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) andteam 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 wastime 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 platformto 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.
I am familiar with and impressed by Nike’s case study on using BPM (Business Process Management) apps to improve processes and reduce paper in pursuit of “perfect order” performance -- orders delivered in full, on time, every time -- and for improved exception handling when inevitably orders encounter errors. Paper remains to this day a significant challenge in the supply chain and finance cash-to-cash cycle, and removing paper is one way to not only improve productivity but also serve sustainability objectives.
On the list every year since the Top 25 ranking started, PepsiCo is noted this year by Gartner for strengths that include “route-to-market capabilities, strong consumer insights linked to its supply chain capabilities and an open innovation platform.” Gartner also highlights PepsiCo as an early mover in sustainability.
I had a front row seat to see the beginnings of the current sustainability trend when I participated in the Supply Leaders in Action (SCLA) council several years ago. Top 25 companies like PepsiCo who are on the council were already showing the way, leveraging their supply chain for profitable growth. And that’s not all they were doing. PepsiCo among others on the SCLA were combining efficiency with growth AND sustainability initiatives. PepsiCo coined the phrase “performance with purpose,” which promotes finding innovative ways to reduce the use of energy, water and packaging, and more. They won an SCLA award in 2011 for work in this area.
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While not on the Top 25 list, Chiquita Brands received their SCLA award in 2009 for excellence in global supply chain management and carbon foot-printing. Earlier this year, one of their divisions Chiquita Fruit Solutions demonstrated how they combine a continuing commitment to sustainability with finding new innovative growth applications.
Fruit Solutions began as a waste management stream for bananas that lacked retail-ready appeal. They traditionally made banana puree but found they couldn’t use the peel and some of the fibrous material left over. They used to just dispose of it by moving the sludge off-site but then asked themselves, “What else can we do with that?” The question presented an opportunity to enhance the company’s sustainability efforts. Chiquita began using the material to generate electricity in another one of its plants. Maurice Morange, their general manager, highlights,
With the pressure on the world for carbon release in the environment, we see this as another way that Chiquita will contribute and take a leadership role not only in terms of the cost to deliver to consumers but the mechanism and manner in which we operate our facilities day in and day out.”
Now a recent new product idea is resulting from that same Fruit Solutions initiative, a ready-to-eat snack product for retail, crunchy banana, pineapple and mango chips produced with patent-pending technology that involves no added sugar, oil or preservatives.
In my view, both PepsiCo and Chiquita are great examples of bringing a brand to life in meaningful new ways. As Gartner recommends in their Top 25 report for companies, they “set aspirational goals and connect the dots between the work people do every day in supply chain and its contribution to the societies within which they live, building engaged supply chain talent that can lead business growth.”
Trend 3: Supply chain leaders partner to drive innovation
Every orchestra needs its conductor and that is the role that the best of the best Chief Supply Chain Officers play in our supply chain symphony. But increasingly they are working in concert with a new set of marketing rock stars to partner on a new product idea-to-launch. Starbucks is a perfect example on the Top 25.
Gartner notes that Starbucks
puts the notion of an outside-in orientation into practice, measuring the success of its supply chain from the store back. Its focus on strong integration between supply chain and new product launch is evidenced by the success of the Starbucks K-Cup, cited as one of the top 10 food and beverage launches in 2012.”
I think it is very telling that one of the most impressive, market oriented and innovative supply chain leaders that I met at the SCLA from Chiquita is now joining Starbucks to head up their global supply chain initiatives.
PwC’s Annual Global CEO Survey found that CEOs see innovation as the vehicle best suited to put them on the road for growth. In the survey, 79% of CEOs expect their innovation developments will drive efficiencies and create competitive advantages, alongside the 78% who expect innovation to generate significant new sources of revenue over the next three years.
Part of [being smarter] about growth is partnership across the business. Leading high-tech and CP companies, for instance, are approaching new markets with cross-functional teams that include sales, marketing, operations and IT to holistically design a synchronized entry strategy -- starting with the customer and designing the right product, pricing, margin targets, service levels, and supply chain network design and trade-offs that will all work together to achieve the goal.”
The best companies in the world have customer-centric supply chains
The Top 25 remind us that the best companies in the world have high performing customer-oriented supply chains and supply chain teams. We also see that the best companies are increasingly finding new ways to compete by leveraging innovations that are informed by new customer data, which is being collected in new ways, and in turn made possible and practical by their high performing supply chains. Here then is both the opportunity and the danger ahead.
The voice of the customer has been around for quite some time, Multiple functions including the supply-chain have paid close attention to the value of activities that can amplify and clarify through that voice. Today though there are new ways of reaching out to customers, partners, and employees. Marketing has been first to experiment with and understand both the technology and the results of outreach activities like crowdsourcing for the business.
In his recent Forbes article, Dan Woods discusses how the rise in CMO led technology investments is creating a silo of potentially valuable information and points to the importance of the CIO in implementing a platform to share and integrate this kind of data throughout the business. Dan notes that the signals found in social media and other marketing analysis can contain valuable information that can be used by many different parts of the company. While he doesn't specifically call out the supply chain, I will.
We know that companies have traditionally employed sales and operations planning (S&OP) to achieve focus, alignment and synchronization across the organization. Done well, the S&OP process can help enable highly effective supply chain management. Sales integration has long been a focus for demand driven supply chains. But disconnected S&OP, ERP, CRM, and home grown systems are not well designed to withstand changing products, supplier costs and pressures, regulations and customer demands that exist today.
Now there is a whole new set of data critical to both innovation and a responsive supply chain that is being generated largely through marketing-led efforts. The CIO needs to ensure that a platform, like the enterprise information management technology that I work with, is implemented across the enterprise so that the supply chain can take both the structured systems data and the unstructured data generated around the customer social profile, integrate it and most importantly use it in context for their critical business decisions.
To me, it has become very clear that both the oldest and the newest orchestration challenge for the supply chain is to work in partnership with an outside-in customer centric approach. That is why I believe that marketing is going to be the supply chain leader’s new best friend forever. What differentiates the best supply chain companies from the rest is an unwavering focus across the business on the customer and, for the future, the technology to be able to integrate and leverage that focus. So I predict that supply chain and marketing leaders will indeed become #BFFs, and they are going to need their CIO to make the introductions!
Illustration from Shutterstock
Editor's Note: To read more from Deb, see her Customer Experience Management: Art vs. Science
