meet or exceed VOC expectations.

The Comprehensive Solution: Pay-For-Skill

All too often, training is piecemeal, unorganized, and uncoordinated. Fortunately, there is a comprehensive approach that has been proven to work in many industries, especially those where employee knowledge is highly valued, such as the chemical, oil, and process industries. This approach is called pay-for-skill or pay-for-knowledge.

The Pay-For-Skill Model

In a pay-for-skill model, employees are paid more for each skill or knowledge area they develop and demonstrate proficiency in through job performance. This requires a significant monetary investment by the organization in training employees, but the return on investment is substantial. The organization evolves into a continuous learning campus, partnering with local technical schools or universities to provide comprehensive training and courses.

Overcoming Objections

The major objection to the pay-for-skill approach is the cost and the length of time for payback from the employees' improved knowledge. However, once in place, the power of this employee intellectual capital and the momentum of continuous improvement establish a supply chain-centric organization that is impossible to beat competitively.

The Power of People in Supply Chain

People transform supply chains and organizations, not technology or best practices. By investing in your people and fostering a culture of continuous learning and improvement, you can create a supply chain-centric organization that stands out in the competitive landscape.

Dr. Tom DePaoli is the CEO of Apollo Solutions (www.apollosolutions.us), which provides general business consulting in supply chain, Lean Six Sigma, and human resources areas. He retired from the Navy Reserve after over 30 years of service. In his civilian career, he was a supply chain and human resources executive with corporate purchasing turnaround experience and Lean Six Sigma deployments. He is currently consulting on leadership by storytelling and is the author of 13 books on Amazon. For more insights, visit drtomdepaoli.com.

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