Build Supply Chain Excellence From the Ground Up

Use centers of excellence to drive the next level of supply chain capability.

Supply chain organizations must cope with growing demand, supply and product disruption. This means that now more than ever before, supply chain leaders need to think bigger and bolder. This bold thinking entails transforming supply chains to become better prepared for both the predictable and unexpected. They need the ability to anticipate and respond to future events with integrated plans capable of responding to disruptive business scenarios.

Centers of excellence (COEs) are one way to address the need for transformation in supply chain organizations. A COE dedicates resources to finding, developing, and sustaining processes and practices that drive value in the supply chain. Unlike other supply chain leaders and managers, COE professionals can step out of the day-to-day execution role to lead change initiatives and build healthy supply chain infrastructures that set them apart from the competition.

COEs are often charged with driving change across multiple areas of the business, but have limited resources to do so.

Ken Chadwick, research vice president at Gartner, says supply chain COEs can be cornerstones of innovation and adaptation, but thoughtful design is essential to realizing such capabilities.

“Building a supply chain COE is like constructing a house from the ground up,” explains Chadwick. “The business context is the foundation on which you build the formal structure of your COE. Once the contextual foundation is laid, the organizing model, scope and scale of services, and supporting network of partners act as three pillars to facilitate the stable execution and function of the COE. It is, however, the COE mission itself that acts as the metaphorical roof that protects the COE from the elements of lack of adoption, decreased engagement and obsolescence.”

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Align the COE organizing model with the context and objectives of the business

Supply chains with successful organizational structures create a foundation for their COEs by understanding the current context and future direction of the supply chain in which the COE will operate.

Initially, supply chains tend to have decentralized or center-led COEs, because separate supply chain functions and operating units have yet to see the need or value of driving toward standardization and integration. As the maturity journey progresses, supply chain leaders often start to use each of the models more strategically across multiple functions or processes, depending on required outcomes. For transformation they use a centralized model, for engaging business units in collaborative design and deployment they use a center-led model, and for knowledge sharing they use a decentralized model. The right organizing model for the supply chain will be guided by reflection on the current context of the business.

Frame the scope and scale of the COE

COEs are often charged with driving change across multiple areas of the business, but have limited resources to do so. Determining the scope and scale of the COE can help balance what is feasible and what will provide the greatest value to the supply chain. The scope determines the core focus of the COE’s activities, while the scale determines the reach of those activities within the organization.

To be truly effective, the COE organization needs a network of partners that can assist in deploying initiatives.

“COEs are focusing the scope of their work in three ways,” says Chadwick. “Functionally focused COEs are directed to develop common practices for specific supply chain functions, such as planning, sourcing or manufacturing. Process-focused COEs may involve more than one discipline, because the processes they are standardizing likely intersect multiple departments and teams. Capability-based COEs have the broadest scope, and are engaged in more end-to-end business process or transformation initiatives.”

Although they require greater coordination and investment, multiple COEs can accelerate the rate of change within the supply chain by providing deep focus on the improvement of a specific function or capability. However, Gartner advises supply chain leaders to begin by implementing an initial COE, and get the formula right before coordinating multiple COEs.

Build a network of partners into the COE organization and governance structure

“To be truly effective, the COE organization needs a network of partners that can assist in deploying initiatives,” says Chadwick. “Developing this supportive network requires a focus on how to layer and link together the COE organization to the core business. This includes considering career paths of those coming into and out of the COE, developing connected teams, and linking the structure to core stakeholders and partners.”

Although the number of staff in a COE can vary considerably, most are relatively small (five to 20 core team members). Outside of this core group, other supply chain staff can be involved through project teams, as subject matter experts, or as super users who can help with the training, execution and adoption of new practices. COE engagement with other parts of the business provides a level of information the team will typically not have on its own. It also connects the core supply chain staff to the initiative, leverages resources and improves the credibility of the initiatives.

Gartner clients can read more in “Best Practices in Organizing Supply Chain Centers of Excellence” by Ken Chadwick, et al.

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