Executive Briefings

The Secret Sauce to Supply Chain Orchestration

In Gartner's four-stage maturity model, we call the most mature companies - the ones in Stage 4 - "orchestrators." Not many are here, though. In fact, what we see most often is pockets of Stage 4 excellence.

Let's delve into this term "orchestration" and see what it really means in supply chain. According to dictionary.com, "orchestrate" means "to arrange or manipulate, especially by means of clever or thorough planning or maneuvering." Freedictionary.com defines it as "[arranging or controlling] the elements of, as to achieve a desired overall effect." Synonyms include organize, coordinate, facilitate, plan, mastermind, harmonize, symphonize, integrate, compose, balance and unity. However, most companies are still in Stage 2, and the realization of these characteristics is still only aspirational.

Orchestration describes a value-driven organization that is consciously excellent. This ability to make conscious choices and to understand the trade-offs comes from advanced capabilities in information management, demand sensing and shaping, cost-to-serve analysis, end-to-end segmentation, simulation and analytics. It requires strong collaboration internally and externally.

Every successful company has multiple projects on the go to achieve these capabilities, but most can't get out of Stage 2. So, what's the secret sauce for the leaders? What do the best in our Supply Chain Top 25 ranking do to keep them there year after year? It may sound like "same old, same old," but the success of moving up the maturity curve and sustaining those capabilities boils down to these three factors:

• Having the right organizational design and talent
• Having the right culture and governance that manages change
• Having the capability to continuously enhance processes and the enabling technology to support good decision making, or what we call becoming consciously excellent

Investing in a culture that embraces change is paramount when creating a supply chain organization that can orchestrate and is resilient. Here's what the best continuously do:

Embrace outside-in thinking, and learn from those that have cultures that constantly challenge, question and push the envelope of the status quo embedded in their DNA. These companies invest in people focused solely on this - on centers of excellence (COEs) or strategy groups. These people don't have other "day jobs." Dell provides a great example with its recent implementation of segmentation (see Case Study for Supply Chain Leaders: Dell's Transformative Journey Through Supply Chain Segmentation).

Invest in training and supply chain capabilities, continuously raising the bar on talent, process integration and technology enablement. Change backed by clear strategy that's backed by deep analysis is easier to drive. Look no further than Dow Chemical for a leader in understanding the importance of the right mind-set and change management. Additionally, Insights From the Supply Chain Top 25: Unilever's Product Supply Strategy Focuses on Manufacturing Excellence describes how the company took a customer-centric, end-to-end view of product supply. And in the very traditional supply-centric A&D environment, Raytheon proves that any industry can move to the next level (see Supply Chain Transformation in the Manufacturing Sector: Raytheon Company).

Empowerment is key. Consider this seemingly simple but hugely impactful change: A very successful distributor had strict rules, which are typical in its industry, for changing inventory policies. However, when the recession hit in 2009, this cumbersome process created a bottleneck. The distributor empowered lower levels to make quick decisions on inventory, which served it well through the downturn and when the economy picked up.

Define the vision, and give people stretch goals to help them get there. The vision must look beyond the norm, embrace out-of-the-box thinking and rewrite the rules of traditional best practices, if needed. It must be enabled by a well-defined burning platform, compelling vision and a road map. However, organizations must have the capacity to change - vision without the capacity and a road map is signing people up for frustration and burnout. For examples of out-of-the-box thinking, Amazon went against the norm and opened up its e-commerce platform to sell competitor products, and Zara manufactures in some of the most expensive locations in Europe.

Here are two final thoughts - the first for companies in Stage 1 or Stage 2 that are still focused on supply chain excellence, and the next for the more mature:

• If your focus is still just supply chain, that's a problem. You need an executive-led, value chain transformation program in place to break out of those inward-looking shackles and start driving value. Value is joint value and outcome-driven - consider profitable perfect orders for trading partners versus the traditional on-time, in-full delivery metric.

• For the leaders mastering value chain transformation, what's beyond orchestration? If orchestration implies the coordination, harmonization and arrangement by the mastermind - the orchestrator of the enterprise - then surely what comes next in our intricate global environment is the need to do this across multiple networks and enterprises in a way that's overlapping, but synchronized. So, for those of you who have Stage 4/orchestrate capabilities or vision, is choreography the next level of capability to which you should aspire? Do your planning capabilities really allow you to choreograph your global network?

