The Supply Chain myth

The Supply Chain topic has risen progressively from early 2000s to become an essential part of business approach today. Surprisingly it remained in parallel one of the foggiest topic for people within companies whatever the function they hold.

Birth and story of a myth

The development of Supply Chain theory started with the idea that each process in the value chain should be considered as a contributor of the performance delivered to the final client. The approach aims at digging into logistics processes (procurement, warehousing, transportation, kitting, reverse…), understanding their efficiency factors and adopting a systemic approach to establish strategic and operational links between them.

The revolution around Information and Communication Technologies has supported the development of these interactions by facilitating the information brewing. Data mastering became strategic to drive the business and win competitive advantages, turning Information Systems into vital tools. Progressively they’ve been able to cover every Supply Chain process; we gave them acronym names (ERP, WMS, TMS…) and we stepped into the Supply Chain 2.0.

Few years after, more technologies were developed (RFID, SaaS, APS, automatization, Drones, Block Chain…), more theories were defined (DDMRP, flowcasting, shared inventory management, omni channel distribution…); Supply Chain Management is for good a strategic component of companies' performance.

L'impact de la révolution technologique sur la Supply Chain

Listening to experts, we should even be by now in the 4.0 era.

The widening gap

Looking at examples coming lately from western / historical retailers and OEMs, let’s have a doubt and let’s say that pragmatism is essential in front of the various level of maturity we can face in terms of Supply Chain Management.

​Retailers and OEMs cases are interesting as they both show the reality of problematics that Managers are facing, far from theorizing theories. First ones spent the last years searching for the good solution to address the needs of online market in front of pure players that still handle 99% of this limitless business. The second ones are facing more and more issues with delivery delays and capacity to align rank 1 (even rank 2) suppliers on expected deliverables (Quality / Cost / Lead Time).

​Everyday life is focused on very basic questions:

  • How to maintain competitiveness across all channels handled?
  • How to secure supplies while more and more items are coming from far shore countries?
  • How to handle high variations in demand?
  • How to stick to initial planning? 
  • How to drive the upstream chain and eradicate risks of shortage (even sometimes in link with financial issues at supplier side)?
  • How to deal with extreme customizations needed?

As a consequence, having a conversation with a Supply Chain Manager these days is pretty interesting as they generally try to peck here and there for revolutionary solutions while revamping regularly the organization searching for the right formula. Drown in the profusion of concepts and tools, Managers tend to lose the essence of Supply Chain Management while everything starts with their ability to build and share a vision.

The DNA shortage

Standing out of the crowd, a couple of economic actors are showing a great ability to meet customer demand and create value based on the way they fit their organization. No mystery on that, every world class actor has bet on a Supply Chain entirely designed to make processes flexible and efficient, to speed up the flows and optimize resources needed.

Apple, Decathlon, Dell, Ikea or Amazon, Intel, Mac Donald’s and Unilever (if we want 4 names sticking to the Gartner 2016 top 25 Supply Chain organizations), these are concrete examples of successful application of SCM.

If you run opinion surveys, you’ll find that each of these companies have a strong and easily recognizable identity. They rely on identifiable models: Apple and its pioneer technologies, Ikea and its shopping environment, Dell and its customization offer, Decathlon and its positioning with reinforced own brands.

Do you think it’s only Marketing? Have a second thought and you’ll see that all of these companies are relying on a strong and highly flexible logistic organization. Marketing model pull/align Supply Chain models, Apple and its inventory focus, Ikea and its design to cost approach, Dell and its online BtoB platform, Decathlon and its vertically integrated strategy.

Supply Chain Management remains a myth as most of the companies are not even able to do this exercise of definition of their identity. They are not able to characterize a DNA, to create a vision around this DNA and to align every people within organization with this DNA.

Best of breed entities are on top, thanks to their ability to run this exercise, to align operational processes on strategic vision, and we can see all the positive effects it has on their Supply Chain Management approach.

L'importance de l'ADN pour créer sa vision autour
Managers: Light! Camera! Action!

Then converting a corporate identity into operational application is THE job of Supply Chain Manager. He has to define, to size and to implement the Processes, Flows and Resources needed to secure the feasibility and profitability of the strategy defined by top management. As a result, it requires a set of behaviors and skills pretty unique, bridging strategical and operational approaches.

Strategy ownership, ability to share a vision with teams, self-confidence and self-discipline are key elements giving form to behavior axis. It’s a complex cocktail needed to bring flexibility, reactivity and coordination within the organization.

Operational experience, knowledge of Management toolkit, and ability to define and roll out logistics Master Strategies are the basic skills needed for SC Managers. They are essential to structure the Supply Chain and focus operations on expected delivery (Quality / Cost / Lead Time).

Supply Chain Management remains a myth as most of the Managers acting are vision-less and stress-full for their team (stress resulting from a lack of confidence and discipline). They don’t have time to do their homework, logistics Master Strategies are rarely correctly defined. And their lack of vision is generating a lot of short term decisions based on local constraints and local results expected. Managers are firemen, constantly pulled in operational topics and unable to step back in order to find how to reach strategic targets through operational means put in place.

No one to blame here, Managers are suffering from two distinct problems:

  1. ​Incompatibility of initial formations with job market needs (regarding Supply Chain profiles);
  2. Lack of support developed by companies when they integrate/promote managers. Management has never been so theorized but, in parallel, Management components have never been so ignored.

​What is the consequence?

Say that you work in a warehouse or in transportation, say you handle order processing or inventory Management, everybody will have a rough idea about what you’re doing.

Say you are a Supply Chain Manager you’ll lose 80% of the audience including in your own company.

Nothing complex, it’s just time to go back to basics, time to work on the shared vision and time to align the organization, this is how Supply Chain will earn its stripes.