Supply Chain Management is Strategy

A study just published in one of the world’s top research journals confirmed what supply chain managers already knew: the most successful companies manage and orient their entire supply chain network to serve the end consumer best, and they do this by tearing down departmental silos and integrating across key suppliers and customers. This trend has accelerated in the face of COVID disruptions.

In other words, supply chain management is the best strategy for creating value. True professionals know that the WHAT and the HOW of executing one’s operations determine their capabilities. Supply chain management is the what and the how: it encompasses the planning, sourcing, making, delivering, and returning of products and services. We challenge you to think of any struggling company. Now look to see if it has a “strategy” that is divorced from the reality of their supply chain management capabilities, or if the supply chain capabilities match the operating environment. Either way, competent supply chain management that aligns with the ultimate end user is key to success.

This has powerful implications for the wave of technology investments starting to take place. The biggest mistake that companies make is the failure to understand how technology should enhance capabilities. The baseline capability for all other outcomes is supply chain transparency. There is no point in investing in advanced optimization, forecasting, and collaborative capabilities until a company can see what is going on in a timely fashion.

Considering the importance of technology to supply chain management, what is the biggest obstacle to its adoption? Research is clear that performance takes the most significant hit when technology is significantly upgraded without concurrent improvements to the people and processes. It turns out that faster, more efficient technology is amazing when you get it right. However, it also is faster and more efficient at propagating bottlenecks, errors, and problems when the rest of the organization does not properly support it.

A recent example we have seen is a company that automated its distribution centre at the cost of tens of millions of dollars—yet to save money, it cut its training and talent development budget. It focused on big partners (customers and suppliers) first. This is a quite common approach, and the outcome is also far too common: throughput increased, making automation’s proponents happy, yet the problems have increased even more! The workers are frustrated by the technology they do not understand, bottlenecks are appearing that nobody knows how to resolve. Many processes are slower, and relationships with carriers, suppliers, and customers are suffering as the result of the snarled flows of goods and failure to work (or even communicate) with a large number of smaller partner companies to redesign processes.

Some companies are applying technology to better leverage and manage their organizational processes and talent management. A recent conversation with Blake Pinard at Snagajob, America’s #1 hourly work marketplace, revealed that the pandemic challenged them with a 546% increase in supply chain-related jobs. The company is developing numerous technology tools to document worker skills and experience and match them to where they contribute the most value. Badges for worker skills and tools for companies to monitor performance are among the insights offered by Snagajob’s specialized talent management systems. Years of research show that companies like Snagajob and Microsoft and others that invest in workers outperform their peers.

The COVID pandemic has brought supply chain management to the forefront of national consciousness. Empty supermarket shelves and toilet paper shortages have turned out to be the strongest advocates for the supply chain’s importance to our society. Supply chain managers have done an amazing job of pivoting to deal with the disruption in record time, reinventing entire supply chains and changing the global economy in one quarter of a year. The most successful companies in this new normal will be the frontrunners when it comes to technology and worker relations.

© Supply Chain Management Review