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How Supply Chain took the driving wheel

November 10th, 2011

Author: Darryl Judd

Moving from the warehouse floor to the boardroom, the rise of the Chief Supply Chain Officer (CSCO) has changed the way companies compete in these turbulent times.

"Supply chain can be applied as a business tool to effectively integrate both internal and external operations to form a key driver that will provide them with an edge on their competitors".

Supply Chain as an industry has gone through a massive revolution in recent times. In the past the role of the supply chain professional was to provide the grunt work in getting the goods manufactured and delivered in full and on time. Preferably in the most efficient way possible! Strategy was left to the finance or executive team.

According to Mr. Kim Winter, Group CEO of Logistics Executive, one of a few search firms dedicated to supply chain and logistics recruitment with a global footprint – this is no longer a trend that is being touted exclusively in academic circles. “Today CEO’s and Board of Directors are including supply chain management on their strategic agendas and turning to their supply chain as a way to differentiate themselves from their competitors. This progression has been accompanied by a transformation of the role of the Senior Operations Officer into that of the Chief Supply Chain Officer (CSCO), a role we have been increasingly recruiting for”.

It seems that Kim and his team have had front row seats to this silent revolution. “We used to walk through company operations and warehouses a lot until a few years ago. These days we find our meetings are predominately with the CEO, Boards of Directors and Senior Supply Chain Executives discussing supply chain performance strategies, people change and business re-engineering to encompass the supply chain strategy and how to positively impact the business ”.

So how did this insidious revolution take hold?

Operations management has always been recognized as the backbone of many companies. The importance in the link between an efficient supply chain and successful business strategy to ensure business health is still a relevantly new concept and still yet to be acknowledged in my quarters. According to Kim, “The easiest way to gain the support of most business leaders outside of the Supply Chain function is to point out how Supply chain can be applied as a business tool to effectively integrate both internal and external operations to form a key driver that will provide them with an edge on their competitors”. The designing, refining and implementing of new processes are key supply chain activities, which already emulate this process so it was almost inevitable for supply chain to find its place amongst the executive team in meeting this integrative leadership requirement within companies.

Increasingly it is the Chief Supply Chain Officer’s role is to manage the entire process. Instead of internal business functions running as separate silos with functions such as finance and sales taking precedence, supply chain has created a direct linkage between different functions to form a strategic alignment that drives revenue, cost savings and performance. It is now the responsibility of supply chain to strategically negotiate and manage a company’s destiny in rapidly volatile markets.

This redefinition is evident in companies all over the world, from Apple to Tesco, Coca Cola to Woolworths. In these companies, supply chain is seen as providing the competitive edge that differentiates success from their competitors. Supply chain analytics provides the ability to predict market forces, company effectiveness and the agility required to respond quickly and flexibly. This is increasingly important in today’s markets in which competition is increasingly about whom has the better supply chain as opposed to who has the best product.

This comprehensive, integrated approach has changed the behavior of supply chain professionals. Whilst previously they focused on costs, they now also focus on “value” and “driving out waste”. Supply chain as a whole, is now seen by CEO’s has a key area where investment can be used to best exploit market opportunities and gain valuable competitive advantages.

For instance according to Reuben Slone, Executive VP of Supply Chain at OfficeMax, supply chain executives must speak the language of the CEO, CFO, and the board. Slone says, "Every supply chain initiative we have is judged on economic profit. We look at how we can reduce working capital and cost while making sustained improvements in product availability. All of our initiatives must have a return greater than the weighted average cost of capital for our firm." Slone and other top performing supply chain leaders know that to be a part of driving company strategy they have to relate all of their actions and results to what matters to the CEO. ¹

One thing that has not changed, in fact has become even more entrenched, is the critical shortage of supply chain talent. It goes without saying that the Chief Supply Chain Operating Officer plays a critical role in this process. As Supply Chain develops strategically and commercially, it is critical that Supply Chain leaders continue to broaden their commercial, strategic and leadership competencies and build high performance talent teams. Somewhat of challenge in an industry and function that is not seen as attractive to management gradates.

Attracting, developing and retaining top supply chain talent has been proven to have a significant positive effect on a company’s bottom line. Supply chain personnel must be experts in logistics, legal terms, negotiations, inventory control, risk management and corporate governance. Employers are now starting to acknowledge the change that is occurring as Supply Chain shifts to more of a strategic business management tool, rather than a functional business response. All of which places more pressure on to ensure as an industry we grow the available pool of talent in order to remain competitive.
As Logistics Executive’s 2011-2012 Global Employment Report demonstrated “competitive pay” and parity with other business functions has resulted in significant increases in salaries paid to supply chain personnel and poaching talent from your competitor will only come back to bite you in the long term.

In summary, the old catch cry known, as “the war for talent” is truer than ever before as Supply Chain goes through a revolution that has given it a more prominent business face.

Talented Supply Chain practitioners have stepped up to the mark but are seeking greater recognition or often leaving to pursue greater exposure and career opportunities overseas.

This shortage is not going to cease anytime soon. For business leaders this means ensuring Supply Chain is fully understood within the business, particularly HR and that the job design is aligned to what the business requires. It also means recognizing the value that can be generated through ‘best in class’ supply chain practices and hiring accordingly.

Finding the right specialist HR partner to work with, who understands your business and more critically than ever before who understands and has a well-developed response to the markets they work in. For supply chain professionals this is a well-deserved moment and recognition that has come after a lot hard work taking the back seat but the fun no doubt has only just begun.

[1] The SCM World Chief Supply Chain Officers’ Report 2010

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