High Performance Supply Chains
Many corporate executives are concerned, perplexed and confused with supply chain related activities. Supply chain is often viewed as the transportation group, a standalone warehousing and distribution function or simply an unexplainable mixture of everything that is wrong in the firm! Its organizational role, accountabilities and actual ability to drive corporate performance is often a point of contention in boardrooms. This confusion and in many cases frustration, is usually self inflicted by senior supply chain executives. Corporate supply chains have the opportunity to drive significant enterprise performance improvement with some simple and achievable boardroom alignment and expectations management techniques.
In order to have alignment across the enterprise regarding the roles and objectives of the supply chain, a clearly documented strategy is required in order to achieve and sustain agreed upon corporate goals. This plan must be supported with simple user friendly and intuitive output reporting. In this newsletter, I will lay out a framework for senior supply chain executives and their boardroom peers to achieve superior corporate results and to deliver these results through an important function called the “supply chain.”
Customer service and P&L results as Enterprise Goals
The COO and CFO will see the supply chain from different vantage points and thought processes. This gap will widen as the supply chain’s performance is reviewed and interpreted across the balance of the executives and managers within the organization. Most supply chains are required to support many internal and external customers.
While many business unit leaders may wrestle with corporate goals and objectives, few will have issues with “improved customer service” and improved “operational costs.” Improved “in stock” positions and “transactional costs per unit” will usually get enterprise support. A focus on five to six metrics, supported by a well structured plan, is all that most boardrooms need in order to drive amazing enterprise performance.
Gap Analysis & Building the Plan
Once you have achieved corporate alignment on goals and objectives, it is imperative that you complete a “gap analysis” across the enterprise and determine where you have your biggest issues. This is a critical next step and will serve as your foundation in determining corporate asset requirements (budgets, people) and timelines in achieving and sustaining performance to the agreed-upon goals and objectives i.e. managing expectations.
Communicate and educate with user friendly reporting
This may also seem like a simple piece of the puzzle. However I have seen many companies constantly changing and wresting with the content and format of output reporting created to provide performance to goals and objectives. This can be extremely counter-productive. It is important to remember some of our senior business associates have little supply chain background. They should not be expected to have a grasp of (nor should they care) the minutiae of complex supply chain reporting. All plans must be supported by intuitive, user friendly reporting that is digestible in the boardroom. Utilizing some simple “reporting best practices” will go a long way in maintaining the hard won buy-in and removes all the speculation on performance vs. goals and objectives. As an example, trending (YTD or YOY) will provide a clear picture of performance to plan. Figure 1 shows how a client strategically focused on reducing Home Delivery lead times over a three year, leading directly to a reduction in “Stop Rate” costs over a similar period and producing a significant, visible P&L impact. The boardroom clearly “got it” at this client and the head of supply chain continued to enjoy all the support needed to achieve the corporate objectives.
Figure 1: Improved customer experience accompanied by better financial performance