The Three Most Foundational Supply Chain Elements

The Three Most Foundational Supply Chain Elements

In order to transform and mature, these supply chain elements need to be incorporated into a brand’s foundation: stakeholder alignment, visibility, and role clarity.

This guest post was written by Paul Rea for Argentus Supply Chain Recruiting, a boutique recruitment firm specializing in Supply Chain Management and Procurement.

I’ve spent my professional life working in and leading industrial and consumer product supply chains. They all have the same foundational needs that I group into three general areas: Stakeholder Alignment, Visibility, and Role Clarity.  Organizations with mature supply chains will likely have this embedded in their DNA already. Immature supply chains that are looking to transform from something reactive to far more collaborative and effective may not. They need to. Supply Chains without these elements are likely incapable of further transformation and maturation.

1. Stakeholder Alignment:

Communicate, collaborate and communicate some more. Find out where you (and everybody else) are going.

Supply Chain is a river running through the company, winding through geography, and facilitating and transporting so much commerce. The vision driving supply chain needs to be completely aligned with its stakeholders and corporate strategy. Even between the rudimentary goal posts of cost containment and service delivery, supply chain needs to consider its internal stakeholders in commercial, finance, manufacturing, regulatory, quality etc. as they all influence, and require support from, the supply chain. Imagine a team that set out to drive costs from the network by extending transit times and managing waste and inventory to that perfect “Lean” minimalism. They have potential problems in a speed to market centric sales strategy. Supply chain needs to be at the table when key commercial strategies are being set or the team and potentially the organization run the risk of fatal mis-alignment. Then, ongoing planning and execution should be managed through a Sales and Operations Planning process (S&OP).

I’ve used internal alignment examples, but the supply chain has many external stakeholders too, not the least of which are 3rd party partners and the customers themselves. The same principles apply. In many cases supply chain will use sales/marketing initiatives as the proxy for the customer’s voice, but it’s not unreasonable to conduct supply chain reviews with key customers. Regular planner to planner (vendor to customer) interfaces are key to day to day supply chain management success. (note: The entire concept of vendor management falls within this bucket.)

2. Visibility:

You must be able to see what you’re doing, and the numbers should add up.

Think of the vast amount of end to end supply chain activities that live outside your walls, from overseas suppliers to 3rd party finished goods DC’s, not to mention the holy grail of supply chain planning itself; the demand signal. Too often people don’t look past their own ERP when thinking of supply chain planning, management and execution.  Holistic, managed visibility is critical as complexity or channel distance grows. Remember Mr. Drucker’s “what gets measured gets managed”.

This is more than data and some KPI’s. It requires the right granularity. A monthly KPI may mask what actually happens every Tuesday afternoon. Data and averaged metrics without meaningful analysis and management are dangerous to supply chain. Inventories (raw and finished), transit times and supplier lead times all need to be continually assessed against good demand forecasts, marketing programs and other requirements. The numbers also need to be as real as possible. “System” inventories must match real inventories or there could be a serious mis-fire on a reorder point. Actual transits need to be reviewed in real time. Imagine the manufacturing lead time chaos created if import raw materials were simply presumed to be hitting the port on schedule from when a P.O. was cut (manually or out of an MRP system). Visibility goes far beyond data itself, and an expectation of disciplined regular monitoring and management has to sit on top of the data. 

3. Role Clarity:

Get organized.

Supply Chain is a team sport.  Silo-ed, uncoordinated (different than decentralized) or poorly staffed supply chain structures can result in decisions that sub-optimize the whole or outright conflict with each other. Even “segmented” channels need to be considered in the whole, somewhere. Supply chains can be complex and distant requiring constant attention. You must invest in either robust tools supporting the process or appropriate head count to compensate. This breaks into a couple of key elements:

a) The specific jobs or activities. Generally the key aspects of Supply Chain management are Purchasing (sourcing), Planning (scheduling) and Logistics (delivery). Sometimes logistics is separate, and procurement may be included with Purchasing, depending upon how location specific the procurement activities are. Manufacturing (make) is often structurally not part of the actual Supply Chain team but is literally surrounded by it and the activities are highly interdependent.    In the preferred model of a demand driven Supply Chain a demand forecast drives both production planning and supply chain planning which in turn drives procurement directly and purchasing strategically.  Purchasing is also influenced by the forecast directly.

Supply Chain planning and demand planning are different.  The demand planner’s role is to be the custodian of a high level of forecast accuracy compared to actual demand.  If there is not a credible owner of demand planning (beyond finance gathering forecast data) in the organization then supply chain needs to account for that.  I can’t over-emphasize the importance of a good item, location and time sensitive demand forecast to supply chain’s success.   Think of it like a TV picture where the demand/forecast is the cable signal input and Supply Chain is the TV set itself.  Regardless of how fantastic the set is if the input signal is poor or corrupt the picture on the set will be bad.  And there’s very little the rest of the Supply Chain group can do to fix it other than educated guesses.

b) The talent itself. Make sure you staff the right people.  Internal moves are great because they shorten or eliminate the company specific learning curve and can further employee development and engagement, but it can be dangerous to be a completely “homegrown” supply chain team.  Its like running a race with an in experienced pit crew. Never be afraid to go outside and get the appropriate talent if you don’t have it internally. Jane may be a great performer in sales but does that mean she would necessarily succeed in accounting? Why then, supply chain.

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