In few years only, Supply Chain Management became one of the trendiest topics for organizations facing globalized markets. But in parallel, it also remained one of the foggiest topics for managers at every level. Sticking to logistics origins, we could stand our ground on initial Supply Chain Management definition (a system reaching all processes, flows and resources needed to deliver the right product/service at the right place, in the right timing, with the right quality, quantity and cost). But I think the best way for Managers to keep an up to date vision is to have a clear understanding of the main trends shaping business environment. Through this exercise, we clearly see how the essence of Supply Chain Management (systemic approach, vision sharing, animation principles…) is essential to face all challenges emerging.
STATEMENTS |
|---|
#1 Value chain schemes involve a growing complexity for business Management
KEY TOPIC?
COMPLEXITY
ELEMENTS OF UNDERSTANDING?
The complexity of a system is usually defined by the incapacity for a given actor to correctly and entirely understand:
- The environment surrounding him
- Other actors' understanding about this environment
- Nature and purpose of actions led by other actors
Complexity is now inherent to every globalized organization
Globalization and international exchanges booming turned Supply Chains into a giant juxtaposition of actors more or less contributing to value creation for clients. A simple mapping exercise reveals how complex SC became.
A complexity clearly found in nature of challenges that Supply Chain Managers are facing in execution of daily operations. From strategic to operational layers, topics assessed are pushing further SCM discipline.
A Knowing that Over last decade, evolution of consumer needs largely contributed to the multiplication of those challenges.
It involves higher risks for business activities
Numerous actors involved and
interactions generated combined to
higher expectations at customer side
(BtoB and BtoC taken together) have
extended the exposition of globalized
Supply Chain to various risks
Among these risks, disruption scenario is the
most sensitive one according to SC Managers
Sources: 1: Global Survey, Mc Kinsey, 2010/ 2: Supply Chain Impact Survey, Cap Gemini, 2013/ 3: Future of Supply Chain, SCM World, 2016
#2 Needs for Flexibility, Reactivity and Coordination make older models obsolete
KEY TOPIC?
FLEXIBILITY
REACTIVITY
COORDINATION
ELEMENTS OF UNDERSTANDING?
Facing 21st century stakes, the best Supply Chains are the ones able to combine:
- The ability to efficiently face demand variabilities (flexibility)
- The ability to be responsive and shorten lead time (reactivity)
- The ability to raise / align each function on the exact same level of operational excellence (coordination)
Answering modes used by older models are clearly overstepped
Potential contribution of Supply Chain Management basics is still underestimated
This lack of vision at top management level is penalizing implementation of rupture scenarios
And daily execution of processes becomes a fire fighter job not allowing to conceive performant and relevant answers for business challenges
That conception impacts process efficiency and lowers Supply Chain performance
The comparison between overstepped models and top of the breed actors demonstrates the consistent impact of under performing Supply Chain on company's performance
It also involves a major risk of losing
the customers deceived by the service
Sources: 1: Future of Supply Chain, SCM World, 2016 /2: Global Supply Chain Survey, PwC, 2013 / 3: Supply Chain Impact Survey, Cap Gemini, 2013
#3 Technological revolution acts as a trend amplifier
KEY TOPIC?
TECHNOLOGICAL
REVOLUTION
ELEMENTS OF UNDERSTANDING?
Late technology developments are impacting Supply Chain professions on two distinct axis:
- Information management (through digital revolution happening on tools themselves and on data mastering with big data analytics or block chain technology development for example…)
- Process revamping (mainly linked to democratization of advanced technologies as robots, automatized …)
New technologies are at the center of high expectations for SC managers
Supply Chain Managers fully rely on newly developed tools to support Supply Chain performance. These new technologies are powerful to higher the level of animation within SC (systemic approach, customer centricity, management systems, performance tracking…).
Among all tools proposed, some are particularly viewed as rupture innovation
Adhesion level varies in function of business sectors and nature of existing stakes (pressure on Quality, Costs or leaD time...)
And they are contributing to shake Supply Chain definition
New technologies are offering to customer a fully new access to the offer generating in return high variability multiplying scenarios and changing the way to approach Supply Chains
Sources: 1: Supply Chain talent of the future, Deloitte, 2015 / 2: Future of Supply Chain, SCM World, 2016
TRANSFORMATION AXIS |
|---|
#4 Operational Excellence forms a powerful approach for transformation plan set up
KEY TOPIC?
