Realising the potential: SC as an integral part of business strategy

29 Mar

The first quarter of the year is extremely busy for me, as it is when I have the bulk of my teaching. I have the pleasure of teaching the principles of demand driven supply chains (also known as demand chain management) to Master students on the Strategic Marketing and Logistics and Supply Chain Management programmes. This year my teaching was inter-leafed with some industrial visits to Beiersdorf, Rolls Royce and Babcock and a meeting of my Supply Chain Responsiveness in Practice (SCRiP) collaborator forum. This combination of activities challenged me to look at some of my views and perspectives on supply chain responsiveness is a new light. It high lighted to me that to truly harness the power of the supply chain it needs to be elevated beyond a functional activity. That the organisations that excel in supply chain management do so because it is an integral part of their business strategy and is not an add-on. This had three immediate insights for me:

1. The power of integrated business processes to create flow both within a business, and with its upstream and downstream supply chain partners. 

Srivastava (1999) identified 3 key integrated business processes:

  • New Product Development (NPD)
  •  Customer Relationship Management (CRM)
  •  Supply Chain Management (SCM)

Increasingly organisations are adding a layer above their matrix structures. An integrated process level. It draws upon the resources within the business to drive improvement in the integrated business processes. An approach that Beiersdorf is successfully adopted.

2. Segmentation is a business level (not a supply chain) strategic decision

For the last 10 years I have looked at the concept of supply chain segmentation and have considered it to be a supply chain decision. It is not. As an integral part of business strategy the decision to segment needs to be endorsed and supported by the board as it will fundamentally change the way in which the organisation delivers value. This is supported by evidence from organisations such as Kimberly-Clark (KC) Europe who have successfully implemented supply chain segmentation.

3. Don’t call it supply chain management

Unfortunately supply chain now has many personal connotations. For some it is supplier management, others a name for logistics and transportation, and a small proportion the full range of activities required in managing the flow of cash, materials and information from customers through internal operations to the supply base.  The problem is that perspectives are very confused. To break this confusion I have seen a real shift in practice, back to the 1980’s and Michael Porter’s concept of the value chain and value chain management. This term seems to capture the spirit of the integrated end-to-end ethos, and aligns well with the concept of integrated business processes.

These reflections inspired me to write a short executive report that summarised my work over the last 10 years in supply chain segmentation in a way that is more accessible to the board. A copy of which can be downloaded from the SCRiP website at:

http://www.som.cranfield.ac.uk/som/p15820/Research/Research-Centres/Centre-for-Logistics-and-Supply-Chain-Management/Supply-Chain-Research-Centre/Supply-Chain-Responsiveness-in-Practice/Resources

Responsible Capatalism: What can your business do?

29 Mar

The bonus announcements from the major UK banks back in February provided the back-drop for a political plea for more responsible capitalism. I found this debate somewhat ironic for two reasons.

Firstly, it was not new. It was the same observation that Henry Ford made around 100 years ago when he observed:

‘As betting at the ring adds neither strength nor speed to the horse, so the exchange of shares in the stock market adds no capital to the business, no increase in the production and no purchasing power to the market’

Secondly, as the Government currently owns a large percentage of two banks why does it not take action?  If it is so keen on responsible capitalism why not develop a new banking model for these banks based on the principles of responsible capitalism. Create the John Lewis Partnership equivalent of banking. I am no expert, but key features could include:

  • A senior management team who are happy with a capped salary that are generous but in line with a largely publicly owned organisation. For instance, the MD of John Lewis was happy to admit that his circa £500k salary was fair reward for the job that he did, even though peers in public listed companies earned significantly more. Let the bank be led by leaders with a similar outlook, and who will not jump ship to earn more elsewhere.
  • Employees are partners and share equally in the rewards and can vote on certain aspects of the development of the business
  • Superior customer service
  • A creative blend of innovative thinking with a respect for tradition
  • Simple portfolio of ethical products that are transparent and based on sound financial principles

People would use (indeed I think flock) to the bank as they believed in its values. The products and services that they offered would be transparent, fair and provide superior customer service. Alas I am not a banker and my ideas may not be feasible. However, I do think those who understand the industry more fully could explore the idea… What do you think the John Lewis of banking could look like?

