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Supply Chain Strategy and the Boardroom

Solving Efeso and the Cranfield School of Management conducted a multi-year study on how companies approach supply chain strategy at the boardroom level, correlating specific practices with supply chain performance and business success. Steve Mayhew, principal consultant at Solving Efeso, discusses the study and highlights key findings.

The purpose of the research project that Solving Efeso conducted with the Cranfield School of Management in England was to understand how companies approach supply chain strategy development and implementation, says Mayhew. “We also wanted to identify the ‘banana skins’ that trip companies up and how to avoid them,” he says.

In addition to finding increased attention to supply chain issues at the boardroom level, Mayhew says the research documented a change in the breadth of supply chain positions. “A growing proportion of supply chain directors now have responsibilities for sourcing, making and after-sales service, which typically have been in different functional silos,” Mayhew says. “This trend indicates that more people are being developed with the ability to manage the big picture supply chain all the way through.”

A number of boardroom actions relative to the supply chain correlate with higher levels of success, Mayhew says. One of the most important is aligning supply chain strategy across the business. “Keeping supply chain strategy as a functional project is a good way to fail,” Mayhew says. “It’s certainly easier not to have to convince all those marketing and production and finance people of your point of view, but when you have different functional areas actually involved in the strategic work, you then have the joint energy needed to drive through recommendations. That leads to business solutions rather than functional solutions.”

Another key indicator of success is the use of quantitative tools like LLamasoft’s Supply Chain Guru. “These tools allow companies to agree on and model the current situation so they can then model various options, which gives them a quantitative fact base on which to base decisions,” Mayhew says. “Companies that fall behind often do so because they make decisions based on someone’s gut feeling – usually the person with the strongest personality.”

The biggest boardroom failure indicated by the research is the lack of senor executive support for strategic decisions, Mayhew says. “This means that the board needs to be actively involved and not just delegating down to someone,” he says. Downward delegation too often results in people at lower levels working very hard to develop a strategy, only to have the board knock it down because it is not consistent with other things going on in the business. “I would say the failure of boards to be actively involved cross-functionally is the biggest trap,” he says.

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