CEO's Don't Get it!! Part I
CEO’s don’t get it! Sales guru’s hate and despise it! Finance wizards want to do it on the cheap! Marketing magicians have no clue about it! The Legal monsters want to outsource it! and HR is sick of it! due to high turnover and absenteeism.
What is it? The role of the supply chain management function in corporate strategy and profitability.
For many years, I have had the privilege of teaching logistics and supply chain to a wide variety of customers: undergraduates, graduates, military officers and executives from all over the world. Obviously, I have not been very successful, because the latest study from PWC reflects the following:
A ‘Staggering’ 83% of CEOs believe supply chains are not up to omni-channel challenges[i]
On average, the CEOs ranked supply chain investment near the bottom of their investments, which suggests that CEOs are still not connecting supply chain optimization with the ability to successfully grow profit margins.[ii]
When I see these type of results, I get sick. For almost 20 years, many industry gurus/consultants/shamans have been talking/discussing/presenting/writing/screaming about the importance of having an effective and efficient supply chain. Many studies have proven time and time again, that supply chain offers any company the opportunity to achieve competitive advantage. The message has been consistent and clear; stated a thousand times. Unfortunately it (the message) seems to have fallen on deaf years because many leadership teams simply don’t get it!!
Below is a slide that I have used to teach the principles of supply chain…..a simplistic ‘see spot run’ version of the basic functions and activities managed throughout the supply chain. This slide is the first in a series of slides that are employed to try to explain the convoluted processes utilized in the FCPG (food and consumer product goods) industry for procurement, distribution, and delivery.
Explaining the roles of trade funding, VMI (vendor managed inventory), CPFR,(Collaborative, Planning, Forecasting, and Replenishment) RFID, Reverse logistics, CRM (Customer Relationship Marketing, Big Data, Slotting fees, Receiving fees, Detention, E-commerce, (E=electronic), M-commerce, (M=mobile), F-commerce (F=Facebook), Risk Management, Social Media, Food Safety, Traceability, HACCP,(Hazard Analysis Critical Control Points), Synchronization, Collaboration, etc is a significant and time consuming challenge. A complex mess for any student/executive to understand.
However, we have a major problem. Just as we are starting to get serious traction in the boardroom, some dude named Bezos (Amazon) and another named Ma (Alibaba) have decided to disrupt the paradigm. Their ideas to utilize the internet as a wholesale/retail system, capable of connecting both business and consumers have turned the supply chain environment upside down.
We don’t know the final outcome because the ‘new’process of free, same-day shipping is just beginning, but we can identify some of the important developments:
- The concept of supply chain management, where the 5 functions: (suppliers, manufacturers, wholesalers/distributors, retailers, consumers) work in a connected model has disappeared.
- The strict definitions of the functions no longer fit:
- Manufacturers have opened retail stores and/or web sites to sell direct to consumers via the web.
- Suppliers, such as farmers, regularly participate in retail sites (farmers markets); they also deliver direct to consumers supported by sophisticated websites that take orders, schedule deliveries and provide for electronic payment. (ie., Relay Foods)
- The old linear supply chain has evolved because consumer now has the tools to access all of the functions, 24/7/365. The system is now circular with the consumer driving the activities.
4. There are no rules! Companies, individuals, and organizations can create new systems and concepts quickly as the barriers to entry are low with the rules of engagement still to be written.
Going forward, the corporate board rooms need to wake up or face the spiral of death. As new agile, innovative companies and entrepreneurs, successfully try new concepts, these players take sales away from the old companies who don’t get it, slowly bleeding their profitability, which ultimately leads to death.
[i] PWC study: Retails New Imperative, Forbes Insights/JDA 2014
[ii] PWC study: Retail’s New Imperative, Forbes Insights/JDA 2014
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