OPERATIONAL
EXCELLENCE
ELEMENTS OF UNDERSTANDING?
Operational Excellence is the modern variation of Lean Manufacturing designating the Continuous Improvement mindset used to refocus activities on Value Added expected by customer.
Coming from automotive it’s articulated around 3 axis:
- Process stability (waste hunting, process reingineering…)
- Built in quality (standardization, mistake preventing systems…)
- Just In Time (continuous flow, closed loops, takt time mngt…)
Profitability is a major concern within Supply Chain performance tracking
As a main contributor to operating costs, Supply Chain directly drives the operating margin of companies. Assessing, challenging and reducing these costs is now on a daily preoccupation for Managers.
Operational Excellence methodology is now largely spread to improve this profitability
Major part of organizations have at least a first awareness on Operational Excellence toolbox. Most advanced ones are maintaining
a constant rhythm for new workshop implementation.
They mostly used OE as a turnkey
methodology to improve process efficiency and
introduce a new mindset regarding people development
Various axis of improvement can be assessed using the Lean toolbox
Sources: 1: Global Supply Chain Survey, PwC, 2013 / 2: International operational excellence survey, Eurogroup Consulting, 2013
#5 Fully aligned business models are on top of best practices
KEY TOPIC?
BUSINESS
MODEL
ELEMENTS OF UNDERSTANDING?
A Business Model basically defines high level strategy to be
deployed by a brand to generate revenues. This model directly drive the organization mindset and impact Supply Chain performance.
Most advanced actors (Amazon, Ikea, Zara...) demonstrate higher
performances thanks to business models integrating Supply Chain as a structuring element of their DNA.
Best practices of Supply Chain all developed a easily recognizable model
Sector: E-commerce
Position: “Largest internet based
retailer in the world”
Net sales 2015: 107b$
Employees 2015: 231 000
Business model at a glance:
Always seeking for innovation to
gain market share, test new markets
and/or drastically reduce prices for
customers. Started from book retail
in 1994 and spread progressively to
become one of Internet big 4 of
with Apple, Google, and Facebook.
Now in position of 1st non food
retailer in several major countries.
Supply Chain alignment:
Supply Chain is supporting cost
efficiency model by implementing
best of breed processes. Global
strategy is including needs regarding
logistics capacity extension. It leads
to most advanced inventory mngt
rules in warehouses, to drone
testing for transportation…
Sector: Home furnishing retail
Position: “World’s leading multi
channel home furnishing retailer”
Sales 2016: 34.2b€
Employees: 164 000
Business model at a glance:
Built an entire model on customer
experience maximization within
furniture market (range rotation,
product practicality, good value for
money, creation of a shopping
experience). Became a case study
for marketing students worldwide.
Supply Chain alignment:
IKEA first succeeded in fitting the
item development within business
environment (short time to market,
design to logistics…) while capturing
changing expectation of customers.
Then SC has always supported both
business and profitability needs
(successful multi channel
implementation, pooling of sourcing
for key sub components…).
Sector: Garment retail
Position: “One of the world’s largest distribution groups”
TO 2016: 23.3b€
Employees: 153 000
Business model at a glance:
Range management is at the center of organization with rotation of collections every 15 days and time to market divided by 4 compared to competitors (1 month vs 4). ZARA is the creator of Fast Fashion approach that is the origin of brand’s success (only 18% of items needs to go through sales vs the double for competitors).
Supply Chain alignment: Footprint is entirely designed to meet time to market needs. Only
permanent collections have far
shore sourcing, high speed rotation articles are sourced from near shore suppliers (Spain in some cases). Processes are fitted
accordingly.
Fully aligned strategies allow Supply Chain Management to express its full potential
"Companies that acknowledge Supply Chain as a strategic asset achieve 70% higher performance"
Sources: 1: Global Supply Chain Survey, PwC, 2013 / 2: SC Management Benchmarking Series, PMG, 2000
#6 Refocus on green supply chain should/ may occur soon
KEY TOPIC?
GREEN
SUPPLY CHAIN
ELEMENTS OF UNDERSTANDING?
Emerging from a global awareness around environmental concerns, Green Supply Chain gathers all initiatives led to reduce impact of business activities.
