Supply Chain Executive – Breaking the Glass Ceiling

Abstract

The advancement of a firm’s supply chain can only go so far without support from its CEO. How can a supply chain executive bring to light the value of investing into this critical area?

Article

Whether you run the transportation, the contracts, or the service management arena, you are being asked the wrong questions by your CEO. Or, putting the blame on Mame…you are not showing off your strategic value to your CEO.
Not only on an international politics level, but also a corporate level; not only your CEO, the shareholder and Lou Dobbs are putting the pressure on Supply Chain performance; but also outsourcing, low wage workers (dare we say undocumented workers, brought to your firm through 3rd party contacts), and short ship cargo strategies (ship to Mexico, or the Caribbean, assemble and return to the US).
The word is out—on the news, in the conferences, and in the day to day supply chain activities you deal with.
Mis-understanding?
Yet, how many in the executive suite, do you think, actually understand the Supply Chain? The scientists among us have had a great time over the last few years creating methods, metric and certifications—CPRM, Black Belts, etc. I would not for one minute question the value of these efforts. I treasure (and teach) the learning I received from my teachers in Supply Chain! And we have begun a new series on Supply Chain Performance in this issue.

Figure 1 -  Blur of Supply Chain Metrics 


 Figure 2 - Blur of Supply Chain Methods 
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Supply Chain Positioning 
in the Enterprise
Our hard work over the last few years has transformed our enterprises—some times saving them from doom (Dell) and/or making them the leaders (Wal-Mart, Lowes, Target, Nike, Disney, etc.) in their categories. And when the firm did not display such prowess (Kmart, Compaq, etc.), it evaporated.
But do you think for one minute that your CEO understands any of this stuff?[1] The CEO’s world is different. Short-term Shareholder Value drives their world. Yet there are unique exceptions where courage, long-term vision, love of product, and true supply chain prowess are the dominant factors. These firms also tend to be the enterprises where the executive also understands the Supply Chain basics and the contribution it truly makes to the enterprise: process integrity, solid management and customer loyalty. But by in large, most are looking at margin and shareholder value as their primary passion (if passion resides in share holder value).
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Figure 3 
However, you work for these CEOs. So in the spirit of good communication, professional excellence, and for your collegiality in other departments in your firm, you owe it to yourself and your organization to educate them on what supply chain is really all about, and how it contributes to their success—or doom!
The Need for Knowledge
First we have to get them excited enough to want to understand—why do others win and keep on winning? Why does the firm lose many millions on errors, and lost, damaged and late goods; reducing sales, increasing operating expense and depressing the stock price? Most executives at the top, or cross functionally, do not understand the interrelationship between their domain and these losses.
Take demand management, for example. Sales behavior is one of those predictable cycles—most firms measure their sales people on quarterly numbers. And metrics truly drive behavior. Sales for many types of industries comes at the end of the quarter (or month). So the behavior is obvious. The last week of the month we put things on promotion or mark-down. Or contracts and POs come in the last 3 days of the month.
Now think of that impact on the supply chain. The knee jerk reaction is in full swing, now, with supply chains chasing fulfillment. This out of balance condition can be easily remedied with a slight change of metrics, to the sales people, for example.

Or returns and the relationship to the customer service desk. A huge amount of hardware returns are with perfectly good products, but the customer is confused on how to operate it. Low investments in documentation groups and off shoring the call desk leads to poor operation of cell phones, PDAs, toys, law mowers, etc., and on to the frustrated customer.
These returns or frustrated agenda can mean the loss of a life time customer.
Now trace and track in logistics. I recently heard that a major retailer has a loss due to damaged goods of around $200 million each year. Somewhere in the supply chain these products are damaged. I personally wouldn’t want to be the carrier being discovered as the one who is ruining my customers’ shipments—from heat, vibration, late deliveries, etc…seeking the low cost 3PL or carrier, or outsourcing fulfillment and losing touch with the data; which could be costing your firm millions—or billions.
Under Investment in Process and Technology
Now, I am not saying that outsourcing fulfillment partners is irresponsible (usually not). I am talking about the investment in the process—by the OEM, retailer or brand company—who seeks the absolutely lowest cost and minimal data integrity. A strategically thinking IT service provider or 3PL who would attempt to offer trace and track, product security, and sensing services is frequently rebuffed, due to, again, the very poor understanding of the impact between the corporate or CEO agenda. Less sales due to stock outs—the merchandize arrived spoiled. Late shipments that missed the promotion or seasonality position are marked down.
These are logistics problems that are solvable with investment in software, RFID and process integrity, for example.
In addition, programs like lean, six sigma, etc. produce stellar results, from strategic processes to the more mundane administrative activities. Ironically, so many risky investments get made in spite of those risks; yet low risk/solid payback in six sigma frequently is not even on the table. So, why don’t firms invest further in these?
Frequently the case does not get made in a conscientious way to the executive suite. The arguments have been made for ERP, ecommerce and past programs on a huge scope and impact.
Make Your Case
Well, the proposer has to make the case. That is you. In figure 2, my attempt is to show alignment of supply chain metrics and the CEO’s concerns. Each firm has their unique metric approaches. And they also have the burning platforms—key issues or critical broken process, losses, etc. that need addressing.
Your next move then is to determine the right approach to attack the burning issue for your space—be it technology, or process—frequently it’s both. 
The Supply Chain executive’s thought process is one that provides strategic value to the firm though supply chain programs. This alignment is critical to get the buy-in and participation across the enterprise (and sometimes across the chain) that large impact programs require.
I am frequently delighted when I hear about a person who took the initiative to try something and went on to lead a business unit or broad based program that helped the enterprise in a profound way.
In the metric series, Kate Vitasek provides a strong foundation performance that should add structure to this thought process.
[1] Again, the exceptions are the Wal-Marts, Dells, etc.
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