For many companies, creating a successful global supply chain is a formidable challenge. There is constant pressure on supply chain executives as they weigh profound decisions.
Silo goal or company goal? Reduce cost or service the customer? Reduce inventory or improve service levels? Customize or standardize the process? Feeling tense yet? Good. It is critical that every organization evaluate supply chain tension and, rather than seek to eliminate it completely, leverage it in a creative and productive way.
Ken Chadwick, research director at Gartner, shared three best-practices for optimizing tension in the supply chain.
Balancing global scale and local agility within the supply chain is an ongoing challenge in the journey towards a well-oiled global supply chain. How can organizations ensure that decisions are made in a timely manner, yet also done in the right place with the right visibility? For example, do you keep employees and decision-making closer to the customers? Or, is it more productive to keep decision-making centralized?
“Agile supply chains balance the distribution of power, identifying those decisions that must be integrated (IT systems choice) versus those that must be localized (delivery schedules),” Mr. Chadwick said. “They are linked together by strong governance mechanisms that set a framework and infrastructure for balanced decision making serving local needs and global objectives.”
Defining the core organization platform and aligning span of control expectations accordingly is critical. There will always be limits to the span of control based on the company business model and culture, which will help to inform how the supply chain organizes itself.
“Begin by looking at the different ways that a supply chain organization can be structured, whether decentralized, centralized, center-led, or distributed matrix,” Mr. Chadwick said. “Next, align the amount of supply chain in your span of control based on the platform and overall maturity. The goal is to set up global supply chain as an orchestrator of the process, regardless the platform or ownership of functions.”
Using proximity to your advantage is one of the best ways to deal with tension. Often when we think of a “centralized supply chain,” we envision a team of people in one office, removed from daily issues occurring around the world at any given moment. The best approach is to use geography strategically. Look at where it makes sense for regional supply chain heads to align with regional business and make decisions for local assets under their control, while aligning with the global standards and metrics. Link the regions through robust governance and supply chain systems that allow visibility of data across the network, so everything is synchronized.
“While supply chain is beyond the age of ‘warehousing and transportation,’ the broad span of direct control is still not right for every organization,” said Mr. Chadwick. “Every industry and company’s products, customers, markets and infrastructure tend toward different spans of control, and every company needs to design the organization to optimize its own tension.”
Ultimately, the key to success is focusing on the outcomes from the supply chain process. Businesses are living, breathing, and constantly evolving, so harness that tension to maximize productivity, which will ultimately lead to a supply chain that works seamlessly for an organization.
Additional information is available in the Gartner report, “Rethink Span of Control for Greater Supply Chain Impact”.
Supply chain excellence will be discussed further at the Gartner Supply Chain Executive Conference taking place September 23-24 in London.