The supply chain industry is evolving at an unprecedented pace, with rapidly-changing customer expectations, the introduction of disruptive technologies and ongoing economic and geopolitical uncertainties worldwide. To survive — and thrive — businesses need to be increasingly agile and responsive to the market around them.
And the ability to do that often starts with having a well-designed supply chain. Competent supply chain design is often the secret behind why some organizations thrive and adapt while others underperform and are slow to change. The more mature a company’s supply chain design, the greater value the organization realizes — which equates to lower costs, improved service, reduced risk and greater sustainability.
Determining how mature — or not — an organization’s supply chain design competency is can be an extremely complex task. The most effective models analyze issues from multiple perspectives, compare performance against various industry benchmarks, assess the skills of the people on the team and examine the strategy behind supply chain design. Due to the many intricacies, many organizations look to outside partners to help them understand not only their current state of maturity and how it stacks up relative to other organizations, but also how to advance and improve over time to meet and exceed strategic business goals.
At its core, however, the process often falls into four distinct steps.
- Assess Your Current Design Competency Maturity
To get the supply chain design to where it needs to be, it’s critical to first understand where it stands at present. Current supply chain design should be assessed across four main areas and basic consideration questions:
- People: Is the right skillset, and are the right roles in place in the organization?
- Process: Are repeatable, scalable, and agile-paced processes established? Is design a core part of company’s decision-making processes?
- Technology: Is the right technology deployed to achieve goals? Is it adopted thoroughly and purposely?
- Strategy: Is the overall strategy affined and aligned with your supply chain strategic view? Is the organizational structure and governance in place supporting the competency development goals at the right speed?
Only upon taking stock of current operations can organizations accurately assess both what projects can be tackled immediately and what should be put on a longer-lead list to work toward.
For example, when an organization in the CPG industry wanted to set up a globally-coordinated supply chain design competency, it started by running through a baseline supply chain design maturity assessment. Armed with this initial insight of each regional team’s people, process, technology and strategy, it then ran an outlook set of assessments to gauge where it could be within three years, given its organizational constraints in every region, as well as its current needs. Driving discussion in alignment with supply chain strategy review, to identify the key principles that tie strategy to strategy execution leveraging design. By setting up best practices, community development within their regional teams and a path to create the value desired within the timeframe, the company was able to achieve savings north of $20M Euros for the first year of the program alone.
- Identify the Ideal Future State
With a realistic view of the current status, organizations can then look toward the future. At this phase, organizations should look to answer questions such as:
- What are long term initiatives to tackle?
- How fast can (or should) the organization shift based on initiatives?
- What are the goals for the organization in the next 3-5 years?
- What are organizational objectives where the supply chain will make a major impact?
For one high-tech organization facing high-growth and a highly-volatile environment, this step in the process was focused on how they could help the company accelerate the time frame for reaching goals. With requirements on inventory rationalization and deployment, as well as an overall network design assessment and review of their current product flow prerogatives, the company was able to put together an ambitious design competency development plan—one that moved them from their current design maturity state to a future high enough so that they would have advantages around response times, visibility for the business, structure of the team and value tracking.
- Identify the Gaps and Build a Program
Armed with knowledge of where an organization is and where it wants to go, the next step is to understand how to get from Point A to Point B. And often, that path and plan can be informed by what other best-in-class organizations are doing and how they have matured in their own respective supply chain competencies. Organizations should weigh:
- What is going on in the industry and what market factors are currently at play?
- How have others garnered success (e.g., managing governance, building teams, etc.)?
- What industry benchmarks exist, and how can they not only be met, but beat?
- How to balance people development, process building, technology adopting and strategy alignment in order to achieve the current supply chain targets on time?
Armed with this information, organizations can then act. It’s best to first tackle some quick-win projects that garner buy-in among key stakeholders that can be assertive in connecting strategy to strategy execution.
One high-tech company applied a more in-depth version of this methodology to its design competency development plans. After several progress reviews throughout the journey, it identified three different classifications of value for the company: value perceived from the customer (similar to a Net Promoter score assessment); recommended value (what is possible based on modeling) and implemented value (the culmination of any design or model when applied). The result from pursuing the accelerated maturity process resulted in implemented value at around $17.5M, plus improvements in service levels, risk mitigation, waste reduction, etc.
- Track the value
It is fundamental to keep your eyes on the prize, and this only comes to fruition when the organization is able to move from strategy into execution seamlessly. What starts in design should end up in implementation, and the benefits, being what they may (i.e. cost reduction, cost avoidance, service level improvement, risk mitigation, greenhouse emissions reduction, etc.) should be tracked and recorded. This is a key part where companies lose their way: not tracking implemented value but just tracking identified value as part of their design work.
In one CPG company, after developing the overall roadmap of projects to develop for the next three years and having worked already in a few initiatives for year one, a standard reporting structure was set in place leveraging its current financial systems. This system allowed it to link the savings from its projects directly to its committed benefits to the organization, which funneled directly into the CFO’s overall budget plan. After the first year ended, the total savings were tallied for the team, and an amazing 40M USD was the figure already validated by finance and implemented. Such tangible results are the ones that support setting up a design competency, and also turn it into the cornerstone of a competitive strategy.
There is significant correlation between a mature supply chain design and the business benefits realized. Whether an organization is just beginning on its supply chain design journey or has a fully-functioning center of excellence (COE), it is critical to have a supply chain design competency development plan to guide progress and help ensure you reach your business and design objectives.
Carlos Valderrama is the Senior Vice President, Global Customer Success at LLamasoft, managing the Customer Success team which helps customers define and successfully execute their supply chain design strategy using LLamasoft tools. Carlos’ career helping companies define their strategic planning and supply chain design strategies in the Americas spans over 12 years and includes acting as an advisor for major businesses in Latin America markets and supporting growth strategy for new businesses development in the region. Previous to his current role, Carlos spent five years successfully developing and managing the Latin America business as LLamasoft’s Managing Director for Latin America. Carlos received a BS in Industrial Engineering from Los Andes University in Colombia, and a MS in Operations Research from Georgia Tech.