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Supply Chain Renaissance is underway

 

Supply Chain has never been a dull profession. Operators deal with disruption daily to address snags, adjust the plan, intervene dramatically; actively working on some element that needs immediate attention, or preventing a future problem from occurring. The last few years have tested the resolve of every supply chain professional in every industry in ways that could not be imagined even by industry pioneers who worked without the sophistication known today. Every possible scenario that could happen, did happen thereby creating the perfect storm. We are now living in a post-pandemic world that is constantly changing, becoming more unpredictable at a faster rate of speed, more than ever experienced in our lifetime.

This chaos and recovery from it read like a supply chain action thriller and at times seems terrifying. The term “supply chain” has been injected into everybody’s discussion from the boardroom to Wall Street to government officials to consumers on Main Street.

 

The world is yearning for a supply chain “normal” to reemerge and questioning whether it will ever come. Smart operators are rethinking how to operate in a world of volatility, uncertainty, complexity, and ambiguity (VUCA.) Whether planning for a new supply chain or reconfiguring an existing one, beginning with VUCA in mind will help mitigate the effects of supply chain disruption in the future. Doing nothing or “staying the course” is no longer a viable option.

 

Assessing the current state is the beginning

The first step in a practical approach to transformation is to assess the current state of the supply chain as it exists today. The definition of supply chain has evolved over the years and is sprawling. A simple approach is to first assess from a people, process, and information perspective. This should be done by functional areas in the supply chain – Planning, Procurement, Manufacturing, Storage & Distribution, Transportation, and Reverse Logistics. Performing a thorough review of your supply chain can be a difficult endeavor. Trying to obtain visibility in a multilayered operating model is always a challenge as much of the information is available yet raw, and some data manipulation is always required to make information useable. Doing so, however, will allow you to determine whether the supply chain is immature, at par, or advantaged versus cross-industry best practices. Some functions may be stronger than others, but this will allow operators to prepare a priority list of opportunities for improvement. The most important thing is to have a plan of record, and to maintain it in real-time as conditions change.

 

Planning a Roadmap to the destination requires alignment and commitment

Once the operator has a plan of record, a comprehensive list of initiatives should be formed and “time-boxed” according to priority. Since it is not practical to address everything at once, the priority items should be defined as those projects that will return the quickest benefit or is a pre-requisite to other initiatives on the list. Business rules and constraints should be considered as well in building and prioritizing initiatives to ensure support. There are many variables and decisions in building a plan of record and required support, too many to mention here, but the key thing is to get started – build version 1.0.

Many companies do not have this list and can never really get started. So, with a list of initiatives, priorities identified, business rules and constraints noted and factored in, the operator can begin plotting a master schedule and timeline forming the basis of a program. Programs need to be funded with people, tools, and money. Decision support and portfolio management usually exists within every organization. Some are anecdotal, in the form of a discussion and a nod, others are more formal with tools, committees, and governance. Regardless of the process, there should be awareness and alignment of ongoing initiatives to ensure that they produce the desired results and receive ongoing support.

 

Configuration of the future state – what are the new considerations?

Supply Chain transformation is never easy. When building a new supply chain, much research needs to go into many variables – location, make/buy, partners, transport providers, proximity to key markets and customers, availability of talent, and the list goes on. Reconfiguring an existing supply chain requires less primary research but may require a deep analytical dive to determine how much or how little to change. Looking at historical forecasts and past experiences is having less relevancy in predicting the future of supply chain. Agility, resiliency, and network proximity should factor heavily in any transformation program. Companies that fared better than their competition over the past few years were prepared to make rapid operational changes to adjust to the prevailing conditions.

 

The events of the past few years have shown how fragile supply chains are and how dependent they are on everything happening the way it is supposed to happen. Operators need to bring back the “what if” challenge: what if the DC is inaccessible? How will we ship product? What if the port is shut down for a day? A month? What if my supplier goes out of business suddenly? What if…? Supply chain configuration for the future is about being nimble – if the primary process breaks, there is a backup plan – it is known, and people know what to do. Plan and build organizations, processes, and access to information to create optionality, agility, and resiliency to be successful. Monolithic supply chains have proven to be an extremely high-risk proposition.