Source: Gartner

In Gartner's four-stage maturity model, we call the most mature companies - the ones in Stage 4 - "orchestrators." Not many are here, though. In fact, what we see most often is pockets of Stage 4 excellence.

Let's delve into this term "orchestration" and see what it really means in supply chain. According to dictionary.com, "orchestrate" means "to arrange or manipulate, especially by means of clever or thorough planning or maneuvering." Freedictionary.com defines it as "[arranging or controlling] the elements of, as to achieve a desired overall effect." Synonyms include organize, coordinate, facilitate, plan, mastermind, harmonize, symphonize, integrate, compose, balance and unity. However, most companies are still in Stage 2, and the realization of these characteristics is still only aspirational.

Orchestration describes a value-driven organization that is consciously excellent. This ability to make conscious choices and to understand the trade-offs comes from advanced capabilities in information management, demand sensing and shaping, cost-to-serve analysis, end-to-end segmentation, simulation and analytics. It requires strong collaboration internally and externally.

Every successful company has multiple projects on the go to achieve these capabilities, but most can't get out of Stage 2. So, what's the secret sauce for the leaders? What do the best in our Supply Chain Top 25 ranking do to keep them there year after year? It may sound like "same old, same old," but the success of moving up the maturity curve and sustaining those capabilities boils down to these three factors:

• Having the right organizational design and talent
• Having the right culture and governance that manages change
• Having the capability to continuously enhance processes and the enabling technology to support good decision making, or what we call becoming consciously excellent

Investing in a culture that embraces change is paramount when creating a supply chain organization that can orchestrate and is resilient. Here's what the best continuously do:

Embrace outside-in thinking, and learn from those that have cultures that constantly challenge, question and push the envelope of the status quo embedded in their DNA. These companies invest in people focused solely on this - on centers of excellence (COEs) or strategy groups. These people don't have other "day jobs." Dell provides a great example with its recent implementation of segmentation (see Case Study for Supply Chain Leaders: Dell's Transformative Journey Through Supply Chain Segmentation).

Invest in training and supply chain capabilities, continuously raising the bar on talent, process integration and technology enablement. Change backed by clear strategy that's backed by deep analysis is easier to drive. Look no further than Dow Chemical for a leader in understanding the importance of the right mind-set and change management. Additionally, Insights From the Supply Chain Top 25: Unilever's Product Supply Strategy Focuses on Manufacturing Excellence describes how the company took a customer-centric, end-to-end view of product supply. And in the very traditional supply-centric A&D environment, Raytheon proves that any industry can move to the next level (see Supply Chain Transformation in the Manufacturing Sector: Raytheon Company).

Empowerment is key. Consider this seemingly simple but hugely impactful change: A very successful distributor had strict rules, which are typical in its industry, for changing inventory policies. However, when the recession hit in 2009, this cumbersome process created a bottleneck. The distributor empowered lower levels to make quick decisions on inventory, which served it well through the downturn and when the economy picked up.

Define the vision, and give people stretch goals to help them get there. The vision must look beyond the norm, embrace out-of-the-box thinking and rewrite the rules of traditional best practices, if needed. It must be enabled by a well-defined burning platform, compelling vision and a road map. However, organizations must have the capacity to change - vision without the capacity and a road map is signing people up for frustration and burnout. For examples of out-of-the-box thinking, Amazon went against the norm and opened up its e-commerce platform to sell competitor products, and Zara manufactures in some of the most expensive locations in Europe.

Here are two final thoughts - the first for companies in Stage 1 or Stage 2 that are still focused on supply chain excellence, and the next for the more mature:

• If your focus is still just supply chain, that's a problem. You need an executive-led, value chain transformation program in place to break out of those inward-looking shackles and start driving value. Value is joint value and outcome-driven - consider profitable perfect orders for trading partners versus the traditional on-time, in-full delivery metric.

• For the leaders mastering value chain transformation, what's beyond orchestration? If orchestration implies the coordination, harmonization and arrangement by the mastermind - the orchestrator of the enterprise - then surely what comes next in our intricate global environment is the need to do this across multiple networks and enterprises in a way that's overlapping, but synchronized. So, for those of you who have Stage 4/orchestrate capabilities or vision, is choreography the next level of capability to which you should aspire? Do your planning capabilities really allow you to choreograph your global network?

Source: Gartner