Sustainable Supply Chain Excellence

Organisations need to achieve excellence. Guess post the Tom Peter's book, In Search of Excellence, 25 years back, the term seems to have made organisations aspire for - Excellence. Supply Chain excellence is critical initiative for achieving organisational excellence. But what is excellence? It simply means the customers of my product or service choose me ahead of my competitors. Even when they have a choice. You don't follow benchmarks, you create one. (http://ageofdiscontinuity.blogspot.com/2009/06/supply-chain-excellence-and-relevance.html)


For sometime excellence was equated to Quality. Quality in turn was meetings specs. So excellence = meeting specs. The imitation of specs made the parameter redundant. It was so easy to meet the desired specs that competitors sooner than later made the organisation loose the competitive advantage. The product or service was thus 'commoditized'. If you can't differentiate, you can't claim excellence. So the revolution of making 'mass customization'. The lever moved from quality to transformation link of the supply chain. Organisations using that lever excelled for some time. A lever like manufacturing is easy to replicate. It requires the competitors to use a supply chain design which makes them achieve the same results. No more is excellence achieved.

The interesting part of the story is the way in which organisations try or have tried to achieve excellence is by 'configuring the supply chain' for its 'hard' components. Organisations change processes and practices, adopt to world class benchmarking for their inventory cycles, OEE, working capital cycles and logistics networks, undertake Process re-engieering for their procurement department or production or new product introduction and many more...but stay far away from achieving 'sustainable excellence'. My understanding is that all that is done to achieve excellence is the 'hard' part of the supply chain. Advantages like new technology have their life before the competitor makes it redundant, improving inventory turns is only to a limit before the benchmark you followed was turned over by some better number..

Sustainable excellence is - People. Something which can't be replicated by your competitor hence will be sustainable. Supply Chain excellence is about People.

Nurturing the Connectors, Salesman and Maven's of your Supply Chain!
(http://ageofdiscontinuity.blogspot.com/2009/12/connectors-and-saleman-in-supply-chain.html)
(http://ageofdiscontinuity.blogspot.com/2009/09/mavens-in-supply-chain.html)

Are Your Sources of Strategic Advantage Eroding? - HBR

I guess this link on sources of strategic advantages has to be viewed in the context of Supply Chain.

Read the article here

Connectors and Salesman in Supply Chain

While Mavens (http://ageofdiscontinuity.blogspot.com/2009/09/mavens-in-supply-chain.html) represent a much needed community in the supply chain universe, the need for making a change be acceptable to the supply chain organization needs a different category of individuals.

A supply chain is one of the organizational entities which undergoes a change more than any other organizational function. The tighter the competition in the market the more agile a supply chain needs to become. The higher the pricing pressure the leaner supply chain has to be. The more regulated the market becomes the more transparent the supply chain needs to be. The continuous changes in the internal as well as external business environment imply that the supply chain is under continuous change. Most of the “transformational” initiatives in the organization are taken to improve it’s supply chain. The large scale projects in Business Process re-engineering or Theory of constraints driven Viable Vision Projects or be it a Lean Six sigma initiative for continuous improvement. They all impact the Operations of the organization. And these initiatives need the “buy-in” of multiple supply chain stakeholders.

In my supply chain consulting projects across multiple geographies I have found a common thread amongst supply chain individual constituents. A large scale change needs so many more people to believe in the vision and invariably it is not the senior most in the supply chain team who can make other supply chain stakeholders believe in the initiative for change in process or policies or tools that they have been using in their current roles. There are individuals who hierarchy wise may not represent organizational power house but they are very well “connected” in the supply chain. They represent the link between the initiative and it’s adoption. I like to call them as “Connectors”. They connect with multiple people & have the network in place. The connectors are a breed which typically would have spent long time in the organization, wish to prove their utility to the organization, & mostly are not very high in the hierarchy. Connectors are well at networking. They have the ability to spread the message. Connectors are needed in Supply Chains to ensure the communication can easily flow through the network.

Connector’s have limitation. They are not influencers. For this, in a supply chain we need “Salesman”. These are the torchbearers of any initiative and have the ability to convince others. Salesmen are the energetic, flamboyant and dare to do kinds in the supply chain. They represent themselves as the front end of an initiative. Salesman is the individual who will own the initiative for making it fly with others. In large scale supply chain projects, these salesmen play an important role to make the project a success. As external consultants to organizations I have always found them to be the first ones to take a baton and carry it with force. Typical Salesman will be forthright, reasonably higher in the hierarchy, has significant stakes in the project in making his or her career successful, can manage and lead rather than do it by him or herself, and is aimed to achieve higher goals.

All along my consulting career I have found Mavens’, Connectors and Salesman. They all have a role in shaping up supply chains. The prudence of Supply Chain organizations is in identifying these characters and then making them assume their own roles to make a supply chain initiative successful.

