Supply chain professionals strive to improve visibility, flexibility and collaboration but how do you bring all the elements into alignment? The Extended Supply Chain conference will be tackling the issue when it takes place on 24th – 25th March at the Sofitel, London Heathrow.
It’s not often that someone tells you: “we now have all the answers”. It is, after all, quite an extravagant statement. But Dr John Gattorna is one of the few people who can make that claim without risking guffaws of derisive laughter.
The question, of course, is what do we need to understand about the way supply chains work to predict how they will respond to changing conditions?
Gattorna has been looking for answers for more than 25 years and has established an international reputation in the process. And with his latest book “Dynamic Supply Chain Alignment” he reckons that solutions are now available for the key issues.
He will be explaining the thinking when he makes the keynote speech at Extended Supply Chain 2010, which is entitled: “Dynamic alignment: a new business model for designing and operating enterprise supply chains in the new millennium”.
The thesis is that existing business models used in enterprise supply chains have outlived their usefulness, especially with the onslaught of more demanding customers and an increasingly volatile marketplace in these uncertain times. There is no silver bullet, but there is a model which is increasingly being applied successfully by global corporations – dynamic alignment.
“Back in 1989-90,” Gattorna says, “people talked about logistics – it was all very physical – and I was thinking that there was nothing very conceptual about it. There was no basis for predicting the future.”
There is a big shift in thinking between logistics and supply chain, says Gattorna. “Supply chain is all about relationships. What runs supply chains is There is a big shift in thinking between logistics and supply chain. Supply chain is all about relationships. What runs supply chains is people, not technology.
“This also gets you into the field of culture,” says Gattorna. “The fact is that some 40 per cent of the activity in the supply chain is human decision making.”
He points out that this was in stark contrast to other fields of management where the conceptual basis had been developed to enable analysis and prediction.
“We decided to break away and start again at base zero,” he says. “We looked at the various elements in a business – marketing, IT, consumer behaviour and so on,” he adds. It was through this process that the concept of the “strategic alignment of the business” was developed.
The idea of strategic alignment is that if enterprises wish to produce sustained operational and financial performance, they must align their strategies, cultural capabilities, and leadership styles with customers.
Gattorna’s first book on the issue, “Strategic Supply Chain Alignment”, came out in 1998 and in it he brought together contributions from a host of leading thinkers. It started by looking at developments in the market before analysing strategic responses. It went on to consider cultural capabilities and leadership before considering information enablers and drivers.
The book quickly became established as a key text in the development of supply chain thinking.
Gattorna points out that while he has been developing the concepts, the world has not stood still – in particular, developments in technology have enabled the supply chain thinking to move ahead. Gattorna points to the arrival of the internet in the 1990s. Before that, he says, integration was limited. Use of the internet made it possible to get around many of the blockages in systems terms.
Having developed the idea of strategic alignment, Gattorna has spent the past 20 years making the concept more granular and going deeper into the detail. Through this process it became clear that there was a need for a fundamentally new business model to take supply chain to a new level, he says.
It was at this point that the concept of dynamism The supply chain has to deal with more than the static customer, we need to configure supply chains to deal with dynamic situations.was brought into play, reflecting the changing buying behaviours of customers. “Strategic” supply chain alignment became “dynamic” supply chain alignment.
“The supply chain has to deal with more than the static customer, we need to configure supply chains to deal with dynamic situations,” he says.
How do you design a supply chain that can respond dynamically to changing market conditions? It would be easy to over-complicate and there are clearly plenty of pitfalls. At the conference Gattorna will be looking at how companies can configure their supply chains so that they can meet changing demands.
If there is a recurring theme for Gattorna it is the need for organisations to understand their customers. “Very few genuinely understand customer behaviour,” he says. Leadership plays an important role in this – particularly getting the right leadership style in the business. “Good leaders understand what is happening in the market,” he says. “There is a huge correlation between good leadership and performance.”
Taking planing a stage further
Oliver Wight will be running two workshop sessions focusing on the theme of integrated business planning (IBP) presented by managing partners Liam Harrington and Lloyd Snowden.
