If your supply chain isn’t behaving the way you want or expect it to, you are not alone.
Organisations globally continue to spend extraordinary sums on trying to improve the performance of their supply chains, with limited success.
Our shareholders expect us to deliver an outstanding return on their investment (ROI) and our customers require the perfect order. The supply chain is the mechanism for realising value from the delivery of our goods and services to achieve the objective.
So, what is it about the supply chain that makes the addition of value through the generation of extraordinary returns on investment coupled with delivery of the perfect order such a significant and daily challenge and what are the impediments to supply chain efficiency and effectiveness that are destroying value in our supply chains today?
This article will identify and discuss the 5 most common structural impediments to supply chain efficiency and effectiveness and what you must do about them to realise your supply chain’s real potential.
The 5 most common structural impediments to supply chain efficiency and effectiveness
Ask yourself the following: Do you have in your supply chain the following:
- A ‘Real’ Supply Chain Leader
- A Clearly defined, articulated and translated ‘True North’
- A Process to deliver Step Change
- A View of Current Supply Chain Performance vs Ideal state vs Capacity– Where is the opportunity?
- Real Team Engagement
If you have all of the above, then your supply chain is delivering an extraordinary ROI and the perfect order is close to reality. Furthermore, you are on course to delivering on your True North.
If you do not, then your supply chain is destroying value and you need to understand where this is occurring and what to do about it.
- A ‘real’ supply chain leader, not just any leader? The buck stops here.
A real supply chain leader is totally accountable and responsible for making sure that your customers’ needs are met now and in the future through the value adding processes of your organisation – via the supply chain. They are responsible for taking your supply chain organisation from where it is now to achievement of its goals, objectives and vision – towards greatness. And, they are responsible and accountable for how this occurs.
Consider for a moment, the last time you were fortunate enough to have been led by a great leader? Can you recall how that felt? Does your supply chain team feel this way now about their leader? Why? Why not?
Real leaders in addition to demonstrated and proven professional competency have very important attributes which they need to be successful .
Leaders must demonstrate:
- Clarity of vision: and the communication skills to articulate that vision to anyone and everyone.
- Capacity to Inspire, Challenge, Engage, Motivate and Encourage: They solve and remove barriers that are affecting the performance of their team. They innovate, utilise their creativity and they never stop learning. They are not afraid to find new ways or working, new ways of delivering results. They test, trial, run pilots, learn from others successes, inside and outside their corporation.
- Integrity, ethics, and are beyond reproach.
- Decision making capability that is pragmatic, fact based, objective and in the best interests of the organisation, balanced between now and the future: No conflict and no self-interest.
- Ability to work across organisational cultures and are global citizens: They modify the way they work with others to get the most out of the people around them.
- Self-awareness: They are responsible for their own personal and professional development. Proactive – not reactive, Recognising of their own strengths and weaknesses and how these can be accommodated complimented by others, their colleagues and their teams, they actively seek engagement from individuals who are ‘different’ to them so that a complete solution can be found to their issues.
- Respect for organisational processes, systems and procedures and organisational decision making: They comply with the disciplines of the corporation because they understand that these are in place to protect everyone.
- Invest in the future: Leaders ensure that there is continued investment in the personal and professional development of their teams and organisation.
Importantly these attributes can be developed. Leaders can and should emerge from anywhere in the organisation. In fact without leadership being demonstrated by everyone in the organisation the organisation will not be successful.
Finally, real leaders, to be effective, need to be supported by other senior leaders in their organisation.
The healthy tension that exists in corporations between individual functional siloed objectives and that of the cross functional supply chain requirement is well documented and comes with the territory. When this healthy tension becomes unhealthy and leads to value destruction, then your supply chain leader needs support from senior leadership. Is your supply chain leader receiving the support they need to be successful?
- A clearly defined, articulated and translated ‘True North’
The organisational vision and strategy must clearly indicate where we want to go – our True North.
Our True North needs to be clearly translated into the only language that is understood by the business – the business levers that we can actually manipulate to deliver our vision – by product and/or service are, price, volume, mix, margin, cost, channel and route to market.
We need to understand where our products and/or services are now, where they need to be in the future (Our True North) and how we will get there.
This is the strategy that we will adopt to deliver the True North. It will include all elements of what’s needed to deliver profitable growth starting with the market strategy however may also include supporting strategies, such as resources, procurement, supply, capital investment strategy among others.
The 3-5 year plan falls out of the strategy. The annual budget is derived from the 3-5 year plan.
Importantly all of this information needs to inform the S&OP and the specific process that we use to ensure that this occurs in the portfolio management review process.
