AMR's Search for Strategy
AMR recently released a two-part article where they noted that a supply chain strategy can be an elusive enigma, something every organization should know it needs, but something many an organization is uncertain on. To help organizations out, AMR searched and searched and, after answering some basic questions, outlined what a strategy might look like, what some of the important elements are for success, and developed a framework for strategy development based on their demand-driven supply network (DDSN) world-view (no surprises here!).
AMR points out that before one can explain what a strategy is, one must first point out what it is not. To this end, AMR notes that a supply chain strategy is not:
- focused solely on supply or company operations
- inward-facing
- focused only on your company
- technology centered
- point-in time based
- a substitute for business strategy
- a financial plan
- buzzword bingo
AMR then points out that a good plan is realistic, clear, actionable, and approved by leadership and stakeholders. It is based on market performance, emerging market dynamics, and supports the strategy. Furthermore, it considers and defines the following elements:
- holistic design
- process evolution
- talent
- predicted power shifts
- key relationships
- network design
- simulations
Furthermore, a good supply chain strategy supports the business strategy from start to finish. It supports the current and expected future states of the business and details relationship strategies and process for demand, supply and innovation over five to ten years.
Furthermore, the strategy addresses:
- business strategy
- supporting supply chain strategy
- supporting business processes
Each of these components are devised by starting with a proper goal and asking the right questions.
Business Strategy
Goal: What is the right direction to increase the value of the company?
- What is the best way for the company to compete?
- Which businesses and markets best support the strategy?
- What events and market shifts need to be incorporated?
- How are evolving technologies, customer preferences, product competition, and channel dynamics changing the ecosystem?
- What is the true market opportunity?
- To capture this market opportunity, should the company be a cost leader or a differentiator?
- What is the brand?
- What are the risks and how are they balanced?
- How are assets and relationships aligned to win the market?
- How does the business strategy translate into a financial strategy?
- What is the role of technology?
- How should award systems be aligned?
- What is the necessary organizational culture?
- Is the plan actionable?
- What will success look like?
Supply Chain Strategy
Goal: What supply chain strategy is necessary to support the business strategy?
- What organizational structure and talent is required?
- What does success look like?
- How many supply chains are required and how are they designed for success?
- How are demand, design, and supply networks aligned to maximize the value of relationships?
- What should be global and what should be local?
- How should demand, supply, and product processes be synchronized to create opportunity?
- What supply chain competencies are core and what should be outsourced?
- How is risk to be mitigated?
- What does global mean to the organization?
- How is the profitability of relationships increased?
- What is the right level of complexity?
- What is the right IT strategy for the supply chain?
- What are the right supply chain metrics?
- How does the organization measure up to its peer group?
- What is the execution roadmap?
Business Process
Goal: How do I do the right things right in the execution of the strategy.
- What are the supporting business processes?
- What are the gaps in process and organizational roles and responsibilities?
- What is the best organizational structure?
- How is continuous improvement best enabled?
- How should network relationships be defined?
- How should opportunity sensing, complexity, and risk mitigation be balanced?
- How is demand best measured?
- What is the right balance of assets?
- Are there untapped opportunities in working capital or cash-to-cash efficiency that can improve cash flow?
- What reliability is required to support the supply chain strategy?
- How should manufacturing quality, logistics, and IT systems be aligned to support reliability?
- How should shared-services organizations be aligned?
- How should processes be designed to be outside-in and adaptive to the business climate?
- What can be learned from leaders?
- What must be measured?
Once all these questions are answered, then, provided that the end result is:
- feasible from a physical capacity perspective,
- feasible under a price / volume analysis, and
- feasible from a profit perspective using activity-based costing
The organization should now have a decent, starting, supply chain strategy. (I say starting because a first cut should always be revised using input from all affected stakeholders and the plan should be reviewed every year for continued relevance in light of market changes and new knowledge obtained by the organization.)
All-in-all, not a bad pair of articles.
I find these long lists of obvious high-level bullet points tedious and irritating. On the ground where the bullets are flying, Procurement has neither the power nor the visibility to talk strategy. AMR can pontificate all it wants, but its advice is as useless as pixie dust.
What Procurement needs are ways to return real value and thereby gain visibility and recognition within the organization, so that its advice starts to be heeded. In the meantime, reciting Chicken Little lists, especially ones consisting of open-ended questions, is absolutely pointless.
And I love some of these questions. "What is the right IT strategy for the supply chain?" Hey IT, how about this: stop telling me that your one-size-fits-all BI solution is all I'll ever need for procurement. Shut up and go back to playing Doom in the server room.
I prefer the more subtle approach when taking pot-shots at an organization that is trying, but to each his or her own.
Michael, I tend to agree with Oh Please in some ways, but more in the sense that procurement needs to pay attention to the politics of an organization. More important, in my view, than detailed lists would be a clear and compelling "big idea" behind the strategy that people can get behind. Too often, this gets dismissed as window dressing, but without it you're down in the weeds arguing supply chain details to executives who neither know nor care much about them.
As for the IT question, I think it comes down to understanding what IT cares about. If it is having more time to play Doom (doubtful at the exec level) -- argue that the procurement/supply strategy will actually make IT's life easier. My guess is it is a bit more complex -- you have to make IT important (ie, security issues, data standards, etc.), but not burden them with additional rote tasks that seem to duplicate what they're already doing to keep the ERP ship afloat.