In the third article of his series, Roddy Martin, senior vice president, global supply chain at Competitive Capabilities International, draws the conclusions on how to fully transform a supply chain into a demand-driven system that can ensure sustained competitiveness.
Building global capabilities agile enough to scalably and profitably meet rapidly changing global and local demand and risk has pushed leading manufacturers to critically examine and transform their approach to end-to-end supply chains. These initiatives are being led top down by the most senior leaders in the business.
Even at a functional leader level, recent studies among business and supply chain executive peers are pointing to the fact that there is broad recognition that the end-to-end supply chain is the business operating strategy, is a critical capability in the competitiveness equation, and that current supply chains must be transformed as a top business priority. The challenge is that change is transformational because it fundamentally impacts the way the business currently operates and prioritises work. We all know that change management is not necessarily the strongest component of leadership in the supply chain and manufacturing business.
The transition from push-driven efficient supply systems constrained by cross-functional visibility, a cost reduction focus, and a focus on functional outputs challenges the status quo in traditional companies (especially those that operate in a long connection of business to business partners) that don’t necessarily “see” a buyer of the end product or service – for example, industrial manufacturers and suppliers – and changes many aspects of the business we regarded as a given:
- Functional goals and collaboration processes;
- Information technology and information management;
- Organisation design and supply chain skills.
Underpinning the challenge and amplifying the priority is the fact that requirements for agility and responsiveness to market change and risks on both the supply and demand side of the business are critical to its survival and success.
Leaders like P&G, Cisco, Unilever and Dell, to name a few, are already on this transformational journey and are leading the strategy from the top of the global business.
The capability to sense and translate demand changes as they occur into desired end-to-end business outcomes is lining up to define today’s leaders. Think Apple and how they build supply chains around products (and not vice versa) and shape buying behaviors through technology innovation.
Today’s leadership challenge is to successfully transform the linear business supply system to the customer into an end-to-end set of processes starting with the buying customer. Linear supply systems focused on forecasting and reliable supply must build the agility to profitably sense and shape demand in a value network.
The implications are not trivial and require a change in leadership and performance management. While cost efficient manufacturing is important, customer service levels and account profitability are what really counts in the business results.
From previous articles I wrote, a few fundamentals are cornerstones:
- This is a transformation journey;
- Understanding maturity in performance improvement initiatives is critical;
- Understanding the fact that the business has four interdependent management systems that must be synchronised and aligned – three being technology focused and the highest being the business operating system and the way the business actually operates. Business change cannot continually be accommodated in the technology and must be supported by a flexible business model based information and decision support layer.
All these elements are such important measures of business competitiveness that leaders are developing the business operating strategy to be the guiding execution framework that prioritises work and governance to build the end-to-end synchronised supply chain process capabilities.
This has generally always been the case, but today’s challenge lies specifically in “integratively” executing all people, process and technology elements of the business operating strategy in aligned and synchronous execution programmes and initiatives. Integration is sufficient but not enough!
In particular, it’s not an easy task to connect people, process, and technology dots across the business and build new sustainable process capabilities through projects and a project management office (as stated in a previous article). Leaders like P&G, DuPont, Toyota, and Kellogg’s have built integrative improvement management systems to guide the transformation journey.
The integrative improvement system codifies the transformation of traditional supply chain, IT, human resources, demand planning and continuous performance strategies and functions into end-to-end process capabilities. Integration of a set of projects and systems focused on cutting costs and improving functional cycle times is no longer enough!
“Integrative” is a new term, but one familiar to the life sciences industry. It refers to the following recommendations I made in the last two LMJ articles:
- The transformation journey is multi-year and top down across the end-to-end business;
- The journey must simultaneously accommodate and address globally different markets, cultures, and states of change readiness across the business;
- Integrative improvement means systematically progressing along performance improvement capability stages while maintaining goal alignment and business process integration at every stage of the journey. This all while the business keeps operating (not unlike changing the design of an airplane while it is in flight);
- Systems, enablers and platforms such as IT, organisation structures, change management, and CI must evolve with the stages of performance improvement maturity.
Leaders already on this journey have been working the “integrative angle” for years.
The net result is that these businesses are already seeing outcome results. For example, one leading consumer goods company returned 300% of the business impact of a stock out problem back to the business by looking end-to-end. This return was used to fund the business transformation.
The key takeaway is to deploy an integrative improvement system that codifies the capability building journey and guides the transformation work across the business.