Today I want to talk about some of the processes and management strategies that can be used to help a supply chain on the journey from ‘good’ to ‘great’. To read more about this subject and related themes, I suggest you read the new whitepaper, Supply Chain’s New World Order”,
Visibility and Measurement
Visibility to the potential value locked in the current environment is a key driver in a supply network transformation and is being provided by advanced cloud based network platforms. Departmental workbenches which provide not only the departmental performance as we see with most systems, but also show the effect of dependencies and actions taken in other departments or across customers or trading partners are being deployed in highly complex supply networks.
At higher levels in the organization these workbench analytics can aggregate to show performance measurement based on annual goals, market outcomes, customer service levels, revenue performance, price performance, cost targets, etc., creating for the first time a set of measurements that are both operational and financial in nature, that aggregate from the boiler to the board room, and that can map into the chart of accounts as defined in the enterprise financial system.
Responsibility, Accountability, Authority, and Measurability
When considering organizational dynamics, we must include all the appropriate stakeholders in measurement discussions, not just the department leaders. Across these stakeholders we will have a combination of those who have been assigned ‘responsibility’ for a process segment, those that have been assigned ‘authority’ for a process segment, those that have been assigned ‘accountability’ to a process segment and finally a set of measurements that hopefully bind them all together to drive the desired outcome. Many times those with operating ‘authority’ will choose to meet with the department director who has similar ‘authority’ when in fact a staff member who lives and breathes ‘responsibility’ and ‘accountability’ might have more influence in improving the performance.
When considering organizational dynamics, we must include all the appropriate stakeholders in measurement discussions, not just the department leaders.
Another technology capability that is essential as part of the platform shift is the ability to assign process level permissions to users. The organization cannot operate efficiently without a clear line of site related to authority, accountability, and responsibility. The permissions framework can reinforce this structure both at the process and measurement levels.
Collaboration and Measurement
To leverage cross functional measurement improvements, perhaps pull together a chat session to discuss inventory positions and show the various departments the effects their decisions are having on quarterly cash flows and customer service levels, without becoming negative and turning the conversation adversarial based on the usual “lack of visibility” issues. Properly positioned operating information will be an eye-opener for both leaders and staff and will help them to better focus on the actions needed for improvement.
If we look holistically from an overall supply network perspective, there are 5 high-level business functions per the SCOR model including Plan, Source, Make, Deliver and Return. This is where typical organizational design stops and departmentalization by area causes us to produce suboptimal results, which is typically reinforced by enterprise software designed at this feature/function level.
Under this paradigm we see this dysfunction play out where just within Sourcing we find there are many competing source optimization routines second guessing each other between manufacturing and supply, supply and raw material, manufacturing and logistics, manufacturing and co-manufacturing, supplier and co-manufacturing, supplier and logistics, etc.
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As a result the ‘accountability’ at the customer service level is spread out across many nodes running local optimizations. Any hope of leveraging a learning organization will be constrained by these types of poorly designed organizational boundaries. A well designed permissions framework at the user level can cut through these limitations and focus on the target outcomes and associated measurements.
To read more about this subject, I suggest you read the new whitepaper, Supply Chain’s New World Order”, where I also discuss the cloud, S&OP, and why a holistic approach is needed for supply chain management.