Executive Briefings

If Scrooge Can Change, So Can Supply Chains

Ebenezer Scrooge had three spirits to worry about. Supply-chain executives can do better than that: they're haunted by at least five major nightmares. And while the list won't come as a surprise to anyone who's struggling to maintain a reliable flow of product during both a literal and figurative winter, it does offer some possible strategies for surviving until the spring thaw.

The intelligence comes to us courtesy of Karen Butner, global lead for supply chain management within IBM's Institute for Business Value (http://www-935.ibm.com/services/us/gbs/bus/html/bcs_whatwethink.html). She spoke at a recent IBM-sponsored conference in San Francisco on the theme of smarter supply chains. Butner was reporting on the results of the company's latest Chief Supply Chain Officer Study, which surveyed more than 400 executives in 25 industries and 25 countries. The responses were gleaned from one-on-one interviews, each lasting up to an hour and a half.

Number one on the hit list, cited by 70 percent of survey subjects, was visibility. No surprise there: companies large and small routinely complain of their inability to track the progress of raw materials, components and finished goods through the supply chain. Such failure leads to many nasty surprises and unhappy customers.

The root causes of a lack of visibility are many, said Butner. They include organizational silos, which inhibit internal collaboration (cited by 75 percent of respondents); performance measures that don't reward those who do manage to collaborate (68 percent); technology tools that don't support said collaboration (63 percent); a general management attitude that cross-functional collaboration isn't important (52 percent), and concerns over the protection of intellectual property, further hindering efforts at - you guessed it - collaboration (31 percent). In terms of specific functions, the biggest communication gaps come in the areas of inventory and demand planning, said Butner.

Second on the list of woes, mentioned in 60 percent of survey responses, is risk. Chief obstacles are, in descending order of frequency, a lack of process standardization, data standardization, enabling technologies, proper corporate culture, the right organizational structure, process controls that integrate with logistics operations, and good financial management. The biggest gap between industry leaders and "others," said Butner, centers on the former's use of event-management techniques, tied to strict tolerances, in order to monitor disruptions in the supply chain.

Number three, at 56 percent, is the growing demand for service, or, as Butner put it, the need for "customer intimacy." Only 5 percent of respondents said they were collaborating with customers on demand planning "to a very great extent." On the other hand, 67 percent named the correct identification of customer needs as "the most significant challenge in bringing new products and services to market."

Leaders in this area are deploying sophisticated sales and operations-planning tools, integrating their demand and supply-planning applications, and involving both suppliers and customers in the forecasting and planning process, Butner said.

The fourth executive worry is cost containment, with respondents slashing expenses in order to improve organizational efficiency (69 percent), support enterprise growth initiatives (54 percent) and achieve competitive advantage (48 percent). Evidently the phrase "stay in business" wasn't offered as an option by the survey's conductors.

Fifth is the continuing challenge of globalization, which for many businesses combines the blessing of cheap labor and materials with the curse of lengthy supply lines and poor communication with suppliers. Eighty percent of the respondents citing this problem named delivery issues and the reliability of supplier commitments as their chief concern, according to Butner. Also mentioned were deficiencies arising from longer lead times (76 percent), inconsistent product quality (75 percent) and a lack of adequate capital (76 percent).

As if that weren't enough spirits for one Christmas season, Butner added sustainability and people skills, the latter related to the nurturing of leadership talent.

Not to rule out any chance of improvement; even the odious Scrooge transformed himself into a new man overnight. Business can expect to take a little longer, but there's reason for hope. New technologies for transforming the supply chain offer tools that automate transactions, bring together trading partners and track inventory on a real-time basis. ("That's real-time, not near-time," said Butner. "I'm tired of being shy about [insisting on] that.")

Maybe it all starts with the designation of a single individual as chief supply chain officer. Or optimizer. Or collaborator. Or orchestrator. The important thing, said Butner, is having one person "who's managing all those global assets."

And, it should be added, claims the respect of his or her organization. Only 46 percent of the chief supply chain officers responding to the survey report directly to the chief executive officer, Butner noted. Twelve percent report to a chief financial officer - prime candidates, I'd venture to say, for this year's Bob Cratchit Misery Award.

I'll have more on the IBM Smarter Supply Chain Conference in my next post.

