So often we discuss the nitty-gritty of supply chains in terms of inventory levels, customer service, supplier performance, capacity availability, etc. All too often we gloss over the organizational structures required to operate an effective and efficient supply chain. I was fortunate enough to attend an AMR Research call on March 23rd titled “The Supply Chain Top 25: Lessons From Leaders” (which I suspect will require registration to view). Since the presenters were Debra Hoffman and Kevin O’Marah, the focus of the webinar was on the AMR Top 25 and the hard numbers that can be used to arrive at a balanced manner in which to measure supply chain performance.
As part of the discussion, Kevin brought up an extended SCOR model around the concepts of demand, supply, and products/engineering that includes the usual Plan, Source, Make, and Deliver functions of the SCOR model. To the SCOR model, AMR added Customer Management, Post-Sales Support, and New Product Development and Launch (NPDL). AMR has overlaid a maturity model on top of this, as captured in the numbers 1-4. Lastly, they included some enabling skills in the outer circle around the concepts of Governance, Strategy and Change Management, Performance Measurement and Analytics, and Technology Enablement.
AMR conducted a survey to understand which of these functions is included in the supply chain organization in participating companies, the results of which are captured in the diagram below. What is remarkable is that only the 'Deliver' function is included in the supply chain organization in more than 75% cases, while the other functions are included in at best 50%-75% of cases. What is amazing is that the 'Make' function is most often not part of the supply chain organization. Instead, 'Make' usually reports up into the COO though a completely different hierarchy. I was also very surprised that in only 50%-75% cases is the 'Plan' function included in supply chain. I was less surprised that 'Post Sales/Service' and 'New Product Development and Launch (NPDL)' are often not included in supply chain. NPDL has long been a separate function and Post-Sales/Service has long been the “poor cousin” of many organizations, even if in some cases it accounts for a large part of a company’s revenue and margin.
The diagram was published in the AMR report: “Supply Chain Talent: State of the Discipline” (see page 10 of report as available here). The report goes into some depth on the skills required in supply chain and their relative importance to the respondents, including the availability of these skills on the employment market, which is captured in the diagram below (see page 13 of report as available here). What I find really interesting is how these 2 diagrams relate to each other in that many of the functions that are included in supply chain less than 50% of the time also score low in terms of the level of skill sought. While this may seem obvious, I still find it surprising that companies in general are not looking for high level of skill in some of the functions, such as 'Make', whether they report into the supply chain function or into a different function. This must be a reflection of the high degree of manufacturing outsourcing and off-shoring that has occurred in the US over the past 20-30 years. The notable exceptions to this observation are “Strategy and Change Management” and “Technology Enablement”. Kevin O’Marah made the observation that “Technology Enablement” scoring less that 50% indicates that “someone else” is choosing the systems that are used by supply chain to carry out their day-to-day activities. My guess is that it is usually IT that is making these decisions for the business.
I am very pleased to note that my alma mater, Penn State, was ranked #1 in an AMR study of US universities offering programs in supply chain management conducted in 2009. (AMR is currently refreshing this information.) What I find fascinating having been in and around the industry for about 25 years now, is that supply chain managment has matured from an ill-defined discipline promoted by AMR and some software vendors into a recognized function within companies and programs of study at university. The AMR study includes 19 universities in the study. When I was at Penn State the closest I could get to studying supply chain management was Operations Research and Industrial Engineering. Don’t get me wrong, I have been very pleased with the skills I learned from studying OR and IE, but all the real supply chain knowledge I have gained has been through experience. I think these have given me a very sound theoretical knowledge in which to understand what I have experienced, and perhaps even more importantly, extrapolate from what I have experienced into new situations. Believe me folks, I am not that comfortable talking about myself to this degree, but the relevance is in an observation made by AMR in the university study that “... industry has stated its most pressing need: the additional capabilities required for most advanced supply chain organizations demand a different academic experience that educates generalists.” So while I am encouraged to see the emergence of so many supply chain programs at universities, let us not forget to give broad knowledge and skills to the graduates of these programs, particularly a grounding in Finance and Economics. My greatest satisfaction in all of this is seeing some of the amazing supply chain talent in our customers and prospects and the emergence of supply chain organizations in most of the AMR Top 25. Even some companies in the $100M annual revenue range (which are not included in the AMR Top 25) have come up with amazing concepts and ideas on customer or demand segmentations, methods of collaborating in an outsourced environment, and methods of ensuring maximum on-time delivery at minimum cost, to name a just few. Yet it is quite clear from the first AMR diagram in this blog that we have a long way to go before the supply chain function has a broad enough scope to manage the end-to-end supply chain within an organization, let alone across organizational boundaries. What is your experience? Are the needs for supply chain management skills being recognized within your company? What about your experience at some of the universities? Did the program prepare you for the “real” world?