The five pillars of supply chain excellence

DavidOppenheim

I came across a very interesting IndustryWeek article entitled: “Building A Better Supply Chain”  where experts shared their thoughts about what criteria manufacturers should focus on to improve their supply chain capabilities. 

The University of Tennessee’s J. Paul Dittmann says successful supply chains demonstrate proficiency in these five pillars of excellence:

  • Talent
  • Technology
  • Internal collaboration
  • External collaboration
  • Change management

I couldn’t agree more…what about you?

Discussions

  1. David,

    Having been in Purchasing and Materials management for 17 years, I agree that Professor Dittman has hit the nail right on the head.

    1) Talent – individuals working in supply chain management have many avenues and venues to assist them in improving on their supply chain management skills.

    2) Technology – one would be hard-pressed to find a company in this day and age that does not utilize some form of computer to assist in the management of materials and supply chain. Also, it would surprise me if the company was not using some form of MRP/MPS system in conjunction with their computer system.

    3) Internal Collaboration – this is the one area that could be viewed as being the weakest of the five pillars. I say this due to the fact that, depending on what industry you are talking about, Purchasing and Supply Chain Management is looked upon as not being a skilled profession. Too often I have heard the notion that “a monkey could do that job.” This is not to say that all companies feel this way towards their supply chain management efforts. However, much too often, employees outside of the Purchasing or Supply Chain Management department discuss in detail with their suppliers their needs and requirements. The justification for this is that these employees maintain that they are only trying to help Purchasing “get the item or service order started in order to safe time.” What these employees don’t realize is that they tend to provide too many details to the supplier and, thus, give away all of Purchasing’s negotiating power.

    4) External Collaboration – this pillar follows closely behind the Internal Collaboration pillar. Too many times the supplier bypasses Purchasing and goes directly to the end user to learn exactly what is needed. This leads to the “open door” of information between the end user and the supplier.

    The key word in both the third and fourth pillar is “Collaboration”. What needs to happen is that Supply Chain Management needs to be viewed as a valued asset to the organization. This would then aid to the company by bringing Supply Chain Management into the project discussions. Collaboration with the external suppliers would then be a “team” effort in regards to the company.

    5) Change Management – change happens; everyone needs to accept it. In the field of Supply Chain Management, changes within the industry need to be communicated both ways. Purchasing and Supply Chain Management need to stay on top of what is going on in the industry and relay information regarding changes that affect the company to the pertinent departments. The same goes for those departments that are collaborating with Purchasing and Supply Chain Management. If a change in the industry is taking place that will benefit the overall bottom line of the company, this change needs to be communicated as soon as possible.
    The same goes for internal changes within the company that affect the day-to-day operations. MRP/MPS programs change over time. These changes affect the overall outcome of the department. How these changes are communicated and prepared for depends again on how well the company communicates and prepares for these changes.

    Again, I agree with these being the five pillars of Supply Chain excellence. All of these pillars “support” each other. If one pillar becomes weak, the overall degree of excellence in regards to the supply chain is jeopardized.

    Sincerely,

    Richard R. Fleming, C.P.M.
    Certified Purchasing Manager

  2. Well the pillars are right ability to build a good supply chain is really about consistently managing the chain of your supply chain processes. What Dittman has mentioned about pockets of excellence is right. And for that reason, it becomes almost impossible to come up with definition of ‘universally best’ supply chain.

    In most cases for that reason, it is good to prepare a comparison of supply chains within a segment or sub segment of an industry. And in any case, balance sheet performance is possibly the best method to really compare two supply chain operations. Because after all, purpose of supply chain is to meet customer demand in an effective and efficient manner.

    A long time back (possibly in 2002 or 2003) there was an article in HBR about comparison and setting standard for each step of supply chain / service chain activities. This kind of comparison in my books is really useful for companies who are already topping their respective industry segments and need to look for ever increasing need for showing further improvement. Catch in this situation is that any attempt to improve a sub optimal step in operations may result in overall disturbance on global optima that the company has already achieved. For that reason this kind of tinkering must be done with utmost caution.

  3. What is becoming apparent to me is there is perhaps a proper sequence, a maturity curve which an organization will go through to build these pillars.

    Richard Fleming suggests that Supply Chain Management needs to be viewed as a valued asset to the organization in order to be the successful arbitrator between internal stakeholders and the supply base

    Shashank Tilak reinforces the best way to measure supply chaiin goodness is through external comparison

    Both agree there are dependancies on each pillar.

    Perhaps another way of viewing this is that:

    – Talent and Technology are the foundational elements that must first be in place
    – Change management the enabler (optimizing talent & technology)
    – Collaboration the game-changer (relationship centric) which builds a “trust network”
    and leverages on change managment principals to sustain the process

    If only the first 2 pillars of Talent and Technology are established at a minimum level there will be constant trade-offs unless resolved with Change Management. Having a 100% perfect technical solution without the full buy-in and support of the “Talent” will not yield the expected results. Also having the best Talent available and the wrong tools in place will deliver the same result – less then desired results.

    With Change Management in place, Collaboration can then be approached, first internally, then externally. I would like to see someone discuss further the benefits of change management in improving supply chain processes. It’s a often misunderstood and under appreciated topic

  4. These pillars are quite broad and it’s hard to disagree with them. Not that I would want to disagree with any of it but one could argue that these five pillars are critical to almost any core function of a business. However, when speaking specifically of supply chain resilience and robustness, these five pillars of excellence are fundamental.

    Based on my expertise, I would add to Dittman’s reason for making “Change Management” one of these five pillars. While it is true that your supply chain needs to deal with complex change nimbly and quickly (I assume this is what he means when he says “Are they getting the job done? Strategy is one thing; execution is another.”), I believe that resilient supply chains need to not only “deal” with change but indeed “anticipate and drive” the change itself. In my blog (http://smartchangesolutions.blogspot.com/2009/07/erp-and-business-of-change.html) I argue that for ERP efforts to be successful a company not only needs to upgrade the supply chain processes and technology but the company culture itself. So I would rename the fifth pillar “Change Resilience” because it really takes a whole organization (including support functions) to be truly nimble and responsive to changes all along the supply chain.

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