Ingredients for Successful Supply Chain Strategy

Having an effective supply chain strategy is now widely recognized as an important part of business, yet implementation processes for such strategies remain fragmented throughout industries.

Supply chain management strategy significantly influences an organization's overall performance. That may explain why the supply chain function is now widely recognized as a critical part of most businesses, and why two-thirds of the companies in a recent survey have supply chain representation in the boardroom.

Cranfield University's School of Management in the United Kingdom and management consultancy Solving Efeso recently polled more than 180 senior global supply chain professionals at some of the world's leading organizations to "clarify and understand the interpretation of supply chain strategy in the boardroom."

The final report, published late last month, identified alignment with corporate strategy and customer service as the leading functional drivers of supply chain strategy. The findings also indicate that cost focus, customer lead-time and customer quality are the most important supply chain performance drivers.

The following are the top five findings from the analysis:

  1. The supply chain function is recognized as an important part of the business, securing solid senior-level representation in most companies. In fact, there is a growing and significant presence of supply chain responsibility at the boardroom level. However, the supply chain typically remains fragmented.
  2. Customer service and corporate strategy are key. Although there are many functional drivers of supply chain strategy, customer service is the most significant, followed by corporate strategy. When the senior supply chain executive is on the board, though, corporate strategy becomes the main driver.
  3. Importance of supply chain drivers can vary. Although there are many performance drivers of supply chain strategy, the major drivers are cost focus, customer lead-time and customer quality. The relative importance of these varies by sector.
  4. Supply chain strategy, planning and review within leading companies is highly cross-functional and, in many cases, a continuous process with regular monitoring and adaptation to circumstances.
  5. For organizations that do not have a continuous strategic planning and review process, customer service issues and cost issues are the main triggers for a supply chain strategy review.

In many companies, the supply chain strategy process remains immature and fragmented. Moreover, a minority of supply chain strategies are implemented with very few problems; a substantial number are abandoned completely or encounter sizable implementation difficulties.

"Only 2 percent of respondents confirmed that their supply chain strategy implementation ran smoothly and on-time and on-budget," Alan Waller, visiting professor at Cranfield and vice president of supply chain innovation at Solving Efeso, said in a statement. "The three main causes of implementation failure are: company culture, lack of leadership and poor supply chain visibility. Barriers to strategic success are predominantly people-related, rather than due to technical barriers."

The report concludes that successful strategy implementations have top-level support and use vision-led, quantitative modeling and risk management techniques. Success was also found to be higher when finance, marketing and IT departments are actively involved and accountable in the strategy development process.

"It is clear that in some organizations, supply chain management is still perceived as a means of reducing cost; not as a means of achieving competitive advantage," according to Richard Wilding, a professor at Cranfield's Centre for Logistics and Supply Chain Management. "Supply chain strategies should not be developed by individuals in isolation. Other departments, such as marketing, IT and finance, need to be held accountable, rather than just consulted, in the development and delivery of a firm's supply chain strategy."

Resources

Supply Chain Strategy in the Board Room

by Richard Wilding, Alan Waller, Silvia Rossi, Clive Geldard, Steve Mayhew, Roberto Cigolini and Clare Metcalfe

Cranfield University School of Management and Solving Efeso, June 11, 2010

Boardroom Survey Reveals Ingredients to Supply Chain Strategy Success

Cranfield University School of Management, June 24, 2010

Supply Chain Strategy in the Boardroom - Interim Findings

Cranfield University School of Management and Solving Efeso, February 2010



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