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Ebenezer Scrooge had three spirits to worry about. Supply-chain executives can do better than that: they're haunted by at least five major nightmares. And while the list won't come as a surprise to anyone who's struggling to maintain a reliable flow of product during both a literal and figurative winter, it does offer some possible strategies for surviving until the spring thaw.

The intelligence comes to us courtesy of Karen Butner, global lead for supply chain management within IBM's Institute for Business Value (http://www-935.ibm.com/services/us/gbs/bus/html/bcs_whatwethink.html). She spoke at a recent IBM-sponsored conference in San Francisco on the theme of smarter supply chains. Butner was reporting on the results of the company's latest Chief Supply Chain Officer Study, which surveyed more than 400 executives in 25 industries and 25 countries. The responses were gleaned from one-on-one interviews, each lasting up to an hour and a half.

Number one on the hit list, cited by 70 percent of survey subjects, was visibility. No surprise there: companies large and small routinely complain of their inability to track the progress of raw materials, components and finished goods through the supply chain. Such failure leads to many nasty surprises and unhappy customers.

The root causes of a lack of visibility are many, said Butner. They include organizational silos, which inhibit internal collaboration (cited by 75 percent of respondents); performance measures that don't reward those who do manage to collaborate (68 percent); technology tools that don't support said collaboration (63 percent); a general management attitude that cross-functional collaboration isn't important (52 percent), and concerns over the protection of intellectual property, further hindering efforts at - you guessed it - collaboration (31 percent). In terms of specific functions, the biggest communication gaps come in the areas of inventory and demand planning, said Butner.

Second on the list of woes, mentioned in 60 percent of survey responses, is risk. Chief obstacles are, in descending order of frequency, a lack of process standardization, data standardization, enabling technologies, proper corporate culture, the right organizational structure, process controls that integrate with logistics operations, and good financial management. The biggest gap between industry leaders and "others," said Butner, centers on the former's use of event-management techniques, tied to strict tolerances, in order to monitor disruptions in the supply chain.

Number three, at 56 percent, is the growing demand for service, or, as Butner put it, the need for "customer intimacy." Only 5 percent of respondents said they were collaborating with customers on demand planning "to a very great extent." On the other hand, 67 percent named the correct identification of customer needs as "the most significant challenge in bringing new products and services to market."

Leaders in this area are deploying sophisticated sales and operations-planning tools, integrating their demand and supply-planning applications, and involving both suppliers and customers in the forecasting and planning process, Butner said.

The fourth executive worry is cost containment, with respondents slashing expenses in order to improve organizational efficiency (69 percent), support enterprise growth initiatives (54 percent) and achieve competitive advantage (48 percent). Evidently the phrase "stay in business" wasn't offered as an option by the survey's conductors.

Fifth is the continuing challenge of globalization, which for many businesses combines the blessing of cheap labor and materials with the curse of lengthy supply lines and poor communication with suppliers. Eighty percent of the respondents citing this problem named delivery issues and the reliability of supplier commitments as their chief concern, according to Butner. Also mentioned were deficiencies arising from longer lead times (76 percent), inconsistent product quality (75 percent) and a lack of adequate capital (76 percent).

As if that weren't enough spirits for one Christmas season, Butner added sustainability and people skills, the latter related to the nurturing of leadership talent.

Not to rule out any chance of improvement; even the odious Scrooge transformed himself into a new man overnight. Business can expect to take a little longer, but there's reason for hope. New technologies for transforming the supply chain offer tools that automate transactions, bring together trading partners and track inventory on a real-time basis. ("That's real-time, not near-time," said Butner. "I'm tired of being shy about [insisting on] that.")

Maybe it all starts with the designation of a single individual as chief supply chain officer. Or optimizer. Or collaborator. Or orchestrator. The important thing, said Butner, is having one person "who's managing all those global assets."

And, it should be added, claims the respect of his or her organization. Only 46 percent of the chief supply chain officers responding to the survey report directly to the chief executive officer, Butner noted. Twelve percent report to a chief financial officer - prime candidates, I'd venture to say, for this year's Bob Cratchit Misery Award.

I'll have more on the IBM Smarter Supply Chain Conference in my next post.

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