In this article Carter McNabb of GRA looks at some of the qualities and capabilities required of supply chain leaders today.
In the same way that traditional retailing is undergoing unprecedented change in the face of the online revolution, the traditional role of the supply chain manager is also being transformed from back-room cost centre manager to boardroom executive. This article looks at some of the qualities and capabilities required of this new breed of supply chain leaders.
What is driving the transformation in supply chain management? Primarily, it is the realisation by leading companies that their supply chain can be an effective source of competitive advantage. Companies such as Amazon and Apple design their supply chains to directly support their strategic goals, from best-in-class customer experience to world-leading product design. This realisation has shifted the concept of supply chain, from a traditional focus on the storage and movement of physical goods, to a broader concept encompassing not only the physical, but also financial and informational flows between a company, its trading partners and the wider market.
As a result of this conceptual shift, the skills and competencies required of supply chain leaders have been both broadened and elevated. They are broader in a functional sense, where supply chain leaders are expected to understand and have input to not just warehousing and logistics, but also product design, sales and marketing, finance and IT. In addition, the skills and competencies required are elevated in a strategic sense, where company boards are looking for well-rounded supply chain leaders with the ability to:
- deal with complexity and uncertainty;
- understand the supply chain end-to-end;
- lead peers from other disciplines as part of the supply chain and;
- understand the big picture in sufficient detail to identify opportunities and deliver results.
An illustration of both the broadening and elevation of the skills and competencies required of supply chain leaders can be found in two key aspects of supply chain management. They are:
- the rapid advances being made in supply chain technology and;
- the growing importance of strategic sourcing arrangements.
Only a few short years ago, the acquisition of major IT systems within companies was primarily driven by finance from a transactional accounting perspective. Today, technology allows greater supply chain visibility and timely communication of useable information to both internal and external supply chain partners, thereby enabling the supply chain to be more flexible, proactive and highly competitive.
- The benefits of effective IT systems enabled by, for example, advanced demand and supply planning and effective warehouse management systems include:
- major reductions in cost by leveraging warehouse and transportation management systems, and using bar codes, advanced picking and radio frequency identification (RFID) technologies;
- dramatic reductions in inventory and improved customer service levels by using advanced demand and supply planning and scheduling systems; and
- significant cost savings from performing in-depth supply chain network optimisation.
With the benefits technology now provides to the management of the supply chain, the supply chain leader is increasingly seen as the key business sponsor for major IT investment. That means he or she must have an understanding of the broader IT requirements of the other functions within a company, to ensure an effective return on investment in such technology and alignment with boardroom performance objectives for the company as a whole.
In addition to supply chain technology, one of the most challenging and fast changing aspects of a supply chain leader’s role is strategic sourcing and procurement. With the maturing of online business, supply chain partners can exist almost anywhere. Geographic and political borders have much less importance in sourcing decisions than reliability, quality and total cost. Sometimes there is even an inverse relationship where the best deals are done with the geographically furthest (but most strategically aligned) supplier.
Building and sustaining such relationships requires supply chain leaders to think at a strategic, enterprise-wide level, and to exhibit the “softer skills” necessary to form long-lasting partnerships with key suppliers. Strategic sourcing decisions also require an understanding of the total cost to acquire, which includes not only item and transportation cost, but also other less direct costs, such as reliability, quality and risk costs, in addition to financial provision for exchange rate fluctuations.
While supply chain technology and strategic sourcing are only two of the many aspects of supply chain management that have undergone significant transformation in recent years, they give an effective illustration of how the skills and competencies required of supply chain leaders have both broadened functionally and elevated strategically. The real challenge for companies today is to find and retain talented individuals that can bring those qualities and capabilities to bear, turning their supply chains into a source of competitive advantage.
Carter McNabb is a Partner at GRA, Australia’s premier consulting firm specialising in supply chain strategy, planning and execution.
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