 

In some respect, massive supply chain disruption is bringing back a critical function that disappeared from organizations decades ago. In the quest for cost reductions, other considerations were muted or went away entirely. The important thing is to plan for the future, AND to utilize scenario and contingency planning in the effort to reduce disruption and promote supply chain proactivity.

 

Implementation that sticks

Planning and configuration of the supply chain are important things to implement properly. However, without implementation, nothing actually changes. It is important to remember that supply chains run on people. People make the supply chain work. Tools, robots, and AI are excellent enablers, but people drive the tools, robots, and AI. Any supply chain transformation needs to start and end with people, with people involved for the entire journey. Champions from the organization should be selected to participate from the onset and remain throughout the effort. When the effort is complete, these catalysts become the in-house sustainability brigade, equipped with the mindset, tools, and techniques to carry on. These key people are typically the front-line leaders within the operation. Supply chain transformation requires active change management commitment and skills, especially in the implementation phase of any initiative. Planning and white board sessions may conjure up some emotion, but implementation requires the changes to actually take place. It can get messy, so a steady hand is required to bring the team all the way through the change journey from awareness and understanding to getting full buy-in and commitment. The executive sponsor, leaders, and champions need to provide unrelenting dedication to the work and constructive support to the people involved in the process.

 

Sustainable people and practices to leap into the future

The word “sustainability” gets a lot of work these days, overused, or incorrectly applied in many cases. In the case of supply chain transformation, what does it mean? It simply means that supply chain transformation is eternal. Once the initiatives get knocked off the list, new ones should appear, because VUCA will always be challenging our supply chains, and there will always be a need to adjust, reconfigure, recover from some internal or external stimulus. Sustainability in this regard is: How will we continue to evolve our supply chain capabilities? Who will maintain the plan of record? Who are the change agents in the organization? Sustainability in this sense is the organization’s ability to self-assess the current state, develop a plan of record, layout a roadmap, obtain alignment and funding, configure, and implement changes to the operation. A key component of this type of sustainability requires external research to understand what is considered best-in-class and incorporate best practices and innovations into the plan. Innovation, implementation, and execution drives results, contributes to creating a performance culture, builds trust in cross-functional decision-making, and promotes transparency. This approach allows organizations to maintain or gain competitive advantage over time, as supply chains are dynamic.

 

Time is of the essence

Many CEO’s wait until the optimal moment to embark on a transformation / improvement program. There is no “optimal” time to start because these concepts are eternal – the key is to start and embed performance and improvement into the culture of the organization. There are also many different approaches to transformation – from high-concept, high-energy – with lots of fanfare, to grassroots, pervasive program with key investments, goals, and milestones, executive sponsorship, and assigned owners. The “Big Bang” approach is very difficult to support over the long-term in today’s environment. Executives that commit to a cultural shift and invest in the proper people, process, information, partnerships, and governance components tend to create long-term results and drive a performance culture.

 

Help is out there

There is an abundance of help out there for CEO’s and/or Private Equity firms seeking to create dramatically different outcomes. Depending on the approach taken and the time horizon, initiatives can be launched internally, provided the talent and bandwidth is available. External firms are often engaged to provide the necessary resources and a panoramic perspective on how others have transformed their operations. Bringing in a catalyst is a third option, especially if the intent is to create a performance and improvement culture. A catalyst can be either a contract or permanent resource working from the inside of the organization. A catalyst may bring deep experience, external perspective, strategic thinking, and the ability to execute and deliver large programs.

 

As readers work their way through this document, their supply chains have changed shape, and new needs have emerged…Get Started and have fun!

 

I love to speak with CEO’s, Operating Partners, Supply Chain Professionals about the challenges and opportunities in front of them and how to translate either into a competitive advantage.

 

Let’s talk Supply Chain – Mike Notarangeli | 908-328-7429 |