"Supply chains compete, not companies"

"Supply chains compete, not companies"

Competencies and Skills for tomorrow’s Supply Chain Managers

Supply chain management as an idea is still young.  The first recorded use of the phrase was in an article published in 1982 by two consultants from the London office of the company now called Booz – then Booz, Allen & Hamilton.   In those intervening years a lot of progress has been made in terms of how we manage the flows of information and material into and out of the business.  However it is probably true to say that the real organisational implications of managing the end-to-end pipeline are not always fully understood.  At the same time there is a limited availability of managers with the appropriate skills and capabilities to manage complex global supply chains.

What many companies call supply chain management might more accurately be described as logistics or even distribution management.  Similarly, executives who have titles such as Supply Chain Manager may in reality be logistics managers  (i.e. planning the flow of materials) or distribution managers (i.e. responsible for the physical movement and storage of product).  This is more than semantics.  If we adopt the definition of supply chain management that I like to use, it becomes clear that a key role of supply chain management is to focus as much on managing outside the boundaries of the business as it is about internal concerns:

The purpose of supply chain management is to manage upstream and downstream  relationships with suppliers and customers in order to deliver superior value in the final market at less cost to the supply chain as a whole.

As companies out-source more of the activities they used to perform in-house, the more the dependencies on external suppliers and service providers grow.  Equally, the more that companies move into multi-channel marketing and distribution the greater is the need to work more closely with intermediaries.

The implications of managing across boundaries in what some have termed the ‘extended enterprise’ are profound.  Particularly challenging are the implications for the managerial skills and competencies that will be required if the supply chain truly is to be managed ‘end-to-end’.

One critical implication of the adoption of the supply chain management philosophy is for the organizational architecture of the business.  For centuries companies have used an organizational logic based upon the ‘division of labour’ whereby activities take place within functions or departments.  Whilst this functionally based organizational concept may ensure the efficient use of resources it is inwardly focused and tends to lead to a ‘silo’ like mentality.  These types of organizations also tend to lack customer responsiveness and hence are slow to respond to changes in the marketplace.

On the other hand, those companies that are able to respond rapidly to changing customer requirements tend to focus more upon managing ‘processes’.  Processes are the horizontal, market-facing sequences of activities that create value for customers.  They are cross-functional by definition and are best managed through the means of cross-functional teams.

Put simply, the requirement is to transform the organisation from an inwardly-focused ‘vertical’ structure to an outwardly-focused ‘horizontal’ business.

The horizontal organization has a number of distinguishing characteristics. 
It is:
  • Market facing
  • Organized around processes
  • Built upon cross-functional teams
  • Guided by metrics that are customer-centric

It is the focus on processes rather than functions that distinguishes the horizontal organization.  As was previously noted it is through processes that customer value is created and delivered.  Hence the need to manage processes on an integrated basis – which implies cross-functional teams.  These teams will comprise specialists drawn from the functional areas (which now become ‘centres of excellence’) and will be led by ‘integrators’ whose job it is to focus the process team around the achievement of market-based goals.  In such organizations a different type of skills profile is clearly needed for managers at all levels.

What are the skills and capabilities needed by these ‘integrators’?  One model that is gaining acceptance is the idea of the ‘T-shaped’ manager.  A T-shaped manager has a specific functional specialisation (the down-bar of the T) but also has a strong understanding of the different activities that take place across the end-to-end supply chain process (the cross-bar of the T).

Thus, as a hypothetical example, the process team leader might have a background in inventory management – their functional specialism.  To be successful as an integrator, that team leader must also have an understanding of all the other activities that are involved in converting an order into cash.  Thus they will need to be familiar with the relevant information systems technology, with costing tools such as Activity Based Costing, and with appropriate planning frameworks such as Sales and Operations Planning (S&OP).  In addition the supply chain integrator needs to be capable of recognising and managing the sources of complexity in their supply chain.   To assist in this task they will have an understanding of the tools and techniques of Business Process Re-engineering and Six Sigma methodologies.  To round this off, they will be very familiar with the latest thinking on Supplier Relationship Management and Customer Relationship Management.  Quite a challenge!

It will be clear from this description of the skills and capabilities required to become a successful supply chain integrator that there are probably at this moment very few people who could match the profile.

The implications of this are clear: the skills and capabilities that are fundamental to the role of supply chain integrator cannot be acquired solely through osmosis and experience.  Instead mastery of these skills must be gained through appropriate management education programmes.   Fortunately there are now a growing number of business schools and other organisations offering advanced courses covering these subjects.  The concern is that given the current economic conditions many companies have cut back their training budgets and as a result they run the risk that the supply chain skills gap will widen within their business.  One thing is certain, for those people who have the appropriate education and training this is a very good time to be embarking on a career in supply chain management!