Supply Chain function performance is not enough

A Supply Network is a complex, non-linear and adaptable system. The core supply chains within a network can be managed – from tier 1 suppliers to tier 1 customers. Beyond that, the extended supply chains of a network can only be understood, based on the emerging responses to events.

Therefore, for an organisation to have effective supply chains requires more than good functional performance and improvements; it requires much wider knowledge by supply chain professionals. While efficiency in operations is important of itself, if supply chain professionals only concentrate on achieving the performance efficiency objective of their function, the supply network is not being effective.

To be effective, recognise that your supply network is a system – the individual parts may interact and be dependent to different degrees. So, decisions made at one node or link in a supply chain may affect the performance of that chain and because of dependencies, may affect other parts of the network.

Because principles and theories concerning supply chains are rarely presented as a core subject or unit in university business programs, how supply chains and networks should function is often not understood across management ranks. The latest ‘buzz and hype’ terms can get thrown around in meetings without the speakers being able to translate the terms into meaningful plans and actions for the organisation’s supply chains. This is why ‘key’ supply chain professionals are required.

Understanding global supply chains and the influences upon them requires a broad set of skills and knowledge. A concept was initiated by the McKinsey consulting firm as the ‘T’ shape professional, to describe the type of person they wanted to employ. The term was later applied to reflect the skills and knowledge required of managers and professionals working in a global environment.

In the model, the vertical stroke of the ‘T’ represents the depth of skills and experience in a person’s specialisation, which provides confidence in contributing to the process. The horizontal stroke of the ‘T’ reflects the areas of knowledge required to be effective; these are outside the person’s discipline area.

Because the operations of supply chains cut across traditional business disciplines, professionals working within a supply chain group (consisting at the minimum of Procurement, Operations Planning and Logistics) need to adopt a modified style, as the ‘T’ shape is not sufficient.

The modified concept is to broaden the ‘T’ into the shape of a key. The ‘key’ shape recognises that a supply chain professional will possess several skills in their discipline area, with different degrees of depth. These areas become the ‘teeth’ of the key blade. The shank of the key identifies the knowledge required at two levels: within an organisation’s core supply chains (between tier 1 suppliers and tier 2 customers) and from outside the organisation’s core supply chains (the extended supply chains).

The ‘key’ shape captures the range of skills and knowledge required for professionals to be problem solvers in their supply chain discipline. It also enables confidence to interpret and translate knowledge and therefore collaborate more easily with others, from different disciplines and backgrounds, to solve problems. 

A ‘key’ supply chain professional

An example is an inventory manager in a consumer packaged goods (CPG) or fast moving consumer goods (FMCG) business. Under specialisation skills, their main skill is likely to be inventory planning and control. The second skill could be establishing an inventory policy, based on the form and function of the organisation’s inventory. The minor skill could be warehouse layout planning or familiarity with analytics applications.

For knowledge, there will three types. Within the core supply chain, business knowledge should be concerned with how a business works, especially the factors experienced when converting a planned or actual order to a cash receipt. Also, applying risk management concepts to operations in supply chains, including natural disasters (earthquakes, volcanoes and tsunami).

Knowledge of other disciplines would address sales and marketing (e.g. understanding changing consumer demand patterns, shortening product life cycles and channels of distribution). Finance and accounting would be another discipline, especially accounting for the movement and valuation of inventory.

But, to confidently present future inventory plans and options at management and board meeting, an inventory manager would require knowledge of the broader business and political situation that may affect the organisation’s supply network. Examples of external knowledge required by a supply chain professional are:

• geopolitics situations and their potential affect on international trade
• policies of national governments in supplier and customer countries that may affect or influence decisions concerning supply chains e.g. waste minimisation and actions to reduce transport emissions
• availability of materials used in products and their influence on the operations of supply chains; the operations of futures markets and their influence on the pricing of raw materials
• global demand and supply for types of transport and other supply chain services
• climate change mitigation action. Addressing, storm damage and the effects of floods and water shortages on the organisation’s supply chains

The knowledge required is not that of an ‘expert’, but at a ‘competent’ level. The blogposts presented at Learn About Logistics provide some background and information, to give direction for supply chain professionals about building additional knowledge.

Business is not about finding the ‘right’ answer, but more about identifying ‘better’ solutions to challenges. Having a range of skills and knowledge to apply will assist the decision making process. It also provides recognition by the CEO and senior executives that the supply chain group is the ‘go to’ professionals for a broad understanding of commercial situations.