Supply Chain & Transportation
Few business disciplines within the corporation have seen such profound change in recent years as supply chain management.
Globalization, the Web, and the emergence of more sophisticated information technology systems now allow companies to connect more closely across functions and geographies and to disassemble their operations to take advantage of low-cost labor and better serve customers globally. As a result, excellence across the supply chain has become ever more important for building and maintaining competitive advantage.
Supply chain expertise is crucial for consumer companies, for whom inventory issues are paramount. Cisco Systems’ Internet Business Solutions Group recently estimated that retail companies worldwide are carrying some $325 billion in excess inventory.
Increasingly, retailers measure customer satisfaction based on factors such as product availability and speed to order that relate directly to the supply chain. Additionally, recent fluctuations in commodity prices (oil most dramatically) highlight the value of having a supply chain officer who knows how to manage these costs globally. A $10-per-barrel increase in oil costs can easily translate into a 1 to 2 percent increase in total costs of goods. Even though fuel prices have eased, uncontrollable global issues will always keep this commodity volatile and finding ways to control transportation costs will be a key measure of success for supply chain executives.
Increasingly sophisticated supply chains have created significant challenges recruiting supply chain executives with the requisite talent. In many ways supply-chain management is a discipline that is less than two decades old. As a result, the pool of executives with real experience managing an integrated supply chain is relatively small.
In the past, many consumer companies underinvested in their supply chains.
Further, this functional area was too often considered less desirable for career development than disciplines such as manufacturing or sales and marketing. That has begun to change, however, as company leaders increasingly focus on the bottom-line savings that supply chain excellence can deliver.
Given the limited talent pool and the increasing demand for supply chain expertise, a significant “talent gap” has appeared in all four disciplines of supply chain management: planning, procurement, manufacturing and logistics. Consequently, compensation packages for executives responsible for the four key disciplines of supply chain have risen sharply over the last few years and finding the right talent has become more difficult than ever.
Refreshing the top team
The increased focus on the supply chain has necessitated changes in the make-up of the top executive teams of many companies. Traditionally, one of the key seats at the table was reserved for the head of manufacturing and operations because that position controlled the lion’s share of labor costs and capital expenses.
Increasingly, however, companies are realizing that their core competency lies in marketing and selling goods, and that in-house manufacturing is only one of several options, along with contract manufacturing and outsourcing. As a result, the key discipline needed for the top team may no longer be managing large quantities of labor and assets in a manufacturing silo, but rather the ability to more broadly connect the dots across the organization and manage the flow of goods from concept to consumer.
Finding the right “A” players for senior supply-chain positions can provide additional long-term benefits for the managing of a company. Success working cross functionally to lead an integrated global supply chain is often a precursor to a role as chief operating officer, a trend we have seen emerging over the past two to three years. These supply-chain champions are often the leaders who best understand the whole operating side of a company.
Smart chief executive officers and boards of directors increasingly understand the importance of comprehensive supply chain expertise, and as companies tighten their operations in the current downturn, the value of such talent will continue to grow.