As of today, 3 topics have consistent maturity:
- Gross reduction of carbon footprint for process
- Pooling of logistics resources used
- Modal transfer of transportation needs
Green Supply Chain softly appears among preoccupation list of SC Manager
Environment is still far from trendiest topic but it’s regularly progressing since early 2000s following customer expectation for a “greener” consumption.
Various areas of improvement have been targeted by companies. Optimization of physical flow is the most promising one, being supported by different types of initiatives.
But concrete applications are driven by expected gains on economic side
At this stage, cost savings frequently lie behind Green Supply Chain implementation explaining the relative lateness of concept implementation
And nature of business relationships is not pushing further developments
Sources: 1: Global Survey, Mc Kinsey, 2010 / 2: Executive Survey on SC Sustainability, Alix Partners, 2013 / 3: Future of Supply Chain, SCM World, 2015
KEY ENABLERS |
|---|
#7 Control of information/ data is vital
KEY TOPIC?
INFORMATION
ELEMENTS OF UNDERSTANDING?
Daily Management of Supply Chains is pushing the need for a more transversal vision over business activities. Data handling become critical to capture this vision and take arbitration accordingly. KPI definition (calculation method, scope, target, top down cascading...) and dashboard set up are a basis to give Managers the right levers to drive SC efficiency.
Manual and overpassed handling of data is still the norm for a major part of organizations
Supply Chain Managers are largely
unsatisfied regarding the mode used for data
handling in their organization. Lack of vision on
activity is highly penalizing as it reduces the capacity to understand activity profiles,
profitability conditions and develop answering
modes for each upcoming scenario.
Economical actors are progressively investing on this axis (with various appetites) in order to catch up
Whereas Information Systems are now fitted to build a full vision over SC efficiency
Basic exercises and routines of SC Management are benefiting from automatization of data treatment
Most advanced actors are using information to have a full understanding of performance before initiating actions
Sources: 1: Supply Chain Impact Survey, Cap Gemini, 2013 / 2: Pain in the Supply Chain survey, DHL, 2013 / 3: Future of Supply Chain, SCM World, 2015 and 2016 / 4: Global Survey, Mc Kinsey, 2010
#8 Manager behaviors drive team understanding and involvement
KEY TOPIC?
MANAGER
BEHAVIOR
ELEMENTS OF UNDERSTANDING?
The right animation of Supply Chain (systemic approach, customer
centricity, combination of right tools / mngt systems / performance Tracking) entirely rest upon SC Managers capacity to:
- Create a strategical vision coming from business model and impacting Supply Chain implementation
- Align the organization on this strategical vision with an important focus on people understanding and commitment
- Set up and respect Management routines that will support performance tracking and business efficiency research
SC Managers became the rare birds of modern organizations
SC Managers need to constantly balance their job between strategic and operational levels, between profitability focus of steering committees and “hands on” arbitration requested by middle management. In terms on profile, it results in an interesting mix able to drive transformation plans that come ahead of Supply Chains.
Definition of a vision for Supply Chain at Top Management level is a powerful enabler
General awareness of Top Management regarding Supply Chain stakes is now globally good. But vision on applicable scenarios and understanding of sensitivities is still weak.
Sources: 1: Future of Supply Chain, SCM World, 2015 / 2: Supply Chain Chain Talent of the Future, Deloitte, 2015 / 3: Supply Chain impact survey, Cap Gemini, 2013 / 4: Global Survey, Mc Kinsey, 2010
#9 Misalignment of skill market and business needs is impacting organization design
KEY TOPIC?
SKILLS
ELEMENTS OF UNDERSTANDING?
Looking at all the functions and positions involved in a Supply Chain, the Human Resource Management is inevitably a complex puzzle. Ignored for a while by management education world, the needs for logistics competencies is not fully matched today. A situation fed by the changing environment and the new challenges appearing regularly for SC people.
Resources of Supply Chain form a combination of several different natures of competencies
Know-hows and soft skills are both part of the package needed by leaders driving Supply Chains (for middle Management to operational levels)
And talent acquisition is a challenging exercise
Facing difficulties to identify and keep
Supply Chain talents, organizations adapt their fishing approach
An adaptation quickly needed as job creations are increasing in Supply Chain field for most of the markets worldwide
Sources: 1: Supply Chain Chain Talent of the Future, Deloitte, 2015 / 2: Supply Chain impact survey, Cap Gemini, 2013 / 3: Future of Supply Chain, SCM World, 2015
