As an analyst, one of my biggest surprises is how slowly supply chain processes mature. I liken it to watching paint dry on the wall. You cannot see it, but slowly–and sometimes ever SO slowly–it dries. I often have difficulty predicting the speed and the final color, but have had success predicting the general direction.
What is Supply Chain Excellence?
Last week, I presented at the Chief Supply Chain Officer (CSCO) Summit in Chicago (reference slideshare presentation http://www.slideshare.net/Altimeter/for-the-csco-conference-final) on supply chain excellence. I am currently analyzing 20 years of balance sheet data to track individual company progress to drive supply chain excellence. As I shared in my talk, I don’t believe that supply chain excellence can be defined by putting all companies in a spreadsheet and shaking it up. Instead, I believe that supply chain excellence is defined by:
§ Resilience: I believe it is defined by a company’s ability to drive year-over-year progress against their peer group. I don’t think that you can evaluate a supply chain based on one or two year’s performance against an all-industry list. Instead, the trend needs to be over time against their peer group.
§ Balance: I also believe that managing a supply chain is like running a decathlon It is one where you want to be good at all events, but you need to make trade-offs between individual events to win the competition. For me, the supply chain decathlon is trading off growth, working capital, asset utilization, and profitability (earnings before taxes and interest). The key is making conscious choice. I believe supply chain leaders raise the bar higher each year driving new levels of performance while making these trade-offs. I can see this in the data.
§ Focus on Value-based Outcomes. I also believe, based on interviews, that supply chain leaders believe that the supply chain is an engine of growth. It also offers an opportunity to build new business models. The best known examples of this are Dell make to order/ship direct model, funding the supply chain by negative working capital, Apple’s introduction of itunes, and General Motors introduction of Onstar. For leaders, it is about MUCH more than supply. It is about redefinition of the platform to drive new value based outcomes.
Moving from a Focus on Supply to Value-Based Outcomes
Opportunities abound to power growth through value-based outcomes. At the conference, I spoke on the shifts in four value networks. In health care it is the shift from efficient sickness to effective programs for wellness, in A&D it is the shift from selling airplanes to performance based-logistics, in automotive it is the transition from selling cars to delivering safe transportation, and in consumer products it changes from a focus of right product, right place at the right time to delighting the customer at the three moments of truth (pre-purchase, decision to buy, and product usage). All of these require the redefinition of processes outside-in and across the network.
The availability of new technologies to sense combined with the information supply chain in big data supply chains allows the redefinition from supply to drive value-based outcomes. We are slowly moving in this direction… Again, it is like watching paint dry, however, based on the research, I can more accurately predict the color. I believe that it is green: it is the color of money. Over the next couple of weeks, I will be sharing case studies on supply chain excellence from this research. I look forward to your thoughts.