The supply chain has become a complex ecosystem that demands seamless management and control to deliver ongoing results to the business. According to the Supply Chain Leadership survey by Deloitte, 79 percent of organisations with superior supply chain capabilities achieve above average revenue growth but only 8 percent with low performance supply chains report the same levels of growth. In short, failures in supply chain strategy impact the bottom line and long-term success.
There are several reasons why a supply chain strategy could fall short of its goals. Here are five of the most common and five steps to solve them…
The strategy follows the money
Early 2018 saw leading fast food retailer KFC shut down more than 600 stores. The reason? Supply chain failure. Somewhere between signing the contract and planning the distribution something had failed. For some experts, this was due to KFC opting into cheap rather than efficient.
In tight economic times it makes sense invest into solutions and service providers that help reduce the weight of the supply chain on the bottom line. After all, according to research by Oliver Wyman, this can be anything from 10-20 percent of overall revenue. This is further supported by insights from an Accenture report which found that most cost-saving initiatives only see three to four percent in category reductions year-on-year.
The solution: Look to zero-based supply chain strategies that can potentially resolve future cost challenges rather than redress those cost burdens that sit in the past. This, according to Accenture, can potentially see 5-10 percent savings while simultaneously introducing an agile operating model that’s capable of leaping incoming economic hurdles.
Disruption is the norm, as is frantic grabbing at strategic investment that gives the business the edge it needs to be prepared for what is to come. The problem is that many supply chain strategies are so busy looking outwards that they fail to look at how disruption will hit from within.
The strategy isn’t looking in the right disruption direction
The solution: Existing supply chain management processes and operations can be disrupted internally. At the recent Infor Executive Forum, three areas of the supply chain stood out as the most relevant for self-disruption: granular segmentation to manage customer and segment change, integrated supply chain versus linear, and holistic cost assessments that funnel back into innovation.
Future-forward key performance indicators
Rapid change demands rapid decisions. Just as the supply chain strategy has to disrupt from within it has to be flexible and agile enough to handle the digital evolution from without. The consumer, the market, and the channel are moving at ever-increasing rates of change and the business that can’t keep up with demand will likely be the one left lying on the side of the digital highway.
The solution: The supply chain strategy has to include investment into technology and innovation that allow for the executive to make rapid decisions in a fast-moving environment. This includes developing modern, business-ready metrics that answer questions defined by the organisation’s long-term strategy. Deloitte found that industry leaders were more likely to use optimisation software, analytics, and visualisation software.
Empowerment isn’t strategic
The Deloitte survey above also found that it is critical for the organisation to not just develop talent but to empower the executive. Supply chain leadership has become crucial to supply chain strategic success. Those organisations showing above average rates of growth and high supply chain performance are more likely to have supply chain leaders (56 percent) and clearly outlined talent strategies (88 percent).
The solution: Ensure that the talent is not just aligned with the strategy but that the strategy is aligned with the talent. This should also include investment into skills that ensure supply chain leadership is au fait with the technology that’s about to disrupt the supply chain and the business.
Death to digital
When an organisation’s culture and mindset fail to recognise the benefits of digital, then it is very likely that the strategy won’t reflect this either. Digital may be hype and may fail if implementation isn’t done in line with the business or existing supply chain challenges, but it adds immense value if done well.
The solution: Look to how digital can refine supply chain management, process and operations. From the driver to the last mile, from the data used to define short-term strategic goals to the cost-cutting advantages of the right technology in the right place.