Let this be food for thought to all in the supply chain. To take time to reflect on what the principles of responsible capitalism may mean to your organisation and the way in which it does business. Reflect on my final quote from Henry Ford:

‘Competition whose motive is merely to compete, to drive some other fellow out, never carries very far. The competitor to be feared is one who never bothers about you at all but goes on making his own business better all the time. Businesses that grow by development and improvement do not die.’

Insights from Boston in the Fall

22 Nov

I am visiting Boston to attend the Decision Sciences Institute 42nd Annual conference (November 19th – 22nd 2011). It never fails to amaze me where the supply chain and resultant issues can appear.

One dimension of management is the ability to make decisions. The challenge for the supply chain manager is to make decisions regarding the supply chain. For senior managers in the supply chain this is the ability to be able to make strategic supply chain decisions. But what exactly is a strategic supply chain decision?

I have recently been having this debate with a number of senior supply chain decision makers. As I entered into the debate I had a preconception that certain decisions would be strategic and others operational.  Through these discussions I realised that this was an oversimplified view. The strategic or operational nature of a SC decision was related to the organizational context.  

  • Strategic SC decision – closes a gap with an aspect of  the business strategy
  • Operational SC decision – closes a gap with an aspect of the supply chain strategy 

For instance, for companies who are contracted by the Government to keep our defence assets operational over a number of years, supplier selection is a strategic decision as it is business critical to ensure continuity of supply of parts and is a strategic supply chain decision. In contrast the sourcing of commodity items (e.g. cardboard) by consumer packaged goods manufacturers is part of the procurement strategy, a facet of the supply chain strategy and could be considered as an operational SC decision.

Whilst being in Boston there are 2 insights that I would like to share and seek your opinion.

Insight 1: The MIT Lemonade story – Strategic vs. operational SC decisions

My first insight comes from the Massachusetts Institute of Technology (MIT). A short and fun video that uses kids making lemonade as a way to illustrate the challenges of supply chain management and promote their SCM programme.  You can view it on:

http://www.youtube.com/watch?v=gBRrG0-SA1I

It identifies 9  decision-making areas for the supply chain manager:

  1. Sales and Operations Planning
  2. Inventory Management
  3. SC Risk Management
  4. Logistics Information Technology
  5. SC Strategy Development
  6. Global Logistics Operations
  7. Strategic Sourcing
  8. Network Optimization
  9. Global Sustainability

Many of these focus areas align with the findings of the recent Crimson & Co study (see my 1st post) but are more generic and without the same degree of granularity. I would be interested in knowing which of these areas resonate most with you and your organization and if they represent strategic or operational SC decisions.

Insight 2: B-good burger – The benefits of private ownership & ‘limited’ scale 

B-good burger have made the decision to  “make fast-food ‘real’ by making it the way it should be… by people not factories”. This decision has had major implications for their business model and the resultant supply chain strategy.  There are only 8 stores in the Boston area. The menu is kept simple and wholesome and the ingredients are all sourced locally.  This enables the company to deliver high quality fast food, that is a true pleasure to eat and supports the local economy.  It is a business with strong values that shape the whole value chain.

For more information visit: http://www.bgood.com/realpeople.php

It demonstrates that ownership and ‘limiting’ the scale of operations can  have a major impact on the ability to make decisions. Private (particularly family) ownership enables a longer term perspective so decisions can be made that benefit the organisation in the long run. 

The speed of decision-making has a relationship with company size. From my experience  I would suggest that decisions can be made quickly and relatively informally in a company with less that 400 employees. When the company grows above this size, the decision-making processes need to be formalised and this can slow down the decision-making process.