Maven's in Supply Chain

It’s now almost a cliché that the supply chains are growing longer and more complex. The increased activity and the resulting complexity in supply chains is attempted to be optimized using contemporary processes and / or technology solutions. Supply Chain Processes have also evolved into leaner practices leading to make organizations more responsive and flexible. Advanced Planning and Optimization techniques have digitized most of planning processes using business rules and business intelligence solution which can simulate multiple scenarios.

The central nervous system of Supply Chain across the industries and geographies still seem to be individuals who posses knowledge. It’s not too difficult to find a typical scenario on the shop floor where some machine has just gone down. All digital solutions have run their simulations to find the solution to the problem. But its intelligence still falls short of finding the solution. Then one person who knows the machine and the functioning of it knows where the root cause of the problem is and offers the solution. (S)He possesses knowledge which is shared voluntarily. Or an assembly on the floor is halted due to non arrival of the material from the vendor. The Procurement folks are running all over the place to identify an alternate source either through their identified (approved) vendors list maintained in a sophisticated information technology system or their own network. While all this is happening a person from the shop floor holds the knowledge of a source that can get the material of the specified quality within the specified time. This person has nothing to do with sourcing but still possesses the knowledge of where the solution can come from. And is solving his/her problem by solving others problem.

Maven’s are what these folks in the organizations are. Maven is a Yiddish word. It means one who accumulates knowledge and in case of an epidemic act as a data bank. And more importantly Maven’s don’t collect information passively. Once they know there is a good deal available, they will be more than willing to share the information that they have collected. They turn out to be critical in cases of disruption as they know what other’s don’t. In Supply Chains we talk about “disruptions”, “risk” and “collaboration”. It needs an intent from the organizational constituents (read: People) to lay down the culture of collaboration. Supply chains need folks who not only posses’ knowledge but know how to pass it along. Supply chain need Maven’s who are kind of people who want to help for no other reason than they like to help! It would transform a supply chain from being one with barriers to a supply chain which is nimble as Maven’s would spread the virus (in it’s positive sense!) of collecting knowledge, looking for new ideas, and more importantly share those unselfishly. In the process Maven’s gain attention of the organizational leaders. This means more attention to themselves. No amount of process improvements or digitization can ever replace the importance of Maven’s from organizations, and particularly Supply Chain Organizations’. Core of supply chain is “relationships”. Means People. People who are excellent accumulators of knowledge and will volunteer to share it to help overcome a difficult situation. And Maven’s are more than experts and socially motivated to make it happen than anyone else.

We need more Maven’s to make Supply Chain responsive and agile. Talk Talent Management in Supply Chain!!

Supply Chain Innovation

A few years back when I quit my SAP consultants’ job stating to my boss that I came from and wish to go back to Supply Chain domain as there is a lot happening there, the response that I got was that listen to your heart but before you go let me know ONE supply chain innovation in the recent past which is not a function of technology. Leaving the bias to technology (as after all he was head of a SAP practice) it’s a profound question.

Innovation is a breakthrough in a system which is path breaking. It may or may not have similarities with the current way of doing things. e.g. In the past organizations had supply chains which were functionally oriented hence used to have a procurement function, a planning function, a production function, a warehousing function, a logistics function and so on. Each had their individual objectives to be met which may not be consistent with over all organizational objectives. The term used was “Local Maxima”. In later 80’s, I guess, organizations appreciated the concept of an end to end supply chain and local maxima gave way to “Global Optima”. Global Optima is path breaking hence an innovation.

We have seen organizations innovating on products and services. Organizations’ have spent enormous time in design innovation. Innovation seems to be at the heart of Business models and frameworks. But when it is Supply Chain organizations seem to lack. Most of the contemporary innovations which get elaborated and discussed in a supply chain innovation context seem to be a decade old the least. One still feels energized to reduce inventory, reduce operating expenses, to adopt a Kaizen program for continuous improvement, undertake a Six Sigma project or do a Business Process Reengineering for the supply chain. Advanced Supply chains seem to talk visibility, traceability, continuous replenishment, use of 3 PL or 4 PL and collaborations with supply chain partners etc. The advanced supply chains still have innovations which were discovered at-least a decade ago! And on top, these innovations all seem to be possible more due to advancement in technology rather than a supply chain effort for innovation.

The contemporary Supply Chain, which has been stated to be the central nervous system for organizations, is expected to have objectives of revenue enhancement, cost containment and sustainability. Organizations have focused so much on product design/services innovation that as compared to those initiatives the progress made of supply chain innovations is pretty less. And still we hear that – Competition is not between organizations, it’s between the supply chains of organizations. Most of the organizations are no more monopolistic. Most of them offer products or services which can’t even be differentiated. Or at least consumers may not be able to appreciate that. So aligning organizations with the interests of consumers would mean making the organization work along the consumers’ expectations. In simple terms it means – Avoid Commoditization. The goal is achievable through investments in Supply Chain innovation.

