Supply Chain Disruption: Aligning Business Strategy and Supply Chain Tactics

Dwight Eisenhower famously said: ‘You will find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics’.

In contemporary business supply chain management (SCM) we have come to appreciate that ‘supply chains compete, not companies’, and in an increasingly volatile global environment, climatic and insurgent situations greatly challenge Humanitarian logisticians in their mission to support the victims of crises and disasters.

In an age of accelerating forces of globalization, technology and climate change, a new SCM perspective is needed on how we minimize ever-increasing and damaging (at times fatal) operational breakdowns in the performance of such a critical organizational function.

Supply Chain Risk Management

Supply Chain Risk Management performs a critical function in an age of persistent disruptions to operational continuity across the full spectrum of military, humanitarian and business SCM domains.

Mitigation strategies such as dual-supplier sourcing, knowledge back-up processes, inventory redundancy, improved aggregate forecasting, reduced product variability and increased product postponement, shipment visibility tools (Bar Coding, RFID) and increased supplier socio-technical collaboration and techno-process integration are widely adopted.

However, disruptions continue, and the reason may be staring us in the face. Quite literally, from the top management team (TMT) meeting room where strategic formulation and renewal takes place. And that is because there is no seat at the big boys’ table for the logistician.

Supply Chain Management (SCM) is instead tasked with strategic implementation. Decisions made that directly impact SCM but without their consultation, and indeed without sufficient TMT education and knowledge of this profession, provides the constituents for strategic misalignment and the true source of Supply Chain Disruption. This in turn leads to a gap of pain in response to disruptive events, ultimately impacting profitably and human lives.

What can we do to engage in better strategic alignment? Contributing professionals to Supply Chain Disruption have identified four key areas of engagement to bridge that gap of pain:

Supply Chain Education

Nurture a shared understanding between the TMT and SCM: This begins by speaking a common language free from SCM technical-speak and it is important to reassure the TMT that their authority is not diminished by strategic alignment.

The strategic goals of the organization must be shared with SCM. There are two main reasons for this transparency: SCM must be aware of the boundaries of the organizations’ core competencies and goals so that these are not breached during SCM tactical implementation; Organisations often look for operational cost efficiencies without considering the SCM network implications for doing so and often it is too late with SCM having to ‘pick up the pieces’. For instance, labour cost savings may be off-set with significantly higher SCM costs associated with servicing more remote locations

SCM education of the TMT broadens their operational awareness and helps to reconcile TMT ‘rational designs’ and operational ‘emergent processes’. This is important given the dynamic nature of SCM and enables cross-functional co-evolution. It can also harness a culture of change-adaption, which embraces and counters challenges through forced efficiencies and greater clock-speeds in a profession that is continuing to transform and innovate.

SCM intelligence regarding both multiple industry self-disruptors such as Mega Container Ships that are causing port congestions and indeed closures, thereby increasing costs and lead-times, and a further level of external policy considerations including periodic China government manufacturing plant closures can inform the TMT strategic formulation process. This acknowledgement of three levels of strategic (policy) impact can reduce disruption:

Another point of education is the concept of Supply Chain Strategic Friction. This was introduced in Napoleonic times to describe petty circumstances and blind natural forces resulting in management and commanders being doomed to disappointment. An element of chance and uncertainty must be factored into strategic goals as a form of temporal redundancy

Supply Chain Data and Metrics

We are not all blessed with the Computational and Visual Education (CAVE) lab of the MIT Center for Transportation & Logistics but capturing minutely detailed SCM data across the full spectrum of operations through the deployment of Logistics Control Towers and dashboards ensures that informed decisions can be made autonomously at the tactical level.

When such data demands outside-SCM budget capital investments such as physical changes in the SCM network or SCM technology introductions, it requires negotiation with the TMT to secure an agreement. For this, communication through TMT and Board level KPIs is critical to success. Superior data analysis and presentation thereof (again including translation of SCM technical language) can contribute to the elevation of the status of SCM within organizations.

Supply Chain Simulation

Prior to SCM-TMT negotiation, it is prudent to secure cross-functional and customer advocacy for any implementation proposals. This is achieved through the use of scenario planning tools, such as LLamasoft Supply Chain Guru for network design, which removes ‘emotions’ from the equation, and when linked to customer research (buying behaviour) and line of business interviews, creates a safe environment in which to simulate alternates together.

Thus beyond straight facts, it helps to draw people into the project and take ownership. In addition, ToolsGroup Multi-Echelon Inventory Optimization (MEIO) truly helps to deliver tangible and logical solutions.

Supply Chain Mêtis (Rhetoric) and Bῖe (Strength)

Mêtis and Bῖe are concepts from ancient Greece but are just as applicable to contemporary SCM. Complimentary to the above approaches is the use of soft skills such as encouraging, coaxing, cajoling and persistence, and employment of the ye olde ownership technique and FUD (fear, uncertainty, doubt): ‘this project is really important, and to you personally, do you really want to cheap out?’ What is important is presenting solutions in such a way that the TMT conclude that they formulated them

To summarise, Supply Chain Disruption is caused by a TMT strategic formulation and renewal process that does not consult SCM professionals. This can be resolved through engaging in the process of dynamic TMT-SCM strategic alignment using approaches such as SCM education (of the TMT), SCM data and metrics, SCM simulation, SCM rhetoric and strength.