Executive Briefings

So Having a Chief Supply Chain Officer Isn't Such a Great Idea After All?

Over the past couple of decades, supply chain management has become a crucial concern for multinational firms. In our super-connected world, firms must maintain a handle on the way products, supplies and people are zipping around the planet. Companies that streamline the links between their suppliers, manufacturers, distributors and subsidiaries can realize a distinct advantage over rivals that have not yet caught on to the importance of high-functioning logistics and purchasing departments. Indeed, research has identified several aspects of supply chain management that can boost firms' bottom line.

But has the need for efficient supply chain management translated into a demand for supply chain expertise? Following the seminal observation of the great business historian Alfred D. Chandler that "structure follows strategy," it stands to reason that we should see more leading firms hire executives with backgrounds in supply chain management, and that the firms' performance should outpace their competitors as a result.

Turns out that's only partly true.

A study from researchers at the Swiss Federal Institute of Technology in Zurich—the first empirical attempt to document the presence and impact of supply chain managers on large U.S. firms—shows a long-term, gradual increase in the number of chief executives responsible for supply chain management, even though most firms have cut down on the size of their top management team. That’s great news for supply chain jockeys and their advocates. But the study also contains a bit of not-so-great news. It turns out that firms that have a chief supply chain officer post lower operating profit margins than those without one.

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But has the need for efficient supply chain management translated into a demand for supply chain expertise? Following the seminal observation of the great business historian Alfred D. Chandler that "structure follows strategy," it stands to reason that we should see more leading firms hire executives with backgrounds in supply chain management, and that the firms' performance should outpace their competitors as a result.

Turns out that's only partly true.

A study from researchers at the Swiss Federal Institute of Technology in Zurich—the first empirical attempt to document the presence and impact of supply chain managers on large U.S. firms—shows a long-term, gradual increase in the number of chief executives responsible for supply chain management, even though most firms have cut down on the size of their top management team. That’s great news for supply chain jockeys and their advocates. But the study also contains a bit of not-so-great news. It turns out that firms that have a chief supply chain officer post lower operating profit margins than those without one.

Read Full Article