Rethinking Resources

There is a gap in thinking about resources at a company level that highlights the mental block about managing supply chain for most managers. If I were to speak to managers about Human Resources, and ask them what they thought of the following situation I would get a strong response: Suppose a company’s payroll is managed independently in each functional unit: Some employees might get paid weekly, some biweekly, some monthly or perhaps twice a month. Managers may classify their jobs as they want – different coding schemes, descriptions, skills, and so forth. All staff heads may decide to interpret labor law depending on their particular outlooks. An annual employee performance review may occur whenever a manager thinks it expedient – maybe only when an employee is in the process of being retired or laid-off. One department may identify their strongest employees, and focus enormous amounts of training and skills development on them, while trying to isolate and ignore the ones who need the most help, and the amount that they invest on development may not necessarily have oversight, or governance. Imagine that there is no headcount management by area, and managers may bring on all the employees they see fit to hire and fire week-to-week, depending on what they feel is appropriate. Or, most interestingly, a department may never bother to identify the employees who happen to be working for that department, simply depending on people showing up and doing what they are supposed to do. And if anyone speaks up and attempts to standardize anything, they are shot down by line-of-business managers as “impeding their ability to perform.” The strong response, of course, is that this is a description of an out-of-control, chaotic labor situation in a company that is fantastically immature and nightmarish.

Now, slightly more familiar, imagine a company where every function has its own IT department. They are able to choose independently whatever IT systems, hardware, and network standards they like, as management deems suitable.

Every group may purchase software at will without any coordination or leverage at the contract level, and with different support levels and radically different configurations. Datacenters may grow under desks, in closets, and in unused offices at will, and things like security, business continuity management, and backup/recovery planning are totally ad-hoc—whatever the a department feels is appropriate. There is no particular governance overall on IT spending, and the groups that are the loudest are probably able to allocate the most resources overall to suit their needs. And if anyone speaks up and attempts to standardize anything, they will be shot down by line-of-business managers as “impeding their ability to perform.” Well, these are not terribly unfamiliar, though perhaps exaggerated. But for lowmaturity IT functions, these descriptions are not very far off the mark, with results that are quite expensive and risky.

OK, now consider the following scenario at a company where every department has its own set of supply chain processes: Processes like business planning occur at a frequency and a depth that is at the whim of the department management.

The types of supply chain processes, and descriptions vary completely, department-by-department, and the measures of how well the supply chains are performed (if they are performed at all) will be judged through whatever standards that are handy.

Departments with strong supply chains are allowed to invest at will, in diminishing returns, on further strengthening their own work via automation or labor, without any coordinated oversight, governance, or balance. There are no supply chain strategic performance reviews daily, weekly, monthly, or annually. Perhaps the performance reviews occur only when the supply chains or (more importantly) the department is seen to be non-functional. New supply chain processes are introduced (and, of course, automated) at will, tactically, and without periodic ‘cleaning’; worse yet, tactical processes slowly become standard processes, and no thoughtful design for the organization’s flow ever really get set up. And, of course, most fun, the departments never really bother to identify what supply chains they have, and never ask if the supply chains are performing as they are supposed to perform (for a customer perhaps!). These groups are all suddenly surprised when they are ‘outsourced’ in an attempt to have at least some semblance of order imposed. Most importantly, if, at any point, the company attempts to standardize or create a semblance of coherency in the supply chain process assets in these groups, line-of-business managers scream bloody murder because their ‘ability to perform’ is being impeded.

So why is the HR situation a nightmare for all involved, and the IT situation familiar but clearly non-functional, while the supply chain situation is somehow both familiar and simultaneously comforting and nightmarish at the same time.

Supply Chain maturity does not require that managers give up their processes. After all, creating a standard payroll process did not require managers to give up their staff, did it? Creating standard job classifications for the purposes of managing skills and labor standards within a company did not stop anyone from getting their job done. Would doing the same for supply chain processes stop the processes from working? Everyone expects an annual, or perhaps semiannual review, and most of us are familiar with weekly or monthly one-on-one meetings with our boss to review expectations and needs and make sure things run smoothly. Is there anything strange about mandating frequent reviews of supply chain performance against business goals to see how they are performing? Most of us would think it is crazy to over-invest in areas of strength: Are you going to send your best project manager to project management school 10 times? But you may continue to (over) invest in automation for your favorite, or perhaps best-understood, supply chain process though there may be no return.

I believe that over time the ‘mental block’ against supply chain maturity will slowly go away; for example, through supply chains that are defined and understood (you understand who’s working for you, and what they do don’t you?); supply chains that are periodically measured against business goals to ensure they are performing (instead of waiting for the disaster); and supply chains that are standardized and deployed once instead of ad-hoc, tactically, or redundantly in areas where they have low return. Supply chain investments are assessed against the standard sets of strategic company goals for the supply chains before they are made. Line-of-business managers do not ‘lose control’ of their supply chain processes, but, rather, are held to a much higher standard of performance. Supply Chain process resources, like Human Resources, IT Resources, Financial Resources, are understood to be company assets and managed as such, not simply as features of a line-of-business manager’s particular style.