Note to CEOs: Stop taking your supply chain for granted!

4/28/2020

truck-blur

By  · Initially published in Logistics Management 


“My C-Level execs need to hear this!” Such was one shipper’s response I received after publishing a recent Two Minute Warning about how too many executives take their supply chains for granted. Candidly, I know that this is a challenging message for C-Level executives to hear, because over the years I’ve received several calls and had conversations with presidents and CEOs who have expressed concerns about the effectiveness of their supply chain.

 

“My C-Level execs need to hear this!”

Such was one shipper’s response I received after publishing a recent Two Minute Warning about how too many executives take their supply chains for granted.

Candidly, I know that this is a challenging message for C-Level executives to hear, because over the years I’ve received several calls and had conversations with presidents and CEOs who have expressed concerns about the effectiveness of their supply chain.

In short, they’re not happy. So, when we invariably get to the, “Do I need to change some people?” part of the conversation, I ask them to hit the pause button so I can ask them a more important question:

“Are you taking your supply chain for granted?”

“Of course not!” is the usual response, followed with examples attesting to their supply chain engagement and commitment . They will then tell me that those perceived weaknesses or disruptions in their supply chains and procurement must be addressed!

So, to put their claim to the test, I ask them to grade their company on what I call the “Supply Chain Spectrum.” I ask questions have them to rate their company using a scale of 1to 5. 

We start with, “How do you rate your supply chain?” Most of the time, they figure their company’s supply chain is around a 3.

Average.

So, I probe a little deeper and ask some “Yes/No” questions:

“Have you mapped your supply chain and identified potential issues with critical suppliers?”

“Does your company have a contingency plan or have you engaged in any scenario planning that addresses the impact of potential disruptions in your supply chain?”

“Does your company have a written Transportation Spend Management Plan detailing how transportation will interact with your sales, operations, and procurement areas?”

“How much has your company invested in improving its supply chain over the past three years?”

There are fifteen other questions I could ask as well, but usually that is not necessary, because after answering, “No!” to most—if not all—of these questions, they begin to realize they really are taking their supply chains for granted!

Truthfully, some of these executives would prefer to ignore the problem, hoping that their supply chain issues will magically disappear—but they won’t!

In our recent interview with MIT Professor David Simchi-Levi, he shared the results of a survey he conducted on supply chain issues with over 600 companies. Very few companies have created contingency plans or done any scenario planning that address what will happen if their supply chains are disrupted.

In our interview with Harry Moser, founder of the Reshoring Initiative, he noted that “low cost” procurement and outsourcing decisions, along with waste-eliminating lean operations, have created more risks for supply chains than companies realize. The stability that most U.S. companies enjoyed of late allowed them to prioritize cost reduction over supply chain resilience without worry. Obviously the COVID-19 crisis has changed that equation and help companies understand: You can’t take your supply chain for granted!   

Since I like to end the conversations I have with CEOs on a positive note, I share some insights from companies that have had great outcomes in building a durable supply chain. There are three things they should consider (and so should you):

Be truthful.

Understand what’s going on in your supply chain and stop kidding yourself that nothing bad can happen. Dig into the “What if?” questions to find problem areas, and create a plan to address them.

Be transparent.

Get together with your team and share your findings. Our recent “Breaking Down the Silos” webinars, hosted with our friends from CSCMP and NASSTRAC, have highlighted some great examples of companies enjoying the benefits of eliminating turf battles and silos and replacing them with regular, cross-departmental conversations.

Be tenacious.

Building a great supply chain can be challenging. You’re typically dealing with lots of people and a range of “BIG” issues from different areas within your company. It is easy to get discouraged, which is why we like to encourage people: Don’t give up! Building a great supply chain enables to serve your customers better, make more money and have a healthier bottom line—and no one takes those things for granted!