Frequent Kinaxis blogger Madhav Durbha was recently honored as a Supply & Demand Chain Executive ‘Pro to know’. We are thrilled that his contributions to the industry were recognized. Madhav’s experience and educational background show his passion and enthusiasm for supply chain and the role it plays in making the world a better place. He shares this passion with others through his speaking engagements and writings. Madhav brings deep knowledge across verticals and significant market intelligence to Kinaxis. He is also a strong asset and advocate to our customers as we enable their transformation by revolutionizing planning. I asked Madhav to share some insight with our readers. Check out his responses.
What do you believe are the biggest supply chain challenges companies are faced with today and for years to come?
The key challenges facing today’s organizations are complexity and volatility. The root causes for these include growing channel complexity, SKU growth, demand variability due to more dynamic pricing and promotions, trading partner growth, increased outsourcing relations, geopolitical risks, and informed consumers. Not all of these factors apply to all industries but most industries are impacted by a subset of these. In light of this growth in complexity and volatility, Demand Planning is becoming increasingly challenging. Being solely focused on increased forecast accuracy to align supply and inventories is no longer sufficient. Being able to quickly respond (in near real time) to unforeseen circumstances is become increasingly important.However, current supply chain planning processes are very batch oriented in most companies. In my role, I educate these companies on the need for speed in planning and supply chain decision making. Kinaxis provides the technology to enable such near real time planning supported by scenarios to combat this rising complexity and volatility. One of the examples of this is, when the Tsunami hit the Japan coast a few years ago, a high tech customer of ours was able to quickly run scenarios and lock in alternate sources of supply and for their competition, that same process took several weeks and this resulted in them having to pay a premium to secure the supply, for whatever is left after the said company locked in the supply. There are many more such examples.In my role I help companies, in dealing with uncertainties such as the one in the aforementioned example, by helping them craft an end state vision and a journey map to get there. While Tsunami may be an extreme event for many, on a day to day basis there are mini earthquakes and mini Tsunamis impacting every supply chain through surprise orders, missed deliveries, production outages and so on. In this day and age, information is power and time is money. So “know sooner and act faster” is the mantra that I evangelize.
What is the importance of connecting the supply chain function to a company’s broader strategy?
Supply chain as a function is becoming increasingly prominent in lot of companies. Tim Cook of Apple and Mary Barra of General Motors are two high profile examples of supply chain leaders becoming CEOs.Chief Supply Chain Officer (CSCO) is a role that is getting a seat at the executive table. This rising prominence is because companies are coming to the realization that the scope of supply chain is quite vast and that significant amount of fixed and working capital is invested in the supply chain. They also realize that majority of costs are related to supply chain functions such as production, distribution, warehousing, and order fulfillment amongst others. In terms of attaining and exceeding a company’s revenue and profit goals, a well-functioning supply chain is the greatest enabler. In this sense supply chain’s alignment to a company’s broader strategy is rather a necessary condition for the strategy to be successful in my opinion. This can be best accomplished by the following:
- Ensuring that the chief supply chain officer directly reports into the executive suite (preferably to the CEO).
- Executive suite and the board asking explicitly how supply chain objectives and strategies align to the company’s broader strategy.
- Within the supply chain organization, capabilities need to be built so that the business community gets answers to their supply chain questions/challenges in near real time. Business community need to benefit from the ability to run what-if scenarios, simulations with explicitly factored in profitability and revenue considerations.
- A well designed S&OP process with explicit linkages to tactical planning processes and execution is a must have to ensure broader company strategies are driving the lower level planning processes and execution. Supply chain organization needs to champion the S&OP process as they sit in the middle of the sales, operations, and finance teams.
- A supply chain center of excellence (COE) needs to be established to drive common practices and shared learnings across the company.
- Appropriate technology investments justified by clearly stated ROI are necessary to differentiate by supply chain excellence. Such ROI numbers need to be measured and reported to the executive suite and the board. This is very important, as well executed supply chain technology investments are proven to yield double digit percentage benefits in various financial and operational metrics. Success breeds success.
- Organizations should identify their core competencies and insource or outsource, as appropriate, specific supply chain functions.
- Last but not the least, talent acquisition and retention is key for the success of any supply chain organization. With the rising prominence of machine learning and data science in general, skills need to be constantly evaluated and refreshed.