Each year at this time, supply chain geeks (and I use this term with great regard and affection) eagerly await publication of the annual Top 25 list. I have been following this list since its inception in 2004 by AMR Research, now Gartner, and along the way have drawn some conclusions about the processes and technologies it takes to be the best in orchestrating the supply chain.
Here is my take on key trends as inspired by this year’s leaders, plus one emerging strategy I predict is the new “must have.” Let’s see if you agree.
Best Practices for Orchestrating the Supply Chain
When Gartner releases its annual Supply Chain list, it is always interesting and fun to see who made the leaders cut on this part achievement, part popularity contest that is the Top 25. I have written about the list in the past in my CMSWire article series and shared my observations about companies competing on the basis of their supply chain.
As a technologist and a business process improvement practitioner, I am fascinated by the value that a best in class supply chain can deliver to a company and in awe of the Chief Supply Chain Officer (CSCO) and team of people who can make that happen.
In case you are not familiar with the Top 25, Gartner uses a 50/50 overall weighting for an opinion component and a financial component of the ranking, with the financials focused on three metrics: ROA, inventory turns and revenue growth. While the methodology and the Top 25 list itself have changed over the years, it has always been about sharing best practices that have honed the leaders’ supply chains.
Of course best practices by their very nature evolve over the years. There was a time when we talked about managing the supply chain. The CSCO worried about streamlining their supply chain, reducing the number of strategic partners and driving results for the business by taking costs out of the supply chain. Top of mind were shrinking inventories, offshoring and outsourcing.
While much of that is still important, companies are now facing increased complexity and risk in the supply chain, as well as heightened expectations for supply chain contribution to top line growth. So today’s supply chain leaders find themselves caring more about orchestrating the supply chain, listening and collaborating with partners and customers, while at the same time finding innovative ways to increase both revenue and sustainability, with engaged and talented teams. This is reflected in the best practices I see as trending from this year’s Top 25:
- High performing supply chains collaborate in new ways
- Leading supply chains pursue performance with purpose
- Supply chain leaders partner to drive innovation
I think all three of these must be present to be a Top 25 in the future, just as all parts of a symphony orchestra must be present, working harmoniously to create the best sound.
Trend 1: High performing supply chains collaborate in new ways
Collaboration is certainly a strong underlying Top 25 theme. I am excited by companies who are looking to collaborate in new ways, especially using social techniques. Using our supply chain symphony analogy, social collaboration can be likened to that of the percussion section as it taps into the pulse of the people, amplifying the beat to create a unified sound. Including these social elements means new ways of sensing and acting upon your supply chain data.
A responsive supply chain is all about sensing and being demand driven, and supply chain leaders are learning to do this in harmony with the new dynamics of customer engagement. According to the 2013 Financial Performance Report by the GMA and PwC US, “leading CPG companies and retailers benefit from responding to the speed of the connected digital consumer; top-performing companies see success by engaging with their customers, using digital channels, mobile and direct-to-consumer approaches.”
One stand out in the Top 25 is McDonald's, with “a recent re-emphasis on a strong customer experience, advanced demand sensing and forecasting capabilities across geographies, and an impressive supplier collaboration framework.” Ray Kroc’s philosophy was, “None of us is as good as all of us.”
These days, crowdsourcing and social media are a way to better sense and understand customers throughout their journey, and these conversations need to be included in the collaboration for a complete view of your supply chain. Companies know they must gain visibility at the boundaries and touch points of the supply chain flow, and not only in their transaction stream, but also in the conversation stream that surrounds these activities. Supply chain teams were some of the first to realize that it was time to stop talking to employees, partners and customers and instead start listening to and collaborating with them. The earliest teams found that the technology to help them do this was lagging, but that has begun to change.
This year’s number four on the Top 25, Unilever, has undertaken some forward-looking initiatives with crowdsourcing and collaboration. Crowdsourcing enables a company to broadcast an issue to a diverse audience and ask them to contribute ideas to solve the problem:
The idea is not just to create better solutions but to drive concerted, cross-sector change.”
Unilever adopted a crowdsourcing approach, inviting all stakeholders to take part in the effort to find ways to meet its goals, and unveiled a new Open Innovation website platform to gather and assess ideas from external resources, inviting “anyone who has a fresh, serious approach to new thinking” to pitch in.
Aberdeen tells us that increasing information visibility is a critical strategy for complex and multi-tiered global supply-demand networks. They found that companies have turned to social listening tools to uncover meaningful insights hidden among the noise of the social sphere. In fact, data from Aberdeen Group's Omni-Channel Customer Experience survey suggests that 48% of companies have deployed social media monitoring and that an additional 38% plan to implement these tools. With the help of this technology, companies can use the voice of the customer to make critical adjustments and find issues related to inventory allocation, order management, returns management, cost, overall service satisfaction and beyond.
At the same time companies are suffering from information overload. So while effective listening is the first step in a new way to drive visibility, the next step must be to integrate and synthesize that information with other data and put the results to work in context for the business. Here too technology has advanced to enable orchestration capabilities that include social.
The enterprise information management (EIM) technologies that I work with provide web, social, sharing and integration capabilities to include collaborative information from conversations, emails, social discussions and crowdsourcing in the discussion that surrounds supply chain processes, partners and customers. Perhaps most importantly they also provide the enterprise content management and case management construct to apply this information to the case or activity at hand, while capturing it for regulatory and audit compliance and for archiving governance.
Trend 2: Leading supply chains pursue performance with purpose
Perhaps the single strongest theme in the Top 25 narrative this year is sustainability. It appears in almost every company ranking description, but quite interestingly not in a vacuum but rather combined with the pursuit of performance excellence across the board. Here again I think my symphony analogy applies well.
Just as trumpets and clarinets must be blended with the strings in an orchestra to help create the proper sound, so can the pursuit of supply chain operational efficiency be combined with sustainability to create value for the company. To do this effectively though, the elements must be carefully orchestrated, as in these examples from Nike, PepsiCo and Chiquita.
Nike is cited by Gartner on the Top 25 list for investment in platforms and tools for its suppliers, contract manufacturers and logistics providers, including supplier assessment tools that incorporate sustainability-related metrics. Nike has focused on a number of aspects of sustainability for a decade or more. Like many leading companies, Nike’s earliest response to sustainability included “going green,” removing paper to improve performance, and achieving greater straight-through processing in the case of their financial supply chain.
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