Supply chain in the boardroom

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Coca-Cola’s mission is to have a coke within an arm’s length of everybody on the planet. But how do you get a Coke onto the beach in Bermuda or a yacht in the Mediterranean? That’s a supply chain mission. Coca-Cola is a brand management business with a supply chain mission. If we look at Wal-Mart, we might naively think they are just a retailer, but we would be wrong. Wal-Mart describe themselves as ‘a procurement agent for the consumer’. Wal-Mart is a supply chain manager.

For the Spanish retailer Zara, the supply chain is the business model that they have used to create competitive advantage by faster, more responsive sourcing to bring new fashions to the shops quicker, cheaper and with lower end-of-line mark-downs. Dell regard supply chain as the key leverage point of their business.

If we examine successful businesses like these operating in the value chain then we can start to understand how in today’s customer-driven, globalised, hyper-competitive world it is increasingly the performance of supply chains that determine business success. Supply chain is now centre-stage in business strategy, and is critical for business success. And by supply chain we don’t mean just the bit that, for example, a retailer or manufacturer has direct control over. We mean the whole chain that extends from raw material and packaging source through to the end customer, end consumer and even beyond, given the increasing emphasis on returns and recycling.

Going for top line growth
Why is it then that so many Chairmen and Chief Executives still see their supply chain activities as a necessary evil either to source their supplies, or to get their products to market, and therefore see their job as managing down the supply chain investment rather than investing in the supply chain for top-line growth?

Well, supply chain is new. The skills and mind-sets required are new. Today’s leaders cut their teeth in a world where even the words ‘supply chain’ were not used. And over fifty percent of European businesses recognise that they aren’t investing enough in the training and development of supply chain managers for the future.

So most businesses still organise themselves around the functions, processes and performance measures of yesterday. This has to change. Supply chain is cross-functional, and supply chain processes need to cut across functions to drive value for the customer. Cross-functional performance measures need to replace functional measures, for example manufacturing needs to be measured on its contribution to supply chain performance (making what is needed when its needed) and not just on its ability to make product cheaply.

The only way businesses can address these issues is from the top. Business strategy, company organisational structure and management reward – and the development of future leaders of the business – are all driven from the top, and therefore so must supply chain.

But change is happening. The roles of Logistics Managers are evolving into those of Supply Chain Directors, and a small but increasing number of Chairmen and CEOs have a sound background in logistics and supply chain.

Meanwhile the task for this new generation of Supply Chain Directors is challenging.

They need to develop and implement new supply chain strategies to drive forward their businesses. They need to develop a vision of how their supply chain needs to perform and drive through change to make this happen. This means having joined-up thinking, processes and systems across functions in their own organisation, across the borders over which their supply chain stretches, and between their own organisation and the other organisations in the value chain on which they depend for their success.

Strategy is sound only if it is implementable. Developing the strategy is often daunting, but this challenge fades into insignificance against the challenges of implementation. The key demands of developing and implementing new supply chain structures and processes, supported by appropriate technology, are exceeded only by the tasks of developing and managing the people and creating successful partnerships between supply chain players.

And there are the internal and upward challenges. Getting the buy in and support of the Chairman and Board is also critical to success. The key requirement is to leverage supply chain capability to get ahead-and stay ahead. In this fastchanging competitive world, doing nothing is not an option.

But doing anything at all proactively poses risk. The task is to minimise risk, and this has to be built into the process of good management: Be clear about the vision and how achievable it is; be creative in generating the alternative ways of achieving the end game; be thorough about evaluating the options; be realistic about the chances of success and the risks of failure and slippage; be reactive to economic changes and competitor activity; and be firm in evaluating and rewarding success.

But how does the Supply Chain Director go about this process?

There are many different sources of help; personal education and training, professional institutes and business networks, business schools, management consultants, technology providers, logistics service providers, conferences etc. The list seems endless and everyone seems keen to help in their own way.

But time is never on the manager’s side. Confidentiality is a key consideration. Money and other resources are finite. So each source of help needs to be evaluated for each situation.

Common to all these approaches is the need to pick peoples’ brains – to learn from others by avoiding their mistakes and adopting their successes. This can be provided cost-effectively through business networks, and one powerful senior networking organisation is The Conference Board.

In the days of the depression in North America, Chief Executives around New York got together informally to discuss the critical issues of the day. This was the start of The Conference Board. Since those early days the Board has grown in stature and influence, with membership from over 3000 companies in over 60 countries, and with specialist councils not only in North America but across Europe and other regions. These Councils operate in the spirit of the original meetings, with senior managers discussing and learning from each other in an environment conducive to confidential but open exchange.

One such Council is The European Council on Global Supply Chain. This council has evolved over the past 15 years from the European Logistics and the Manufacturing Councils, and so has a strong pedigree in the key elements of Supply Chain.

The Chairman of Unilever, himself an active Global Counsellor of The Conference Board, fully recognised the importance of Supply Chain when he addressed a meeting of The European Council on Global Supply Chain: ‘Our focus is on markets and brands, but without an effective supply chain we can not even begin to compete’.

The European Council on Global Supply Chain is run by The Conference Board Europe, and with member companies in all European countries, provides a unique forum for senior executives working in supply chain and other management areas. It creates and disseminates knowledge about management and the marketplace to help businesses strengthen their performance and individual members to hone their personal competencies..

The mission of the members of the council is to increase supply chain profile in their boardrooms and those of their suppliers, customers and business partners. The Council has a membership of more than 50 supply chain and logistics executives from leading industrial and transportation companies. The Project Director is Alan Waller, Vice President with Solving International Management Consultants, and visiting professor at Cranfield School of Management. He is a former chairman of this council and is also President of the Chartered Institute of Logistics and Transport (CILT.) The Council is governed by the Project Director assisted by a small Executive Board including the Chairman and Vice-Chairman. 

Meetings are usually hosted by one of the council members and typical meetings include those held at the IBM factory in Scotland; Audi in Germany; Heineken in the Netherlands; Auchan and Tibbett and Britten in Hungary; SKF in Austria; Serono in Switzerland.

The meetings, which take place three times a year, involve the host company describing its current supply chain operation, issues and challenges. The company also presents to members, on a strictly confidential basis, an outline of its strategic thinking and planning.

The members form breakout groups, working with management representatives of the host company, to provide suggestions, challenges and feedback on the strategic plans. ‘Because the sessions are conducted confidentially, there is considerable exchange of ideas and suggestions’ says Mark Bedeman from Accenture and current council Chairman ‘Getting feedback like this from senior supply chain executives with considerable experience over many industries is invaluable. This is high level advice of the very finest kind.’

The current Vice Chairman of the Supply Chain Council is Peter Laurence, supply chain director of world Biotech leading company Serono. ‘We hosted a visit to our plant near Geneva’ he told us. ‘Our products are as different as you can imagine from those of most companies’, but the issues were so similar to other industries. These included the increasing customer service pressure and competition and also the opportunity to use Internet based technology to create supply chain visibility and responsiveness,’ he added. ‘I found this very useful and so did my managers who participated and had the opportunity to meet members and gain from their experience.’

The European Council on Global Supply Chain has extended its influence to South Africa, where it organises joint meetings between European members and senior executives from local and global companies.

Executives wishing to learn more about the European Council on Global Supply Chain should contact the Project Director, Alan Waller, alanw@solvinginternational. com, +44 7802-170507 or Olivier Christ in Brussels: olivier.christ@conferenceboard.org

Alan Waller of Solving International and Denis O’Sullivan of IBM are both Executive Board members of the European Council on Global Supply Chain.

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