A good example  in the UK is the Northern retailer Booths. A  successful family owned retailer with only 29 stores in the North-West of England, strong ethical values and a preference for local sourcing. For more information visit:

http://www.guardian.co.uk/business/2011/nov/13/supermarkets-big-competition-booths

Your thoughts on these insights would be most appreciated.

About

21 Nov

About.

SC Insights from Indiana

10 Nov

Have just seen a press release on the results of the annual Indiana Manufacturing survey. Whilst the insights are from one state in the US they give sound advice to all in the supply chain.

Quote:

“The survey also revealed specific business, manufacturing and  supply chain strategies for manufacturing to be competitive. First, superior product design and customer service are keys to new growth. Second, smart manufacturing and process improvements lead to financial success. Third, supply chain integration is linked to better customer service and inventory control. Together, these findings suggest that the roadmap for successful manufacturing consist of:

• Crafting a business strategy that features superior design and delivery for new products as well as outstanding customer service for more mature goods.

• Picking a path in terms of manufacturing improvement. The strongest strategies are those featuring either advanced smart manufacturing technologies or process improvements (or both).

• Leveraging upstream suppliers and downstream customers in the supply chain. Since no manufacturing company operates in a vacuum, manufacturers working together with their customers, suppliers and transportation providers reported significantly better performance versus those that do not. “

Treacy & Wiersema (1994) state that there are 3 strategies for success:

  1. Customer Intimacy
  2. Product innovation
  3. Operational Excellence

The results of this survey would suggest that to compete in today, companies need all 3 and extend them beyond the boundaries of the organisation too!

 For the full press release of the survey go to: http://www.insideindianabusiness.com/newsitem.asp?id=50728&ts=true

For the full results of the survey: www.ksmcpa.com/2011_indiana_manufacturing_survey

 

 

The Challenge of Supply Chain Management (SCM) – Join the Conversation !

9 Nov

This week has seen Crimson & Co. publish the top  supply chain 10 challenges. They are the result of interviews by Crimson & Co. with 300 senior decision makers across 200 different companies and include:

  1. Inventory management and Planning
  2. Demand Management and Forecasting
  3. Supply Chain Network Optimization
  4. Supply Chain Segmentation
  5. Training and Development
  6. Supply Chain Risk Management
  7. Sales and Operations Planning
  8. Performance Improvements in Warehouses and RDC’s
  9. Material Purchase Price Reductions
  10. Green Supply Chains

Full details are available at: http://www.supplychaindigital.com/global_logistics/top-10-supply-chain-concerns-of-2011

Criticism directed at academics is that we can lack relevance to practice. Studies of this kind are useful to academe for two primary reasons.

1) Helps academics ensure that they are doing research that is actually relevant to practice (extremely important if you work at a University like Cranfield that prides itself on turning knowledge into action)

2) Identifies the areas that organisations may require support (e.g. consultancy, bespoke research, MSc projects,  learning and development and recruitment)

My career has been split 50:50 between industry and academia and at the heart of my personal value set is the desire to turn knowledge into action and improve the practice of supply chain management (SCM).  SCM as a term has been around for over 30 years (first invented as many things are today by consultants)… but it is still a very immature field. Ask a room full of supply chain managers to define supply chain management and every one of them will give you a different answer. Whilst recent studies (e.g. AMR in 2010) have shown an increase in SC representation on the board, when you look beneath the surface there are still huge differences in the span of control and responsibility of the so-called SC directors; with only a small minority having full control of the core supply chain processes (plan-source-make-deliver).

I start this blog as a way of providing both the students I teach and companies I work with the opportunity to share the insights that I gather almost every day. Sometimes they are small, and other day’s (like Monday) a bit more significant (but more of that on my next entry). As a dear friend of mine constantly reminds me ‘every day is a learning day’. In this way hopefully we can share and develop insights and together improve the practice of SCM.

Those who know me, know I like to talk, and love to create new ideas by co-creating them in conversation with others. This blog is a way of enabling me to talk and for those who want to, to listen and hopefully enter into the conversation. I hope you chose to join.

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