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Catalysts for Supply Chain Transformation

Analyst Insight: Supply chain transformation requires a business-aligned supply chain strategy and change management prowess. At its core, it is about change. Gartner defines supply chain transformation as a step function change in supply chain performance that is sustained for more than one year. Data from 30 in-depth interviews, hundreds of inquiries and interactions with Gartner clients during the past 18 months revealed the key drivers of supply chain transformations. - Michael Dominy, Research Director, Gartner Supply Chain Leaders

Catalysts for Supply Chain Transformation

Supply chain transformations are almost always driven by forces outside the company, are part of a larger business transformation and deliver differentiated supply chain responses that impact customer experience or profitability "”often both. Supply chain transformation requires a change to at least two supply chain processes and involves two or more of the following:

"¢ Roles and responsibilities of individuals within the supply chain organization

"¢ Metrics and incentives used to manage and govern supply chain performance

"¢ Implementation or expanded use of supply chain technology, supply chain outsourcing or other supply chain services

Companies are transforming their supply chains from internal, linear, cost-focused operational functions to externally oriented, customer segment aligned demand-driven value network. The reason for the transformation is always company-specific and influenced by industry dynamics; however, we found six key attributes or underlying forces behind most supply chain transformations. Not all of these attributes apply to every transformation, but we often saw the following attributes present when companies embarked on a supply chain transformation:

1. The loss of customers and declining market share resulting from technological innovations that usher in products and competitors from existing or adjacent markets

2. Eroding margins or slowing revenue growth as a result of competition from existing and new players in current or developing markets

3. Financial pressures related to the overall economy, regulation or taxes, or from investors and boards

4. A realization that the supply chain function is internally focused and structured to support only one customer segment, thereby limiting its ability to profitably support the different, changing and expanding requirements of a wide variety of customers

5. The need to change the planning and operation of the supply chain as the result of a merger or acquisition

6. Executive support and involvement for the transformation with leadership driven from a business unit or operations

Although our research found that a visionary leader can create the case for change, most of the true sustainable drivers are the result of some external force. These external forces can be thought of as "push" drivers, while the internal forces created by a leader within the company can be thought of as "pull" drivers. The pull drivers are based on one person's vision, and are dependent on that person's power, expertise and position in the organization. When this person leaves, so does much of the change. Push drivers are the external forces that move us. Leaders come and go, but these forces pushing on us do not.

                                                        The Outlook

Whether transformation involves the seemingly mundane, such as integrating functions, or something more extensive, such as expanding in new markets, the catalyst for change can be linked to customers, competitors or investors. Supply chain leaders can only transform their organizations and processes if at least one of these drivers is present, and they can identify how the changes to the supply chain capabilities are linked to them.

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