Published June 27, 2017
Guest Blog by Chris Gopal
Global Supply Chain & Operations Consultant and Educator
Today, we are experiencing what can be best described as a tsunami of opinions and advice around the supply chain. Analysts, online journals, mainstream media, trade publications, and consultancy white papers are inundating us with advice about improving and innovating the supply chain through the use of some technology or the other; and that the supply chain is about to be disrupted courtesy of a particular technology. The obvious message is that, if a company does not do something, it can be in serious trouble, and soon. An interesting aspect is the apparent absence of discussion about total costs of acquisition and implementation, and the tangible, specific benefits that will result – especially to customers, but also to the company.
The list of urgent, “necessary” and disruptive technologies is long, and includes pretty much everything from artificial intelligence and blockchain to drones and driverless vehicles. There is little doubt that, at some point, these ideas and technologies will change the supply chain drastically and need to be thought about and planned for.
What executives ask for: And, yet, when I talk with supply chain and financial executives, the issues foremost in many of their minds are fairly short-term and basic, and have little to do with technology and disruption.
They are concerned with issues that range from the operational:
“How do I reduce my total costs by 10% in six months?”
“How do I plan for inventory to eliminate stockouts while not exceeding my working capital targets?”
“How do I reduce my fulfillment costs to the customer and still remain competitive?”
To the programmatic:
“How do I get this Enterprise Resource Planning (ERP) implementation back on track?”
“Why don’t our investments in supply chain systems pay back as promised?”
And the general:
“How can we (I, together with my team) design key processes so that they are specific to my company and industry, and are flexible enough to change as necessary?”
“How can I educate my people in supply chain processes and analysis so that they can be efficient and effective?”
A Gap: It appears that there is a gap between the “thought leaders” and those who actually are tasked with leading and managing global, domestic, and local supply chains.
Two questions come to mind:
“How do we navigate the problem/trend-to-execution-to-results and measurement spectrum”, or, put another way, “How do we best operate supply chains to better enable the business strategy and goals?”
And, thus, “Are we focusing on the right things?”
The answer to the first question is not technology. It includes operations strategy, structure, and the operations model(s). More often than not, it’s about business processes and accurate information; and, it’s always about people. This takes, I believe, a combination of strong and varied experience, observation, assessment, listening, and an understanding of how organizations and their customers best work. It also requires an understanding of technologies and their application, the global environment, and some imagination to pull it all together. Innovation is not about the technology, or the ease of thinking up new uses for sometimes unproven (financial, technological, organizational) technologies – it’s about how one thinks of the application to better understand and solve problems and challenges. This sort of thought leadership seems hard to find these days.
Regarding a focus on the right things, it has to be those that address problems and key metrics, and drive results – on a quarterly and annual basis. Those things that drive stock price (free cash flow from operations, working capital, costs) and address the metrics that supply chain executives are measured on. These include cost reductions (over a reasonably quick period of time), cash-to-cash cycle, inventory optimization, customer service and costs-to-serve, quality, compliance and increasingly, profitable growth in revenue, driven or influenced by the supply chain.
And, to be effective over the shorter timeframe, the focus must be on discrete problems, functions and processes, with sustainable improvements and “no unnecessary excellence”. The challenges posed by these two questions need to come together – thought leadership and the focus on what matters, driving results. Only then will supply chains truly create value and contribute to business goals.