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 potentially 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 a much wider knowledge base by supply chain professionals. While efficiency in operations is important of itself, if supply chain professionals only concentrate on achieving performance efficiency for their function, the supply chains are not being effective.

To be effective, recognise that your supply chains network is a system – the individual elements are dependent, inter-dependent and dependent to different degrees. So, decisions made at one Node or Link in a supply chain may affect its performance and because of dependencies, may affect other parts of the supply chains network.

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

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

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

Because the operations of supply chains cut across traditional business disciplines, a modified style that broadens the ‘T’ into the shape of a key is required for professionals working within a supply chain group (Procurement, Operations Planning and Logistics).

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 customers and Tier 1 suppliers) and the Extended supply chains out from Tier 2 Customers and suppliers.

The ‘key’ shape captures the range of knowledge and skills required for supply chain professionals to be problem solvers. It also enables them to build confidence for interpreting events and therefore collaborating more easily with others from other disciplines 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 their specialisation skills, the 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 by location of the organisation’s inventory. And the minor skill could be familiarity with analytics tools.

Knowledge within the core supply chains is concerned with how a business works and potential internal risks. Knowledge of other disciplines would address sales and marketing (e.g. understanding changing consumer demand patterns, shortening product life cycles and channels of distribution). Also finance and accounting, especially accounting for the movement and valuation of inventory.

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

• geopolitical 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
• 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, fires and water shortages on the organisation’s supply chains
• risk management in supply chains, including natural and man-made disasters

The knowledge required is 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 knowledge and skills 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.