I recently had the pleasure of spending a few hours with the global leadership team of Lenovo's supply chain organization, and I was left with the impression of a rising star. Without betraying too many secrets, I can safely say this group is doing a lot of what we preach when we say "demand driven." For instance, the company's annual report shows so much respect for the importance of supply chain that the Senior Vice President of Global Supply Chain Gerry Smith is featured in a full-length photo alongside the chairman of the board, CEO and other top leaders. The CEO has also charged the team with shaping the business and taking it past the traditional role of servant.
Much has been written about how to structure a supply chain organization. Our three-circle model of a demand-driven supply network (supply, demand and product - for more on this, see DDSN: 21st Century Supply on Demand) has been around since 2005 as a high-level blueprint, but of course it's a lot easier to do in PowerPoint than in reality. The ideal is an end-to-end value chain approach, with hard-line control over at least sourcing, manufacturing, logistics and planning, plus some dedicated resources (e.g., people and budget) to manage new product development and launch (NPD&L) as well as customer fulfillment. Lenovo not only has this ideal covered, it also owns the very important function of getting paid by customers. "End to end" in this context truly means "cash to cash."
Supply chain metrics is another topic we've covered extensively, with The Hierarchy of Supply Chain Metrics: Diagnosing Your Supply Chain Health still standing as the most-read supply chain research of all time at Gartner. Lenovo is all over this, too. The organization seems to have boiled down its key metrics to only a handful (five, as of now), with team ownership of achievement. This dashboard offers clarity of goals and progress made against them. It also makes "balanced excellence" a straightforward concept that's easily articulated across constituencies that traditionally compete, such as sales and operations.
Lenovo's ideal structure may reflect its excellent bloodlines. Building as it has on the original IBM PC business, the company's supply chain organization carries the DNA of people who did great things with design for supply chain and rationalized component sourcing and inventory planning. Perhaps even more important, the structure reflects data on which we've previously reported that says Chinese companies have a far wider span of control for supply chain than North American or European companies. Our 2010 field study found that, in China, supply chain owns manufacturing (60 percent), post-sales support (82 percent) and NPD&L accountability (73 percent) twice as often as in the United States.
None of this is to say Lenovo is perfect. The AMR Supply Chain Top 25 for 2010 doesn't include the company among its well-publicized membership. And it's not only a matter of votes either. According to our calculations, return on assets and growth were far from outstanding in last year's analysis. What does seem fair, however, is to look at Lenovo as a good test case of what being demand driven can accomplish.
I can be reached at firstname.lastname@example.org.
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