In a paper titled, A New Approach to Sustainable Supply Chain Excellence, Zaklad et al. are of the opinion that supply chain executives tend to fall prey to two fatally flawed approaches to performance improvement. One approach has to do with the tendency to treat every operational problem as if it is a technology problem. The second faulty approach is to ignore or overlook the people factor. Since managers often feel ill-equipped to deal with the people issues, they too often get ignored, putting critical supply chain projects at unnecessary risk of failure. To create and sustain supply chain excellence, an integrative improvement system will prove to redress these flawed approaches, help set you on your way towards a world class global supply network, and ultimately delight your customers.
Supply chain management is no longer the Cinderella of the business world. For many executives, achieving end-to-end supply chain excellence has become a top priority. Yet, even though it represents one of the most exciting opportunities to create value, delight customers and build market share, the supply chain remains one of the most confusing and least understood aspects of the business landscape.
Excellence in supply chain management is a combination of operational effectiveness and added value performance. Each participating enterprise must skilfully manage all the functions involved in fulfilling its stage of the extended supply chain. The more skilful they become, the better able they are to increase customer loyalty, win market share and improve free cash flows for themselves and the extended supply chain. Several studies indicate that superior performing supply chains increase free cash flows — the key driver of shareholder value — by up to 20% on average. It is therefore clear that supply chain excellence is a crucial engine of sustained economic growth.
As the world becomes increasingly boundaryless, major multinational organisations are realising that they must not only cut costs across their global supply chains, but also position themselves to capture new market opportunities, innovate to differentiate themselves from the competition, and become adept at managing social, political, geographical, and other business challenges. This is a common quest among all organisations, but achieving and sustaining it often proves to be a very steep hill to climb — largely owing to a lack of skills development and the deployment of piecemeal improvement initiatives as opposed to an integrative approach.
Several studies indicate that superior performing supply chains increase free cash flows by up to 20% on average.
To attract the people and skills needed for the future, organisations need to tick the boxes in response to the following three questions:
- Are your assessment of skills set requirements and your people development and recruitment activities keeping up with the changing needs of your customer and supply chain strategies?
- Are you making the appropriate investment in in-house development and future talent programmes? Do you have the metrics in place to assess the return on such investments?
- What are the opportunities for shared initiatives across your supply chain or with other companies in your sector?
The delighted customer
Delighting customers almost always requires innovation, as customer expectations are constantly increasing. What delighted customers five years ago, is expected today. And what delights customers today will be expected soon.
Delighting the customer through outside-in innovation is not just profitable — it is immensely profitable. That’s ultimately why it has to become a business imperative. Its conquest of the business world is inevitable — and not only because the people doing the work are happier or because it extends the life expectancy of a firm, generates jobs, and fuels the growth of the economy. The real driver of its inevitability is that it makes more money for those organisations that accomplish it.
Delighting customers ideally requires a broadscale integrative improvement approach— based on customer desires — that consistently provides excellent results. “However,” cautions Jeanne Reisinger, Global Supply Chain Improvement Strategist and retired Procter & Gamble veteran of some 32 years’ standing, “as you start on the journey of integrative improvement, it is important to realise that not all systems are created equally.”
According to her, some are:
- internally focused without the commanding drive to meet evolving customer needs
- focused just on operations when in reality 80% of the opportunity resides outside the four walls of the plant
- focused within a single function or a single business unit and end up suffocating in an unsupportive corporate atmosphere
- focused on day-to-day operations but don’t account for the regular upset to the status quo that comes from new product introductions and initiatives
- unable to address the vision and the culture itself that is required to sustain the improvement over time as leaders and strategies change
Integrative improvement therefore needs to address these scenarios. According to Jeanne most improvement programmes only last three to five years and then they die out. “This often happens because the programme has a single, strong champion who then moves on, or the company has a history of ‘programme of the month/year’ and people ‘wait it out’, or the programme lacks reinforcement through the rewards and recognition initiative. To overcome these barriers, you need an approach that involves the entire multifunctional leadership team committing to integrative improvement and making it a core element of the culture that is explicitly supported by training and development, promotion and pay, and recognition and rewards. It needs to become an element of the culture rather than just a programme.”
Delighting customers ideally requires a broadscale integrative improvement approach — based on customer desires — that consistently provides excellent results.
Once the commitment to an integrative improvement culture is made and the supportive structures are in place, the transformation can begin. The first step in delighting the customer is to know the customer. You therefore need to create a customer insight process, knowledge management system and communication plan.
The insight process must include all functions that interface with the customer — Sales, Customer Service, Distribution, Marketing, and Finance. A process is needed to gather details on each customer’s product, price, promotion, and service expectations. But having the information is only the first step; analysing it and making it accessible through knowledge management is also required. The final step is to formalise this multifunctional work process where the data is reviewed and evaluated against current supply chain capabilities, and where tactical and strategic interventions are executed to close the gaps.
Drive horizontal process excellence
“The reason why improvement programmes within a single business or functional silo often fail is that they are not inclusive — they are run by key experts and the people that actually execute the work processes that sustain the company are left out,” says Jeanne. “The improvement programme needs to be structured around these work processes, and can be done either formally through a process-oriented organisation structure, or informally through horizontal process teams or Implementation Task Forces.
“These critical horizontal work processes take many shapes. Some are housed within a single discipline but have many handoffs with other functions. For example, the Demand Planning process is usually part of the Sales or a Supply Chain discipline but has interfaces that include Sales, Marketing, Manufacturing, Procurement, Finance, Supply Chain, and the customers. The Supply Planning process is usually part of the Manufacturing or Supply Chain discipline, but has interfaces that include Demand Planning, Manufacturing, Supply Chain, Finance, Procurement, R&D, and Marketing.
You need an approach that involves the entire multifunctional leadership team committing to integrative improvement and making it a core element of the culture …
“Other horizontal processes follow a life cycle — Procure-to-Pay and Hire-to-Retire are two examples. All of the many horizontal work processes need to be fully aware of their role in meeting segmented customer service requirements. The people involved in the processes need to be structured into teams. This will be ‘ground zero’ for the integrative improvement process. These teams will define input, process and output measures. They will map their processes, identify opportunities, and implement the improvements. The experts who work in the system will now work on the system.”
Writing on The W. Edwards Deming Institute blog, John Hunter also makes the point that organisations should strive to move satisfied customers into the ambit of delighted customers. “A delighted customer base provides a strong foundation for the company. A satisfied customer base provides the opportunity to try and keep their business.” This, coupled with an integrative improvement approach and a continuous search for trends that will raise the bar, will lead to your sustained success in the market.
This resource has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained herein without obtaining specific professional advice. Competitive Capabilities International (CCI) does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this resource or for any decision based on it.