I do not see this as the root cause of the problem. I believe (and concur with some previous comments) that the performance management system of a company is the starting point to align all behaviour, and as such the alignment of company objectives.

Business success is all about people and processes, and if you do not direct your people and encourage the correct behaviour through the correct metrics, you cannot ever integrate all functions and make them work together.

I also agree that very few companies see the above two solutions (which may cost you a lot less than throwing expensive software at a problem) as the answer. And it definitely cannot happen without the support and drive from the top.

So in summary, the ingredients better alignment and subsequently performance (my humble opinion):
1. Top management drive and focus
2. Focus on performance management (people and processes)
3. S&OP/ Integrated Business Management

More importantly, the point Fred makes about outsourcing is bang on the mark. Outsourcing is a financial instrument tha has wrecked havoc on operations. Don’t get me wrong, I think that, notwithstanding the social consequences, outsourcing has been a very good thing for western companies and consumers. Where I think Fred is bang on the mark is in his remarks that the assumption was that somehow the operational aspects would sort themselves out and “that somehow the suppliers would just ‘do it’ without facing the same complications as the vertical plant”. The reality is far from this rosy picture. If we add product proliferation and demand volatility to the picture, there has bee a huge rise in supply chain complexity, and, as Fred point out, “the typical CFO has not conceded the free lunch concept and still underestimates the complications and real potential of SCM”.

Fred’s last paragraph is parhaps the most important, especially this statement that “… the Operations people have lost their Industrial Engineers and their scientific approach and therefore have trouble articulating or predicting what it is feasible for the supply chain to do. Ultimately, their SCM strategy becomes limited to chasing parts and there is no-one left to understand the science.” Yet one had to only read Kendall’s post, specifically his statement that “I am not a college graduate or certified manager, but I am full of common sense and understand that what is on the shelf is an asset or debit, depending on what side of the fence you are on”, to understand that “science” is a fairly blunt intstrument and that the enablement of people like Kendall to evaluate gut-feel/human judgment alternatives to solving a problem through the evaluation of operational and financial metrics is the better way to go.

As much as there is a gap between Finance and Supply Chain, there is a gap between the long-term planning typically carried out at a corporate level, and the operational level decision making that has to be made by front-line people such as Kendall. Nothing exemplifies this issue better than his statement that “I was given the ‘key to the cage’ and told to create a working inventory in which I had little, if any, decision making input.” Let’s make sure that the limitations of our “scientific approach” are understood and that we use these to provide targets for front-line people such as Kendall, but give him the authority and tools to get on with his job.

There are companies that understand the golden thread weaved by the supply chain through all their operations, and these should be rightly applauded and used as examples to which others should aspire. The AMR Top 25 is an example of how the best performers are appluaded, and much of the manner in which they are measured is based on financial and operational metrics which span the organizations, such as cash-to-cash cycle.

Yet I agree with Curtis “… that most businesses never see a connection between manufacturing and service, sourcing and engineering or R&D and material management”, which is an idea echoed by Ed and Millard. Millard states that “SCM professionals need to understand the fundementals of all business functions (manufacturing, finance, sales, marketing, etc.) in order to be able to explain the potential contributions and build meaningful metrics”. These statements combined support my original point that Finance knows too little about Operations (supply chain), and Operations (supply chain) knows too little about Finance.

The potential is huge, the opportunity is within reach. Visibility is key to enabling a transparent and collaborative environment in which all functions can collaborate to reach consensus through compromise. While there is a lot of organizational chnage required, technology is a great enabler, and sustainer.

When outsourcing became a vogue way of shedding the risks, costs and complications of the vertical system it was too simply assumed that it would be “free” in the sense that somehow the suppliers would just “do it” without facing the same complications as the vertical plant. In reality SCM, indeed, required those same Industrial Engineering applications, only they would need to be spread amongst different companies as opposed to different departments.

It is my theory that the typical CFO has not conceded the free lunch concept and still underestimates the complications and real potential of SCM. Sadly I feel that the Operations people have lost their Industrial Engineers and their scientific approach and therefore have trouble articulating or predicting what it is feasible for the supply chain to do. Ultimately, their SCM strategy becomes limited to chasing parts and there is no-one left to understand the science.

Managing a business like Ed is seems very straight forward. Each variable impacting the business is congruent. There isn’t one element of a business that doesn’t impact another. While my focus for the past 19 years has been on one business, I contend my experience internally compared to what I read daily supports that most businesses never see a connection between manufacturing and service, sourcing and engineering or R&D and material management.

I will agree with Trevor and John. I feel and believe turning around is somewhat like our cricket nowdays. The initial period we have POwerplays, where in the batsmen have to go bang-bang and have a terrific starting rate, and then once the powerplay is over, the acceleration slows down, so that the startegy can be finalised and innings steadied. So too, when we look to turnaround, the stimulus has to be so powerful, that the starting rate should be sky high and then slowly strategies to be formulated, which will steady the ship. Yes, so we have to be aggresive in the starting and then defend the strategy. I feel that our company too is on the way to the bottom, since the strategy that was formulated was a very defensive, in the sense too much focus was provided to reduce costs…..I learn so much from this discussion, happy to be part of it. I have just 9 years of experience, and my deep aim is to become the best in SUPPLY CHAIN PROFESSION

Of course we have to concede that there are lots of successful companies that are not run in this manner, but I contend that they would be a lot more successful if they did operate in this manner. The issue is that while they are successful there is little incentive to change.