Misnomer (n): A wrong name. The misuse of a term or name.
I am a supply chain gal. I work with many organizations on their supply chain strategies.
One of the important lessons I have learned in my lifetime of doing this work is to never be afraid to ask what a term means … especially when everyone in the room is comfortable. The more content people are, the more important it is to ask the tough questions to drive alignment. I find that many times companies have the wrong name, or a misnomer, for what they are trying to achieve. Let me give you an example:
Last week, I gave a presentation at a global supply chain team meeting of 175 professionals. It was a large multinational company. It was my first time working with this group. They had seen my videos on the website and needed a speaker for their global kick-off meeting. They really did not know me, and I did not know them. While we had spoken by phone, this was our first opportunity to work together.
As I sat in the back of the room, shifting in my chair, waiting for my time to speak, I watched speaker after speaker endorse the concept of one team. For a couple of hours I looked around the room and saw glazed eyes. “Lucky me,” I thought, and smiled. This team is not buying the message. They were as uncomfortable with the message as I am with the scratchy fabric of my boiled-wool jacket rubbing my neck.
The team was organized around the functional silos of source, make and deliver. Their career paths, their identities, and their comfort zones were steeped in the traditional definitions. It had been this way for over two decades.
I was asked to be an agent of change. This is why I was selected to speak. As I cleared my throat, and pushed my toes deep into my shoes, I bounded up the stairs to start the presentation. I shook hands with the moderator and patted him on the back as he apologized publicly for mispronouncing my name. (As I laughed it off, I stopped and thought, “What is in a name?” I grimaced and reflected. ”Today, everything. This is why I am here…” )
I opened, “Hi, my name is Lora Cecere. My name is often mispronounced. The first name is Irish. My second name is Italian. No one gets it right on the first try.” I looked into the audience and caught a couple of eyes and winked. The group laughed. I let the laughter subside and continued, “When someone mispronounces my name, it opens up an opportunity for me to explain to others what I do.”
I walked to the center of the stage, looked stage left and continued. “I study supply chains. I am passionate about it. So much so, that three years ago, I founded a research company to focus on understanding supply chain excellence.
In our work, we tie research from quantitative and qualitative studies to financial results to drive new insights. This morning, I heard you use the term ‘one team’ and I am worried. We find these words used frequently, but with very different meanings. Most companies think that they know what this means; but, to be actionable they need definition. Let me explain.”
I looked stage right and continued, “Let’s start with the phrase ‘one team’. What is a team? If you played sports, you know that the rules for soccer, football and baseball are quite different, and that a team-based sport looks quite different than an individual sport like swimming or track. The teams can come together because the rules are defined. The problem is that in today’s supply chain organization the rules are not well-defined. In my interviews with your organization, I find that you, like most companies, are struggling with conflicting objectives between functions.” I then showed them the slide shown here as Conflicting Objectives.
“Let’s take a minute and look at this slide. It’s a lot to digest…. It is the essence of both the problem and the opportunity in the definition of what ‘one team’ means for you.” The group was quiet as we discussed the fact in the traditional organization that functional silos are not designed to work together. “Working together requires more than a name change. You cannot move from a functional orientation to a end-to-end value chain focus with just a name change,” I stated.
“Let me tell you a story… Seven years ago, I worked with a woman named Deborah. I was a new analyst and felt quite cocky in my knowledge of supply chain. I, like you, spent many years learning from hard work the process industry. I had managed factories and distribution centers, and strongly believed that the best supply chain results stemmed from strong, well-run functions. Proudly, I had led my division to have the lowest manufacturing costs with the highest Return on Assets. I was proud of my record, and shared it with Deborah. She asked me, ‘What was the impact on total costs?’ I answered that I did not know. It was not measured.
When we started benchmarking companies, Deborah and I had a friendly wager. I believed that we would find a company with the lowest distribution costs (warehousing and transportation), and the lowest manufacturing costs, and this would result in the best overall cost structure. I also believed that this company would have the best inventory and customer service. I was wrong. We never found this company. I now know that this is not reality.
Deborah and I benchmarked 97 supply chains; and, we found the inverse to be true. Instead, we found that the companies with the lowest total supply chain cost (a total of source, make and deliver) had average costs in manufacturing and distribution. We found that it was the sum of the parts that mattered. Surprisingly, to me then, I found that a function run as a function drove up total supply chain costs. The reason? Functions within the supply chain are not naturally aligned. When an organization optimizes one function, by definition they company will suboptimize the others, unless there is a clear end-to-end vision of how the functions should work together to deliver on the operating plan. Hence the need to define the word team.
This is important. Why? In our research, we find that only 8% of companies can access total supply chain costs to anchor decisions, and that less than 1% have a clear end-to-end vision. Most say the word ‘team’, but they do not define it.
In building one team, alignment is critical. This can either be through direct reporting or a matrixed organization. We find the fastest results when the organizations have a direct reporting relationship.
I rubbed my hands together, and looked at the audience and stated, ”So, see… you are in good company. Most companies are stuck in this functional quagmire. It is one of the primary reasons why nine out of ten manufacturing companies are stuck at the intersection of operating margins and inventory turns.”
In contrast, we find in our research that companies with procurement and manufacturing reporting to the supply chain organization have stronger, and more reliable results on inventory, operating margin and Return on Invested Capital (ROIC). Today, 60% of sourcing organizations and 45% of manufacturing organizations report through the supply chain organization.”
As I travel from organization to organization, I find that each company defines supply chain slightly differently. They say they want to achieve one team, but they fail to define it. There is a desire to minimize the friction between silos and operate as one entity. This starts by clearly defining the roles of each function, and then focusing the cross-functional teams on the same metrics. My favorites are customer service, operating margin, inventory turns, and ROIC. The goal is to manage the supply chain as a system, together.
When all functions are jointly focused on improving these metrics, then we can have one team. If not, I am afraid we have a misnomer. What do you think?
We are a month away from the publication of Supply Chain Metrics that Matter. I am excited! I cannot wait to smell the ink. The publication of a book takes a couple of years. I have spent a year of weekends hunched over my kitchen table writing, rewriting and writing. It will be great to hold it in my hands!
This week, I travel to Bentonville, Arkansas to facilitate a customer meeting on the use of channel data. We are the middle of closing the study on the use of downstream data and would love to have you in the survey. If you give to us, we hold all responses confidential. In response to filling out the survey, we will share the results with respondents on a one-hour conference call.
On Thursday at 11:00 EST, we are hosting our webinar on the Race for Supply Chain 2020. We have invited two visionary speakers—Marty Kisliuk, Global Operations Director at FMC, and Chris Clowes, Supply Chain Manager at Costa Enterprises—to share their thoughts. Very different, but insightful presentations. I look forward to gaining their insights, and hope to see you there.
I hope to talk to you soon either on the road or in one of our webcasts.