This might not come as a surprise to some of you, but the results of a survey conducted by Tompkins Supply Chain Consortium TompkinsSurvey indicate that companies are now more likely to have an executive level supply chain leader.
The survey’s executive briefing, titled The Structure of Today’s Supply Chain Organizations, notes that throughout the past five years, the organizational level of the most senior supply chain executive has gradually moved higher. Nearly half of the retail and manufacturing companies surveyed have a supply chain leader at or above the executive vice president level.
As supply chains become more dynamic and agile, organizations must be able to keep pace, says Bruce Tompkins, executive director of the consortium and author of the brief. Additionally, these companies have begun to realize the significance of having a high-level supply chain executive influence their business strategies, he says.
The functions reporting through the more senior supply chain executives are growing as they become consolidated under one organization and one leader. Transportation, distribution center operations, network design and planning functions are now commonly the responsibility of a senior executive, Tompkins says.
However, there still is significant opportunity for better communication and integration of supply chain functions, according to Tompkins. But as companies discover these opportunities for improvement, they increasingly share resources across divisions and business units.
The need for executive presence certainly makes sense, because as Kevin O’Marah recently posted on his Gartner blog KevinO’Marah’sblog, while the supply chain was a servant of production in the 1980s, it became much more rather quickly.
Indeed, by 1990, the supply chain was beginning to gain importance as directors of materials management started to influence engineering with smart ideas about better sourcing, and operations research personnel started to effect asset utilization in plants and distribution networks with advanced math, O’Marah says. Today, the head of supply chain, in most major manufacturers and retailers, is influencing margins, time to market and customer retention with strategic capabilities that matter to investors.
This isn’t really surprising when you consider the scope of supply chain operations or its budget.
For example, according to Gartner research, IT budgets typically represent anywhere between 2 percent and five percent of revenue--depending on industry. Meanwhile, supply chain management—encompassing direct materials sourcing, manufacturing operations, packaging, handling and transport—is likely to account for as much as 20 percent of revenue including not only technology such as order management systems or planning algorithms, but also machinery, buildings, freight contracts and more. What’s more, big money is increasingly spent each year on bets that merge industrial technology such as conveyor belts and forklifts with information age technology such as sensors, inventory tracking systems and web order forms, O’Marah says.
What about your company? Does it have a chief supply chain officer? What about supply chain vice presidents? Do they, as O’Marah suggests, have hard-line authority over only a portion of the process and consequently must influence the traditional owners of manufacturing or forecasting via dotted lines?