People, Process, and Technology – I’ve heard those stated over and over from a ‘framework’ point of view as the essentials of good supply chain management. I think it’s very incomplete. I’ve worked with companies with great people – dedicated 10- 20- and 30- year professionals in their supply chain roles. Processes, while not meticulously documented and automated, were well-understood, repeatable, and performed to expectation. A company may have great ERP, MRP, and other systems to have high fairly automated environments. Yet, customers are defecting. Inventory is out of control perhaps – both too much and too little, a wonderful paradox. Costs are escalating faster than inflation.
When I talk to these organizations, what is strikingly evident is that they are very internally focused – I did my process at the right time, our ERP has great capabilities, my team is very experienced in our product, we have a six-sigma team that’s constantly looking for improvements. The gotcha is when I ask about end-to-end supply chain performance, and market expectation – the blank look. Let me give you Joe’s five pillars of supply chain management – Markets, Metrics, People, Process, and Technology.
First, supply chains have to be designed for a market, not just a product – financial performance focus by market, supply chain segmentation to identify advantages, strategic analysis, all of these factor in. Imagine talking to a US$10B Medical Device manufacturer and walking them through why they struggle to go direct with supply chains designed for indirect business. We kept circling around the “build the product” supply chain definition, as I kept focusing on “serve the market” definitions. If you get the supply chain designed correctly for a market, you boost sales immensely, a factor rarely factored into supply chain setup. Second is metrics – KPIs – that are end-to-end for a supply chain, matching market segmentation, real-time, and providing diagnostics in performance. Without systematic metrics correctly segmented and cascaded, you can’t make fact-based decisions on design and market performance.
One of my first engagements I took on was with a US$25B chemical company, talking to their newly-minted Chief Supply Chain Officer. They had great ERP, Processes, and People, but they were beginning to suffer cash flow issues, and to his surprise, as he came in, there was no ability to divisionalize key supply chain metrics for Cash-to-Cash cycle time. It took them 5 years, but they built a world-class realtime metrics and benchmarking system for supply chain. With markets and supply chain strategies well-defined, KPI’s and metrics to target and analyze performance, then the Processes were tuned correctly, the People resourced and skilled appropriately, and Technology Assets deployed effectively.
My takeaway here is to look at how you manage supply chain, and ask if you have a sharp and balanced focus on all five key aspects to guarantee best possible performance, keeping an eye on internal views as well as external – Joe’s five pillars: Markets, Metrics, People, Process, and Technology.