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The value of a reliable supply chain

Image credit: endeavor

What makes a supply chain truly competitive, and in fact the major asset to a business? Certainly, it is not managing supply chain in a traditional way, as a function, or a collection of functions, with narrow scope, and focused on their own specific objectives, almost as a separate organization, detached from the business and the customers. Making a supply chain truly competitive and the major asset to a business starts by following four basic principles.

  1. Fully integrated end to end: a truly competitive supply chain needs to be fully integrated, covering end to end, starting from a robust customer interface and going through all the deliver, make, source and plan streams; each individual stream needs to be strong, but the integration of them is the most important success factor. The integration does not mean that the organization needs to necessarily be under the same direct line of reporting, but needs to have integrated accountability. Companies that have their supply chain integrated are more nimble and agile, and also more innovative. A company like Amazon would not be successful in their ability to efficiently deliver their products, with such a diverse portfolio, if they did not have all their supply chain processes and systems integrated;

  2. Strong connection with the business: needs to be perfectly connected and aligned with the business and its operating model, being totally accountable for all business results, based on the same objectives, which need to be customer based. As a result, supply chain leaders would be equally accountable for metrics like sales, market share and customer satisfaction. A strong connection with the business brings a higher sense of accountability and ownership to the entire supply chain organization;

  3. Highly adaptable and capable: it is absolutely essential for a supply chain to be adaptable to the constant changes in the business environment, responding immediately to emerging trends and, most of the times, in fact driving the changes. Supply chain organizations which are highly adaptable are constantly developing new capabilities. Those capabilities enable them to more quickly respond to business and customer needs. Even companies which are considered supply chain benchmarks by Gartner, like Apple or Unilever, keep continuously driving change and reinventing themselves;

  4. The best talent: a competitive supply chain needs to have the best and most diverse talent. Talent indeed makes the difference, and people are more valuable than organizational structures, as lines of reporting are less important than business accountability. Organizations currently are highly matrix and fluid, and will be even more in the future; the ability to have the best talent, which is adaptable to operate in an ever-changing environment is crucial. Companies like Johnson & Johnson base their success not only on their processes, systems and technology, but more importantly on talent, in association with a solid value system.

However, to be the major asset to a business, once you have the best supply chain, operating based on these principles, the next bold step would be to expand it, to cover all aspects that follow the product value chain, both internal and external. Within this concept, a fully integrated value chain would include aspects of new product development, portfolio & life cycle management, product management and quality & compliance. A value chain should be focused by product, category, platform or business unit, depending on each business model. At the same time the value chain would need to be aligned by technology, in order to maximize manufacturing leverage, and by distribution channel, to improve customer experience. The challenge would be to accomplish it all in a single integrated value chain design; achieving that is what would make it effective. This concept reinforces the idea of a value chain focused on talent rather than organizational structure, as in the expansion of supply chains to value chains the landscape would evolve to more sophisticated forms of matrix and collaboration, with increased influence of the external environment.

Ultimately a truly competitive value chain needs to be customer centric, which implies that the main goal should be to operate at the highest level of supply reliability to customers. A powerful supply reliability approach should be broad, based on a cross functional and enterprise wide framework, beyond the value chain, with strong collaboration with customers, suppliers, regulatory agencies and other external agents. Such approach needs to be driven by a broad cultural transformation throughout the entire enterprise, almost as a complete cultural reset, which consequently would also require an effective change management process.

Companies that have achieved this level of supply reliability, based on a robust enterprise framework, have delivered significant and sustainable improvements in their customer service, quality standards, innovation flow, revenue growth and financial results. And, very importantly, their value chain has become a true competitive advantage to the business and a strategic partner to their customers.


Founding Principal at Princeton Global Consulting; Johnson & Johnson Executive

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