I believe that organizations will have to follow sets of principles which will form the base for a sustainable supply chain innovation. e.g. can I have my manufacturing done on the ship which is moving from China to USA, and gets required raw material at multiple ports on its way? This virtual factory will be the kind of supply innovation for future!

Supply Chain excellence and relevance of benchmarking

In the advent of supply chains somewhere in the root of its aspirations lies a factor of achieving excellence. Organizations need to excel which means components of organizations need to excel. Logistics, the movement of goods, has now been replaced by Supply Chain, end to end flow of goods, knowledge, finance and information. The extent to which an organization can succeed in the market place is now a factor of its excellence in Supply Chain. The cliché is – Competition is no more between two organizations, it’s between the Supply Chains of two organizations.

The industrial revolution leading into technology innovations has transpired organizations to adapt to multiple and dynamic business environments. The organizations metamorphosed many times all along the history but the need for achieving excellence has consistently been the key driver for survival and growth. Alignment and Integration of Supply Chain with the organizational objectives is a critical parameter for success. The alignment of Supply Chain to corporate objectives generally follows the top-down approach where organization goals are taken as inputs for supply chain. Supply Chains are then aligned with the goals through multiple methodologies and approaches.

Supply Chain Excellence is achieved when the supply chain supports, enhances and also integrates itself with the corporate objective. Off late, Supply chains have been viewed more as revenue generating opportunities rather than cost functions. In the process of reaching the goals lies the process of setting objectives for supply chains. In my personal experience of a Supply Chain consultant, I have come across this issue of goal setting in supply chain as one of the most acute in practice. The first and foremost question is – where am I today? It’s desirable for supply chain to start with an exercise to identify parameters against which it is being measured today and its achievement against those parameters.

The critical question to be addressed is – are the measures appropriate
a. In the width (coverage of activities)
b. In their depth (level of achievement expected)

Supply Chains have to have a holistic viewpoint for their overall operations to be measured for their excellence. So the fundamental questions to be answered are;
a. What to measure?
b. How to measure?

To respond to these issues, supply Chains have used multiple philosophies to aspire for higher goals, which means “excellence”. One of the most aggressively used and implemented technique is “Benchmarking”. It was one of the most favoured ways to aspire to become someone like the leader in the in the industry. Founded on the firm belief that aspiration for excellence ends with the quest to achieve similar results as the best in the industry, it guided organizations to a self created maze of measures and numbers. As a practitioner in the former assignments and a consultant in the current, I realize that;

a. Finding absolute relevant data is a humungous challenge. It’s rare to find the right organization, in the right industry subsector and in the same geographic area. The mismatch on either of the parameters will lead to erroneous benchmark, particularly so in emerging country contexts. e.g. an organization in engine manufacturing of a size of 100 million USD with operations only in one country will been benchmarking data of a similar organization. The limitation experienced normally is lack of availability of relevant data.

b. Benchmarking practices lack appreciation for process maturity of organizations.

c. Lack of justified benchmarking created a backlash of emotions and lack of acceptance by users.

d. Excellence is achieved by surpassing competition. Benchmarking limits organizational thinking to achieve results to match the “best”, not surpassing the best.

The process used for designing a supply chain for excellence hence seems to be limited if only benchmarking is used by organizations. Being relevant is no proof of being adequate.

A question of GAME change for Supply Chains

In the aftermath of the 2008 crises, the landscape of consumption in the largest economy of the world will undergo a permanant change. An economy which consumed the largest and lived on credit will make a life style change to savings. This will dampen the demand for products and services.

Organisations across the globe will have one time downward impact in the demand for their products and services to be digested. But the implications of that will create a large mismatch of demand and supply for significant time in future. Most of the supply (read: capacity) which got built across the globe in the recent past will suddenly turn out to be "excess" on a permanant basis. The demand destruction of this kind will create a new supply chain challenge which on one side will be price elastic demand while on the other side will have high costs to be absorbed for the supply chain assets that got created.

Many of the suply chains are global in nature for which demand exists in developed world while supply sources are in the developing world. That means countries like India, China and the likes have built their supply chain assets (read: capacities) based on consumption expected. These will now be challenged for meeting efficiency and effectivess performance parameters.

We now have a situation where;
a) the working capital requirements of the supply chain have gone up due to the asset base, while the demand has undergone a permanent downward revision.
b) The pricing power will be less as the consumer will want to spend less (as he wants to save more!) and supply will exceed the demand.

Organisations across the globe need to make a plan for GAME changing supply chains which will result into meeting the same Pre 2008 "customer" with his / her new post 2009 demands of cost, efficiency, speed and quality.