Oliver Wight originated the concept of sales and operations planning (S&OP) more than 25 years ago and has been building on that to develop IBP.
Integrated business planning brings a truly strategic perspective and integration is what distinguishes it from its predecessor. If S&OP is a process designed for supply management to plan the factory (or factories), then IBP is designed for the executive team to plan the entire business – and in a fully integrated way.
Liam Harrington says: “In a classical S&OP environment, it’s possible for finance to put a value on something (the sales value of the forecast, for instance) but then for the sales department to come up with a completely different set of numbers, when asked for a financial commitment on how much they are going to sell. In an IBP environment it isn’t possible for that to happen because, by definition, all the business plans are integrated.
“With S&OP,” he says, “people classically think of forecasting and then they compare that forecast to supply. In general, supply people are fully engaged with the process but demand people less so, which means marketing plans and sales plans – in terms of, say, increased distribution, sales activities, sales resource – are not integrated into the process. But with IBP they are.”
Risk management is an example of where new demands have necessitated change. Risk management is a big issue for companies these days, not least in the service sector, banking in particular, and both IT and business processes have had to develop quickly to meet the challenge. Being able to simulate currency, interest rate, commodity price and energy cost variation, are just some of the simulations that need to be included in the process – and therefore, the risks inherent in those things, properly managed.
Extended Supply Chain
Staying ahead in a changing world
The Extended Supply Chain conference 2010 will focus on the concept of flexibility and meeting customer needs by responding efficiently to constantly changing market conditions.
In particular, it will look at building supply chain capability to manage fluctuating costs and volatile demand patterns; achieving end-to-end visibility throughout the extended supply chain in collaboration with your partners; and translating top level supply chain strategy into operational best practice.
Extended Supply Chain is attended by Europe’s most forward thinking and innovative supply chain leaders. It brings together supply chain and logistics directors from a range of industries to network and debate supply chain best practice.
The conference has two distinct elements. Day one focuses on strategic thought leadership content, delivered by pre-eminent supply chain minds. Day two sees up to 40 case study-led, practical and operational workshops, delivered by industry experts on a range of topics deemed to be of significant relevance to supply chain leaders who operate an extended supply chain.
In particular he will look at auditing your partner network to replace the weakest links and maintain the integrity of the business; working with your suppliers to take costs out of the supply chain while maintaining service levels; and reviewing insourcing vs outsourcing decisions: balancing flexibility and visibility requirements. Developing the talent to deliver ongoing innovation is a crucial issue for supply chain professionals. Dirk Holbach, Henkel’s corporate vice president global supply chain operations, will look at ensuring top level involvement in the supply chain talent debate and assessing your human capability to deliver on your supply chain strategy and putting the right people in the right place at the right time.
Corporate social responsibility will come under scrutiny in a presentation by Kris van Ransbeek, vice president of product supply and GM ingredients business Europe for Chiquita, who will be looking at the practical implications of implementing a CSR programme.
Other confirmed speakers include:
Cloe Zeng, demand flow director (UK & Ireland) of Electrolux Major Appliances. She is responsible for international factory sourcing, demand forecast and inventory optimisation, supply chain development, sales operations and E-Business.
Douglas Kent, European chairman, Supply Chain Council. He has over 20 years of experience focused on the development, marketing and deployment of tailored supply chain solutions.
How to be top
A special feature of the conference will be the AMR Research Top 25 Supply Chain Excellence discussion, which will look at translating top level supply chain strategy into operational best practice.
The session will be chaired by Kevin O’Marah, chief strategy officer of AMR Research and will look at where “Top 25” companies have made changes that have had a significant positive impact on their businesses and how they overcome the challenges of communicating and managing change across a geographically dispersed workforce. The panel will include: Christian Verstraete, chief technology officer, manufacturing & distribution industries at HP; David McMillan, director of sourcing, Europe, IBM, and Edwin Van Der Meerendonk, VP European supply chain, Disney.