If you don’t have the right people in place you can’t build an appropriate strategy and you certainly can’t execute it. Finding talent for supply chain positions has unique challenges due in large part to the cross-functional and cross-company process challenges faced by supply chain executives today.
Unique Skills Are Needed to Manage the Supply Chain Process versus the Function
In several conversations with executives of multi-billion dollar firms in 2007-2008, we found a surprising lack of understanding of the true modern nature of the supply chain process. In some cases, a number of those interviewed defined supply chain extremely narrowly as simply the process of dealing with the firms suppliers! Unfortunately, many firms still live with just such an outmoded view.
Ten years ago, the supply chain leader in most companies held a title such as “vice president of logistics.” It was a largely functional role that relied on technical proficiency in discrete areas: knowledge of shipping routes, familiarity with warehousing equipment and distribution-center locations and footprints, and a solid grasp of freight rates and fuel costs. He reported to the chief operating officer or chief financial officer, had few prospects of advancing further, and had no exposure to the executive committee. The way companies need to think of the modern supply chain executive has changed dramatically.[i]
Today, the Need Goes Well Beyond Functional Expertise.
Supply chain executives still need to be experts at managing supply chain functions such as transportation, warehousing, inventory management and production planning. But the supply chain process extends end to end and even outside the firm, including the relationships with suppliers and customers on a global basis. Leading firms now see the supply chain functional leader as the necessary executive to coordinate the end to end supply chain process, even though he or she does not control it all. Because of that added dimension of cross-function, cross-company coordination, senior supply chain executives must possess a number of unique characteristics, which we describe in detail below. In our interactions, we find many firms have not yet come to grips with that realization. And, in an AMR study, 60 percent of companies still do not have an executive officer who manages even the normal set of supply chain functions.[ii] Further, in our experience, of the 40 percent who do have such a position, the vast majority still have not tasked that executive with full authority to coordinate the end to end process.
The CEO especially should understand that the battle for top supply chain talent must be focused on acquiring people with process expertise, not simply functional competence. The mental shift to supply chain-as-a-process leads inevitably to the shift of the role of the supply chain executive from a functional focus to process focused, and to supply chain becoming part of the executive team.
Supply Chain as Part of the Executive Team
Today, in a growing but still small number of firms, the supply chain chiefs of high-performance companies don’t just have access to the executive team ― they’re part of it. That role requires the need to bring value in terms not only of educating the CEO and the Board and giving them the vocabulary to talk about supply chain subjects and its critical role in creating economic profit, but in finding and driving opportunities to increase economic profit. The job in those progressive firms is no longer a mostly functional one, but instead plays a key strategic role that can influence 60 to 70 percent of a company’s total costs, all of its inventory, and most aspects of customer service.
The supply chain leader in these progressive firms has global responsibility for coordinating processes across functional silos like sales, R&D, and Finance, as well as functional responsibility for activities like procurement, logistics and production planning, and customer service. He pays as much attention to the demand side as to production and materials planning, and knows what it takes to reliably deliver products to customers and to build mechanisms to learn what customers have to say. In some firms, the role of the senior supply chain executive expands so much that he essentially becomes the COO, especially in those companies where the COO does not traditionally have responsibility for Sales, Marketing, or Merchandising.
In this transformed world, even CEOs, who previously had little contact with the supply chain leader, must now demonstrate supply chain expertise. Indeed, supply chain chiefs have even become viable candidates for CEO succession. Wal-Mart’s past CEO Lee Scott, who previously headed transportation, distribution and then logistics for the retailer, is just one example. Mike Duke, the successor to Lee Scott, also has a big dose of supply chain experience in his background. “The supply chain has elevated itself to one of the major items on an enterprise risk spectrum that is discussed at even audit committees and board of director meetings,” said Mayo A. Shattuck III, Chairman, President and CEO of Constellation Energy. “The CEO really has to be a supply chain expert and can not just delegate that completely to someone else.” [iii] And it’s up to the company’s supply chain professionals to find ways to educate the CEO. For example, one supply chain leader told us that after much badgering, he talked his boss, the E.V.P. of Operations, into scheduling a monthly supply chain update with the CEO. Now after eight months of those reviews, he says that the CEO clearly understands it at a much deeper level, with supply chain advances mentioned now in most of his public comments.
However the majority of firms fall far short of this ideal. Many companies today don’t have a complete end to end process view of their supply chain, and these firms face a big problem if their competitors get it before they do. But, “getting it”, isn’t enough. They also have to win the battle for supply chain talent.
[i] IBM Global Chief Supply Chain Officer Study, March 2009: “Right now, most senior supply chain leaders are overseeing traditional functions like logistics (77 percent), demand/supply planning (72 percent), and sourcing/procurement 963 percent). But some are beginning to play a role in strategy development (38 percent).
[ii] The Fifth Annual Global Survey of Supply Chain Progress. Computer Sciences Corporation, Supply Chain Management Review, and Michigan State University. 2007.
[iii] A Study of the Challenges Facing the Next Generation of CEOs: Interviews conducted by Dr. Vicky Gordon, Senior Executive Coach, Founder and CEO, the Gordon Group. Dr. Gordon conducted the interviews March – August 2008.