A Walk On The Beach? A Run For Supply Chain 2020?

Article by Lora Cecere from Supply Chain Shaman; published on July 21th 2013

I like art, and love unusual sculpture. Some days when I need a pick-me-up, I watch the videos of Theo Jansen’s Strandbeests. These self-propelling plastic pipe structures use wind power to walk. I am amazed as one of these ungainly creatures catch the wind and walk easily across the sand. It is carefully designed alignment.

Over time, these modern sculptures have become more resilient. The artist, over two decades, refined the sculptures to withstand the rigors of the environment. In an interview this morning, on Sunday Morning, he discussed two factors that improve performance:

  • Flexibility at the joints
  • Design of the ends to catch and propel the sculpture in the wind.

As he shared his secrets, I smiled. I had started this blog post on Friday afternoon. It is a discussion of supply chain design and the sharing of research that supports that the best supply chains have flexibility in the joints and are well designed on the ends to propel commerce. Like the Strandbeest, using these two design elements, the supply chain is more resilient. It might even propel your organization to win the race for Supply Chain 2020. Take a minute and watch the video of the Strandbeest and contrast this effortless movement to what you see in your organization and see if you agree.

Flexibility at the Joints

Sometimes I find the writing of reports drudgery. Sometimes, it is fun. One that I enjoyed the most was the recent report Three Techniques to Improve Organizational Alignment. The study looked closely at the views of over 190 respondents from three functions within the organization: supply chain, finance and IT. In the survey, each of the organizations rate the need for agility high, and rate it low. As shown in figure 1, the gap is wide. The supply chain group rates it the lowest.

The supply chain needs to be designed to be agile. It does not just happen. There is no industry standard. In this research, we define an agile organization as one that is designed to withstand the levels of demand and supply volatility and deliver the same levels of cost, quality and customer service..

An agile organization, like the Strandbeest, has flexibility in the joints (at the connections between functions within the organization and in the interconnectivity between organizations in the creation of value networks).  A barrier to creating this level of flexibility is the tight integration of functions.  While the transactions need to be tightly integrated, the planning and analytics need to be based on “what-if” analysis and visualization. In our research, we find that only 11% of companies feel that these criteria are being met in their IT architectures today.

Figure 1.

To have this flexibility, the organization also needs to be aligned. In this study, we asked each organization to rate how well each organization was aligned. In figures 2-4, we share the ratings and perspectives of the individual functions. The self-assessed ratings are very different.

The only commonality in the three views is the gap between sales and the rest of the organization. Many companies have made the  mistake of rewarding sales for volume and the rest of the organization for profitability. This, by definition, creates misalignment.

In the figures below, we share the perceptions of each “teams’” view of alignment. Contrast how different these three views are.

Information Technology Group. As shown in figure 2, the Information Technology (IT) team views the organization as more aligned, with fewer gaps, than their finance and supply chain counterparts. They also have a false sense of how well they are aligned with the business teams. They believe that the team has achieved greater alignment than is seen by the other line-of-business counterparts.

Figure 2.

Finance Group. The Finance Group sees the largest gaps within operations. For this group, the gap between operations and finance,  and sales and finance, are both acute. They also feel that there is a gap between manufacturing and procurement, and sales and operations. While they see the gap between sales and IT, they see it as less important than the gap between other functions.

Figure 3.

Supply Chain Team. The perceptions of the supply chain show the greatest lack of organizational alignment. In the views of this team, there is a greater gap in organizational alignment than felt by the finance or the IT teams. This is particularly true in the teams’ view of alignment between the operations group and IT.  This group also feels a large gap in manufacturing and procurement alignment and the gap between sales and operations. They see that the operations and finance team are more closely aligned than the views of the finance team around this alignment.

Figure 4.

So, how do we Run the Race for Supply Chain 2020?

Just as the Strandbeest walks the beach, organizations need alignment to run the Race for Supply Chain 2020. To improve alignment, the research study supports three next steps:

1) Improve Sales and Operations Planning. In our research, we see that companies that have a mature view of S&OP and are modeling the network, and planning to maximize opportunity and mitigate risk, nearly double their perceptions of organizational alignment.

2) Clear Supply Chain Strategy. Agility does not just happen. It requires design. Postponement, demand and supply orchestration, and supplier network flexibility are all tactics that require careful design and deliberation. Today, 95% of organizations are not clear on supply chain strategy.  Like the Strandbeests, the supply chain needs to be carefully designed, and redesigned, to improve agility.

Some organizations see agility as shorter cycles. This is a mistake. Many times people can do the wrong things quickly and create a heap of problems. Take the example of a shoe manufacturer that I worked with for many years. The CEO believed that the best supply chain had short cycles. The team focused on improving cycles and were surprised to find that their costs were 38% higher and that their supply chain cash-to-cash cycle was 49% longer.

3) An Effective Supply Chain Center of Excellence. While the supply chain center of excellence is present in over 35% of organizations, only 53% of companies surveyed  feel that they have a successful supply chain center of excellence. The primary issues lie in the design of supply chain strategy and the facilitation of cross-functional horizontal processes. Most of these issues lie with the organization’s view of supply chain as a function versus the definition as an end-to-end process.

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