The supply chain and procurement executive(s) has a ‘seat at the executive table’. To illustrate its potential impact from a pure economic perspective, where else in an organization does one executive have the ability to influence and manage the cost base of an organization so directly? In even more direct terms, if the supply chain executive contains his or her cost base by 10%, resulting in a savings of, say, $100 Million, consider how much product must be sold (say, at 10% net margins) deliver the same margin impact? The implication is clear.
Aligning a supply chain with a company’s broader corporate strategy requires a somewhat different mind-set to the traditional block and tackle of the past. To be clear, the block and tackle is essential, but several core actions must be considered in this respect:
- Maintain a strategic focus: View supply chain strategy as a direct subset of corporate strategy. Where is the organization going? How are the products going to evolve and change? Which regions are key to growth and hence might result in direct implications from a supply chain configuration and sourcing point of view?
- Position for growth: Evaluate ramp up options not only from a manufacturing capacity point of view but from a delivery and fulfillment perspective. Consider alternate sources. Understand such issues not simply from an internal perspective but from an extended enterprise/partner network point of view—can the full supply chain (internal and external) keep up?
- Speak multiple languages: Understand what critical organizations such Finance (and hence the CFO) need. Translate supply chain results and achievements from a financial point of view. Translate the benefits of key actions in terms of its impact on economics of the business, cost as well as revenue, etc.
- Integrate the voice of the customer: Understand how supply chain movements and changes impact customer functions. How does a change in manufacturing location impact the product’s marketing message (both explicitly and implicitly)? How can the adoption of Low Cost Country Sourcing play into or against domestic and international growth plans?
- Drive innovation: Push for innovation across the supply chain, and most notably with the supply base, who are at the forefront of market developments. Understanding how the existing Sourcing to Distribution paradigm is being impacted by market developments is essential to being able to proactively understand and drive innovation (versus reacting to it).
- Cash is King—continue to manage for costs: This is block and tackle but nevertheless, it bears repeating. Cost management remains key to ensuring that margins remain strong and the organization can continue to grow without undue concern.
Author: Omer Abdullah