The understanding of the supply chain and its strategic role in business is changing for many supply chain-intensive industries and companies. More business leaders are coming to understand that one aspect of creating value for the organisation and customers is supply chain management.
Consequently, supply chain management expertise is increasingly being viewed as a proving ground for senior roles. Some organisations now have a chief supply chain officer, while in others supply chain specialists have joined the ranks of senior executive vice-presidents. Clearly, supply chain leaders are influencing and even making more of their organisations' high-level operational decisions.
One reason more supply chain executives are moving into the C-suite is the growing belief that a well-run supply chain drives success not just by controlling costs but by creating value. Supply chain improvements help to increase revenue, according to 80% of top supply chain executives surveyed in a study published in early 2011 by SCM World, a London-based educational institution. Some 61% said supply chain improvements helped their companies to make long-term equity gains through better customer service and increased customer loyalty.
That helps to explain why some companies are now transforming their organisations by creating the chief supply chain officer position to consolidate all the activities that make up supply chain operations.
Earlier, according to the Harvard Business Review, most companies treated the elements of supply chain management — supply and demand planning, manufacturing/operations and logistics — as separate disciplines. Now more companies look at supply chain management holistically. The reason? Globalisation, longer lead times, higher transport costs and the need to support multiple sales channels all have made the supply chain a bigger element of overall operating costs. That makes it more important to orchestrate various supply chain functions by centralising control in one position so that a decision in one area does not create unintended negative consequences in another.
Another reason behind the elevation of supply chain executives is the increasing importance of sustainability. Companies are finding they can create value by executing and sharing sustainability strategies throughout their supply chains, from suppliers to customers. Naming a chief supply chain officer to head those efforts makes it easier to collaborate across the enterprise, with the goal of operating a more eco-friendly company.
These new executives, with their end-to-end perspective, spend their time thinking about how to integrate all the disciplines including strategic sourcing, inventory management, replenishment, imports, supplier management, transport, warehousing, high-value innovation, new product development, market expansion and customer service under one umbrella to drive results. That sort of integration brings a company several benefits:
Availability: Goods are made available according to what is needed, when it's needed.
Efficiency: Sourcing, manufacturing and delivery are made without lot of inventory in the system.
Cost reduction: An integrated end-to-end view of the supply chain helps companies to reduce the total cost of goods.
Obliteration of silos: Traditionally distributed supply chain responsibilities hamper the flow of products and/or information across operational silos, which impede companies from acting with the speed and agility needed in a volatile marketplace.
The evolving role of the supply chain requires more diverse skills, exposure to the company's end-to-end functions, knowledge of how other companies (suppliers, customers and competitors) run their supply chains and an understanding of how to use data to improve operations. Supply chain executives thus need a good mix of hard and soft skills:
Financial know-how, especially on the cost of goods and operating margins, because they affect both the top and the bottom lines.
Technological know-how: The importance of using technology to gain end-to-end visibility and transparency across the supply chain to enable smarter decisions.
Leadership: The ability to direct large numbers of people working at different levels, doing different kinds of work at multiple locations.
Cultural savvy and a strong international perspective: The global supply chain demands insight into world markets.
Change management skills: Supply chain leaders need to be agile and flexible in the way they think and execute.
This broader perspective that supply chain executives gain also makes it easier for them to move among different verticals — for example, from a consumer packaged goods firm to a technology manufacturer. Companies can look to other industry categories for executives with fresh perspectives on subjects such as supply/demand planning, market expansion, innovation and global manufacturing.
Supply chain management helps to transform companies due to the integrated, end-to-end approach it fosters. Some of the most dynamic companies in the world including Amazon, Intel and Apple have built many of their competitive advantages around deeply integrated supply chain operations. Some have even seen supply chain talent elevated to the executive suite — examples include Apple chief executive Tim Cook and Intel chef executive Brian Krzanich.
Not every top supply chain executive will have a "C" in his or her title, but what is important is whether supply chain executives have regular access to the corporation's key decision-makers and whether they are treated as equals with other functions. If they are, then when structural changes take place within the organisation, supply chain executives can be at their most effective.
Kanishka Ghosh is a supply chain practitioner and regular contributor to The Link. The Link is coordinated by Barry Elliott and Chris Catto-Smith as an interactive forum for industry professionals. We welcome all input, questions, feedback and news at: barry.elliott@abf1consulting.com cattoc@cmcthailand.org