How can we move forward if we cannot align?
In supply chain strategy documents, terms like alignment, agility, responsiveness, and flexibility dot the page. At a principle level everyone agrees with the concepts. In meetings, groups nod their heads that the strategy is correct. However, at a practical level companies struggle with the implementation of strategy due to a lack of definition. It is not easy.
In my work with organizations I ask companies to be patient and remember that we are on a journey. Most are forging new ground. The average supply chain organization is 15-years old, and the practice of supply chain management is just 30-years old. The practices are still emerging and have morphed dramatically over the course of the supply chain leader’s career.
Looking Back at History
For perspective, let’s look back at history. In the beginning, the emerging supply chain concepts focused on functional excellence. The goal was efficiency. In discrete industries the early supply chain organizations reported to procurement. In contrast, in the process industries the supply chain organization reported to manufacturing. Today, while companies speak the words ‘end-to-end supply chain management’, there is a functional quagmire. The organization lacks alignment, and tragically the supply chain often becomes another function—another area in the building with a nameplate—within a misaligned culture. The more a company pushes functional excellence and efficiency, they encounter even greater issues with alignment.
In our research on organizational alignment we find that the alignment gaps are felt differently across the organization. The CSCO, CIO and CFO have very different views. The CSCO feels the issues of alignment acutely; whereas, the CFO and CIO do not. As a result, the CSCO’s efforts to drive alignment can fall on deaf ears. While we have proven in our research that Sales and Operations Planning (S&OP) maturity helps to close the gap between operations and commercial teams, we have been actively studying organizational dynamics to try to determine other techniques that can help. The goal of this post is to share recent research on the impact of the Supply Chain Center of Excellence on alignment.
Some Background: What Are the Signs of Organizational Maturity?
Organizations are at different levels of maturity. Over the course of the last decade companies have moved at different rates to align source, make, and deliver processes to report to a common leader. Based on our research at Supply Chain Insights, today 34% of supply chain organizations have source, make, and deliver reporting through a common organization. This is a sign of organizational maturity. When there is a common reporting strategy, progress in metrics performance at the intersection of operating margin and inventory turns is faster.
Another sign of organizational maturity is an effective supply chain center of excellence. While the Center of Excellence has many definitions, and comes in many shapes and forms, today 40% of supply chain organizations in companies greater than $5 billion have a Supply Chain Center of Excellence. While the concept is vogue, effectiveness varies. Today, only one in two companies believe that their Center of Excellence is effective.
A common characteristic of a successful Center of Excellence is a core competency to actively design the supply chain. When this happens the company can greatly improve organizational alignment. The greatest impact is between the supply chain organization and the finance group. As a result, the company is more agile and proactive. In Figure 1 we summarize this recent research on Supply Chain Centers of Excellence maturity.
Figure 1. Benefits of Having an Effective Supply Chain Center of Excellence
In essence, an effective Center of Excellence helps to orchestrate and coordinate functional goals. I liken this to a decathlon. How so? Let me explain. The decathlon athlete knows they must target to be in top placement, but not the best in all of the events, to win. The development of this strategy happens over many months and years based on training with a coach. The decathlon athlete enters the stadium with a plan: predetermined goals.
I believe the journey for supply chain excellence is analogous. The research supports that a company cannot be the best in all functions and deliver the best results. Instead, it requires the orchestration of trade-offs between the functions. The environment needs to be one of coordination and cooperation, and there needs to be a carefully crafted design. It is not easy, and the journey is fraught with issues. There are too many to list here, but we will be publishing a complete report on this research in our June newsletter at the end of the month.
What do you think? I would love to hear from you!
If this is an area where you have had success, I would love to capture your story on a podcast. I am looking forward to recording the story of Lenovo’s journey next week, and we would love to hear yours as well. We are trying to capture the voices of supply chain leaders’ journeys to accelerate progress on supply chain excellence. Check out our podcast series of supply chain leaders available for iTunes and stitcher.
Life is busy at Supply Chain Insights. We are working on the completion of our new game—SCI IMPACT!—for the public training in Philadelphia in August and the Supply Chain Insights Global Summit in September. Our goal is to help supply chain visionaries, around the world, break the mold and drive higher levels of improvement. The conference will feature case studies on crowd-sourcing, robotics, demand sensing, rules-based ontologies/cognitive learning, Internet of Things (IOT) and the use of sentiment analysis.
About the Author:
Lora Cecere is the Founder of Supply Chain Insights. She is trying to redefine the industry analyst model to make it friendlier and more useful for supply chain leaders. Lora has written the books Supply Chain Metrics That Matter and Bricks Matter, and is currently working on her third book, Leadership Matters. She also actively blogs on her Supply Chain Insights website, at the Supply Chain Shaman blog, and for Forbes. When not writing or running her company, Lora is training for a triathlon, taking classes for her DBA degree in research, knitting and quilting for her new granddaughter, and doing tendu (s) and Dégagé (s) to dome her feet for pointe work at the ballet barre. Lora thinks that we are never too old to learn or to push the organization harder to drive excellence.