Creating Supply Chain Excellence in the Times of Chaos - Complete article

Strategist consider scenarios of Static, Dynamic, Complex & Chaotic environments in which industries operate.  The parameters for determining the same are – number of variables in the environment & the rate of change of those variables. A chaotic environment is one when the rate of change is high & the number of variables in the environment are large. The industry context for that period of industry life cycle is a ‘Chaotic’ environment. The current industry is passing through a phase like that with no surety if that is a permanent change in the way it will need to operate for years to come.

Supply Chains are structures which support a random event called ‘sales’. Each Supply Chain supports a systemic component of demand & a random component of demand. The state of Supply Chains in Chaotic industry context makes the component of ‘random’ness increase. While enterprises may engage in the creation of their Strategic Plans, most of them are falling short of their desired outcomes.

Enterprises have alternatives to make corrections to achieve their desired outcomes. A Pro-active approach, a Re-active approach or a Control approach. Reactive & Control approaches focus on dampening the variations using numerical data & laying down measurements to bring the process under control. This approach has its utility at the operational level while if the environment in which the enterprise operates has undergone a change then the enteprise may well achieve its operational goal just to realise it was marching on the wrong path.

A Pro-active approach would mean that the enterprise perceives the need to change, identifies the theme is wishes to pursue to change so that it is relevant for its markets & it’s needs. This approach would help to create an sustainable organisation for the creating Supply Chain excellence in the times of chaos.

The pillars which would create Supply Chain Excellence for thriving on chaos are Supply Chain Leadership, revenue Growth through Supply Partner Collaboration, Supply Chain Risk Management & Reducing Supply Chain complexity.

      1) Supply Chain Leadership – Supply Chain leaders would need to get conversant with the financial lingos. The CEO’s of company would appreciate Supply Chain leaders who would be able to talk & exhibit their position using the Balance Sheet, P&L including the Cash Flow language.  Supply Chain typically contributes to 60-90% of the COGS of the enterprise. The Supply Chain Leaders hence are a very important stakeholder for the CEO to offer his ears to. The future Supply Chain Leaders will have to present the financial impact of the Supply Chain to CEO’s for they to be creating the next level of Supply Chain Excellence.

Excellence is People. Supply Chain lacks Talent. An important dimension is the Talent Management in Supply Chains. The excellent Supply Chains of future would recruit, nurture & retain talent better than their competition.

   2) Revenue Growth through Supply Partner Collaboration – Supply Management organisations would need to develop supply strategies based on the proposed supplier relation. The clarity hence the visibility of the type of relationship would help supply management activities. Relationships that are based on mutually congruent goals would lead to partnerships. Partnerships with critically chosen long term suppliers would support the customer organisation to generate significant value.

  3) Risk Management -  The development of modern processes & practices has gone towards making enterprises more complex with many links. Just in-time process requirements, longer and more complex supply chains, leaner supply chains, stringent service level agreements, single source supply and greater regulatory requirements have reduced organisational buffers in the form of inventory, lead time and capacity. Added to it is worldwide sourcing and marketing which creates new risks for the enterprise. Organisations able to create a structured process for Risk Management would manage the chaos better.

  4) Reducing Supply Chain Complexity – The search of low cost of supply base would tend to create longer supply chains with additional nodes of supply &  The need for customisation would add to the variety at the input & process stage of supply chain. Supply Chains would become complex. Supply Chain Excellence would be achieved if Supply Chains are able to reduce the complexity through idealised design leading to sourcing strategies, reducing the layers of channel partners & improving the visibility of the chain.