This week, I found myself wanting to scream. Not once, but several times. Imagine me in the picture to the left going from client to client. Not a pretty sight.
Don’t you just love Edvard Munch’s work The Scream?  I think the fact that on 2 May 2012 it broke the highest nominal price record for art sold at auction is a metaphor.  How so?  We have spent bucko bucko bucks for supply chain systems; yet, we still want to scream.  Here I share what made me scream this week.
What is this thing called “Supply Chain” anyway?
I am biased. I believe that–for manufacturers, retailers and distributors–supply chain is business. However, every time that I present in Europe, I get a stark reminder that this is not a commonly held view. The more conventional view in Europe is of supply chain leaders kicking boxes and scheduling trailers. Most companies have only themselves to blame: many supply chain leaders have not been good business partners. The trappings of acronyms, supply chain speak and functional views have not served them well.
However, this lack of progress drives me nuts. We will never successfully connect the customer’s customer to the supplier’s supplier with this parochial view.
It also want to scream when I hear that finance and supply chain cannot talk the same language. I know. I know. The supply chain team has conventionally spoken the language of “volume” and the finance team has traditionally spoken the language of the “balance sheet;” but, I believe that it takes both. They need to be business partners. I also believe that teams need to be aligned to an operating strategy; and based on research, for 85% of companies this is a problem. They do not have a successful operating strategy.
This week, I presented Supply Chain Insights’ recent research findings on Sales and Operations Planning (S&OP) and agility to 100 supply chain leaders. I got some interesting data. (If you want to listen to a replay of the webinar, click on this link http://www.steelwedge.com/resources/webinars )
 

In the webinar, we asked what was the greatest barrier to improving Sales and Operations Planning (S&OP). Notice three big ones: understanding and support by the executive teams, clarity of supply chain strategy, technologies to support the process, and the role of finance. In this study, they could only pick one. I believe that if they could have picked multiple answers, each of these would have had high scores.
Next week I will present at the IE Group’s event for Consumer Products on S&OP. There will be a second group in a second room divided by a BIG WALL that will be discussing Integrated Business Planning. Most of the people in the IBP room will be finance guys and most of the people in the S&OP room will be supply chain leaders. See the problem?
As I sit in these conferences, and look at the strong wall that separates the two groups, I am reminded of The Ronald Reagan speech at the Brandenburg Gate in front of two panes of bulletproof glass, “ …if you seek liberalization: Come here to this gate! Mr. Gorbachev, open this gate! Mr. Gorbachev, tear down this wall!”
Later on in his speech, President Reagan said, “As I looked out a moment ago from the Reichstag, that embodiment of German unity, I noticed words crudely spray-painted upon the wall, perhaps by a young Berliner: ‘This wall will fall. Beliefs become reality.’ Yes, across Europe, this wall will fall. For it cannot withstand faith; it cannot withstand truth. The wall cannot withstand freedom.” Similarly, this functional wall cannot withstand petty bickering between finance and supply chain; but to tear down the wall, supply chain leaders have got to define the supply chain strategy. Without it they cannot align…
Cost versus Value. This week, I had two discussions with two companies considering what I think is blasphemy. <I know… ask me how I really feel! > They were considering setting up a profit center for their supply chain utilizing transfer pricing. I also spoke to two veterans that had recently returned from Unilever start-ups trying to implement this type of supply chain organization. The discussions make me believe even stronger that every time the supply chain creates transfer pricing and a profit center, that they are making the wall between make, source and deliver thicker.
The mature supply chain is not just about cost. It is about the delivery of value. In my work I see that every profit center is a barrier to creating higher value. I know that it might sound good in some consultant’s backroom, but trust me, in the real world you do not want to constrain the discussions between the supply chain organization and the other groups by accounting rules.
 Balance. A couple of weeks ago I wrote that an athlete needs strength, balance and agility. I feel that the athlete analogy is a good one as companies get ready to run the race for Supply Chain 2020. They have built strength, but need greater balance and agility.

In the historic investments, supply chain leaders gained strength. While 90% of companies responded that they can improve supply chain agility through a mature S&OP process, they believe that they need leadership, and a clear supply chain strategy, to achieve balance. (Reference agility research study http://www.slideshare.net/loracecere/sop-and-agility-supply-chain-insights-research-results-march-2012.)
In our webinar, only 20% of companies felt that they had balance. The biggest issue was the lack of a clear supply chain strategy. Companies that are more mature in their definition of S&OP tend to rate themselves with better balance.
 
 
 

  

 
Hype and Honesty. Last week, I spoke of supply chain purchases as hope and helplessness due to market confusion. This week, I want to speak of hype and honesty.
The evolution of the tightly integrated supply chain (supply chain planning with enterprise resource planning) reduced the emphasis on “what-if simulation.” Over the past ten years, supply chain technology capabilities in this area have not improved, but the need has increased. In the webinar, when we asked how many companies were happy with their “what-if capabilities,” only 8% responded positively. When I asked this question in a webinar two years ago, I got a similar response. I think that it is time we get honest with ourselves. Companies cannot be agile without “What-if” capabilities to model demand and supply volatility, and the majority of the industry is not happy. Whether you call this hope and helplessness or hype and honesty, it is just plain sad.
Wrap-up
So, why did I scream? Because so much can be done with supply chain management by those that understand it. And, I feel that the efforts are curtailed by a lack of understanding of the value by executives and the lack of a clear operating strategy. And, this I don’t know how to fix. Can you hear the SHAMAN screaming?
What are your thoughts? What do you think companies should do? Is there a way that you scream to help you cope? Let us know your thoughts.
Next week, I am speaking at the S&OP IE event on S&OP change management and how to define the supply chain strategy to cut down functional silos. Will I see you there?
Reference blog post on agility: http://www.supplychainshaman.com/uncategorized/preparing-to-run-the-race-supply-chain-2020/