Executive Briefings

Supply Chain Transformation Hits a Brick Wall …

Supply chains are driving fundamental and transformational changes in today's organizations. More than that, supply chains challenge the very mental models and core processes that guide most of what people do at work. They challenge the prevailing organization paradigm, requiring significantly more focus on customers, horizontal relationships, integrative thinking, and dynamic and continuous adaptation. These values are difficult to consistently reinforce and support in siloed structures and can't be changed by sophisticated technology alone. Thus, all the promise of supply chain transformation hits an inevitable brick wall!

In the traditional organization, decisions and actions are heavily influenced by internal (vs. customer) requirements, vertical (vs. horizontal) relationships, functional (vs. integrative) thinking, and static/periodic (vs. dynamic) management processes.  While internal, vertical, functional, and periodic ways of thinking continue to play a role, the balance must shift in order for the real benefit of end-to-end supply chains - the ability to operate as a high value network - to be realized.

Technology and new supply chain structures and processes can help organizations to become more able to operate across boundaries within and between organizations.  But this is not enough:  the way people everywhere in the organization think and the mental models that guide their day to day actions must also be recast.

We must influence the structures inside people's minds as well as the structures and processes of organizations themselves.

Imagine these situations:

• A purchasing specialist is working on a problem related to stockouts at the end of the supply chain.  Her manager asks her to launch a study related to cost reduction for a series of parts.  She can't meet the deadlines for both.  Without thinking, she drops her work on the stockout problem and scurries to do her boss's bidding even though she thinks it is less important in the bigger picture.  The vertical allegiance has won out - without questioning or a tradeoff discussion about the larger business impact.

• A manufacturing manager accelerates production of a product to meet end-of-month production goals even though he has early warning information that customer needs are shifting.  His performance review is heavily weighted on the production measure, so he ignores the other signals.

• A product engineer misses several meetings of a cross-functional task team to investigate shifts in consumer usage patterns because he knows that participating won't increase his potential for promotion to the product manager job he desires.

• A customer calls the retail store to complain about the performance of a product.  The service agent says, "that isn't our problem; call the manufacturer."

• A leadership team has identified five strategies that require cross-organization cooperation.  The leaders articulate the strategies and then delegate in functional pieces down the vertical chain of command with no strong accountability links across the silos.

• A production worker notices indicators of a problem with his line.  He covers up the problem fearing a backlash and hoping that it will be resolved before the quarterly production numbers are in.  The problem results in defective products that are only noticed at the customer end and after a period of usage time.

In all of these examples, the person - regardless of level or function - has opted to favor internal over customer, vertical over horizontal, silo-focused vs. integrative, and static vs. dynamic actions.  The structures in their minds dictated actions that sub-optimized the supply chain - the value network.

One quick way to determine what structures exist in peoples' minds is to ask, "Please draw the organization and show where you are in it!"  If people draw the traditional organization chart and show where their boxes are, then they will probably bring that way of thinking to their minute-to-minute decisions and actions.  If they draw a network that also includes the customer and everyone else in the end-to-end value network, then it is likely that their daily work will reflect this and the tradeoffs it implies.

What to do about the structures in people's minds - their mental models?  Begin to change the following:

• the way you visually depict the organization and how it works (show the network)

• the stories about great performance (emphasize the horizontal, including impact on customers)

• the rewards you provide (for cooperation and winning with customers)

• the organization's accountability management/goal management processes (horizontal as well as vertical)

• the organization's way of managing strategies and changes into the business, and beyond that, into the value network with customers, partners and suppliers

If you want an organization/value network that is customer focused, horizontally oriented, thinks integratively, and is dynamically adaptable - then the place to begin and end is with the mental models of the people whose day-to-day decisions and actions comprise your REAL strategy - the strategy that actually gets done!

Source: GoalStreams LLC


Keywords: supply chain management, value chain, supply chain, integrative thinking, supply chain transformation

In the traditional organization, decisions and actions are heavily influenced by internal (vs. customer) requirements, vertical (vs. horizontal) relationships, functional (vs. integrative) thinking, and static/periodic (vs. dynamic) management processes.  While internal, vertical, functional, and periodic ways of thinking continue to play a role, the balance must shift in order for the real benefit of end-to-end supply chains - the ability to operate as a high value network - to be realized.

Technology and new supply chain structures and processes can help organizations to become more able to operate across boundaries within and between organizations.  But this is not enough:  the way people everywhere in the organization think and the mental models that guide their day to day actions must also be recast.

We must influence the structures inside people's minds as well as the structures and processes of organizations themselves.

Imagine these situations:

• A purchasing specialist is working on a problem related to stockouts at the end of the supply chain.  Her manager asks her to launch a study related to cost reduction for a series of parts.  She can't meet the deadlines for both.  Without thinking, she drops her work on the stockout problem and scurries to do her boss's bidding even though she thinks it is less important in the bigger picture.  The vertical allegiance has won out - without questioning or a tradeoff discussion about the larger business impact.

• A manufacturing manager accelerates production of a product to meet end-of-month production goals even though he has early warning information that customer needs are shifting.  His performance review is heavily weighted on the production measure, so he ignores the other signals.

• A product engineer misses several meetings of a cross-functional task team to investigate shifts in consumer usage patterns because he knows that participating won't increase his potential for promotion to the product manager job he desires.

• A customer calls the retail store to complain about the performance of a product.  The service agent says, "that isn't our problem; call the manufacturer."

• A leadership team has identified five strategies that require cross-organization cooperation.  The leaders articulate the strategies and then delegate in functional pieces down the vertical chain of command with no strong accountability links across the silos.

• A production worker notices indicators of a problem with his line.  He covers up the problem fearing a backlash and hoping that it will be resolved before the quarterly production numbers are in.  The problem results in defective products that are only noticed at the customer end and after a period of usage time.

In all of these examples, the person - regardless of level or function - has opted to favor internal over customer, vertical over horizontal, silo-focused vs. integrative, and static vs. dynamic actions.  The structures in their minds dictated actions that sub-optimized the supply chain - the value network.

One quick way to determine what structures exist in peoples' minds is to ask, "Please draw the organization and show where you are in it!"  If people draw the traditional organization chart and show where their boxes are, then they will probably bring that way of thinking to their minute-to-minute decisions and actions.  If they draw a network that also includes the customer and everyone else in the end-to-end value network, then it is likely that their daily work will reflect this and the tradeoffs it implies.

What to do about the structures in people's minds - their mental models?  Begin to change the following:

• the way you visually depict the organization and how it works (show the network)

• the stories about great performance (emphasize the horizontal, including impact on customers)

• the rewards you provide (for cooperation and winning with customers)

• the organization's accountability management/goal management processes (horizontal as well as vertical)

• the organization's way of managing strategies and changes into the business, and beyond that, into the value network with customers, partners and suppliers

If you want an organization/value network that is customer focused, horizontally oriented, thinks integratively, and is dynamically adaptable - then the place to begin and end is with the mental models of the people whose day-to-day decisions and actions comprise your REAL strategy - the strategy that actually gets done!

Source: GoalStreams LLC


Keywords: supply chain management, value chain, supply chain, integrative thinking, supply chain transformation