The Portfolio Management Review Process is so much more important and critical than simply a translation from a budget that an analyst does in a backroom every quarter! It needs to become part of the ‘rhythm’ of the organisation.
This rhythm includes continually reviewing our portfolio – the project management of new product introductions, product obsolescence and the initiation of an innovation funnel to ensure new products and services are being developed, as and when they should be.
This rhythm means feeding the portfolio review into our demand plans, checking that our supply chain can deliver to the plan, continuously testing various scenarios to continually course correct, understanding the implications and consequences with regard to the S&OP, the budget and 3-5 year plans and ongoing challenging and refinement of all our plans (for instance the capital plan) and subsequent actions.
Please note: a sound supply chain process will have built in checks to ensure there are reviews of the budget versus the 3-5 year plan, as well as the S&OP plan against the budget and the five year plan two or three times per year. Any deviations to the plan need to be understood and addressed with revised projections developed showing the impact on our future and key areas of focus going forward.
- A Process to Deliver Step Change
Performance improvement beyond incremental day to day continuous improvement, must be treated as a change initiative and must have a change framework in place to be successful.
70% of change initiatives fail because the business does not have a framework for change in place that is understood within the organisation.
The change framework ensures that the entire organisation, speaks the same corporate language, has embedded in its collective psyche a consistent understanding of ‘how we get things done around here’ as it relates to driving step change in performance. This includes how it will be led, communicated and managed, monitored and measured. It may include aspects of data and information management, policies, processes and procedures and rules and disciplines. It will certainly include what is expected of each employee and participant such that they can both be supported, and help others through this change.
With no effort expended on the process of how we will drive step change, a change resistant culture is guaranteed.
Step change in business performance is the responsibility of the leadership team. Continuous Improvement is everyone’s responsibility.
- A View of Current Supply Chain Performance vs Ideal State vs Capacity – where’s the opportunity?
Supply chain enabling capability is the engine that moves your organisation from where you are now to your True North.
It is all the elements of the supply chain, including people, processes and technologies.
Just like any engine we need to know that it’s in good working order. If this engine isn’t working today or tomorrow then how will you convince your team that this engine will take you to your True North?
In addition to this though, we also need to know what your supply chain is capable of delivering in ideal conditions and how this compares to its capacity. Ideal state performance is not at capacity but that rate which is efficient and effective and within a safe operating range. Capacity is the absolute maximum flow through that your supply chain can handle, any more and it breaks.
Most importantly this will allow you to determine the potential opportunity that exists for further value creation from your supply chain and a plan to realise that potential value.
- Real Team Engagement
Lack of real engagement means the work is not being done and if the work is not being done, then the supply chain planning and execution is failing, and your organisation is not going to be successful.
Real engagement of your team is more than the trite roles and responsibilities, and accountability matrices, positions descriptions, KPI’s, performance evaluation.
It is about harnessing the creativity of your workforce and developing “worker problem solvers”. Its how every member of the organisations workforce contributes to the organisations’ vision. It’s about how the workforce understands that by doing their role, the entire business objective is being promoted.
How do we address the 5 impediments to supply chain efficiency and effectiveness?
So, what do we do about these 5 impediments?
1.A ‘real’ supply chain leader
Great leadership models beget great leaders. Employ people who have worked for and been trained by GREAT Leaders. Ensure that they are set-up for success
2.A Clearly defined, articulated and translated True North
Understand where your products and/or services are now, where they need to be in the future (True North) and how we will get there. Ensure that this is translated into supply chain language, and built into your S&OP via the portfolio management review process. Ensure your strategy is continually tested vs your 3-5yr plan and budget and course corrected as necessary.
3.A Process to deliver Step Change
Step change can only be delivered using an understood process or framework for change. Find one and use it.
4.A View of Current Performance vs Ideal State vs Capacity? – Where is the opportunity?
Go to your leader or find a trusted objective advisor to help quantify current performance vs ideal state vs capacity of the engine. You are seeking opportunities for extraordinary value to be added to your supply chain by better enabling your supply chain ‘engine’.
5. Real Team Engagement
Work needs to be designed so that there is nowhere for a problem to hide.
Your workforce needs to be trained to recognise ‘problems’, install short term containment measures to keep the process going, and also how to identify and address the root cause, so that long term countermeasure can be developed to create better standards.
Go to your leader or find a trusted, objective advisor to assist in work design.
Supply Chains are highly complex and very complicated. They involve many stakeholders.
Making them work efficiently and effectively is a daily challenge even with everything we can control working in our favour.
When your organisation addresses the 5 structural impediments to supply chain efficiency and effectiveness, problems become mere speed bumps that draw attention to opportunities to improve. And, the organisation grows stronger day by day, as it continually aligns, and course corrects towards its ‘True North’.