Note to CEOs: Your supply chain issues will not fix themselves!

1/5/2022

2021 has exposed a sobering fact: several companies have taken their supply chains for granted. Truth be told, they have mediocre supply chains that are causing operational and/or financial challenges.

By  · As published in Logistics Management 

note-to-ceos-1-4-22

 

As 2021 came to a close, I had more conversations with Presidents, CEOs, and other C-Level Executives about supply chain issues than I have in the previous 30 years.

Last year exposed a sobering fact: Several companies have taken their supply chains for granted. Truth be told, they have mediocre supply chains that are causing operational and financial challenges.

Over the past six months, I have delivered a presentation, “You Get the Supply Chain You are Willing to Live With” to hundreds of executives. The main point states that if a company has a mediocre supply chain, it is because the C-Level Executives are willing to accept it. Conversely, companies that have outstanding supply chains have C-Level Executives that are willing to accept nothing less.

My presentations have led to interesting conversations with several executives. Some look at their company’s supply chain problems (i.e. dealing with allocations of critical supplies or managing skyrocketing freight rates and outrageous accessorial charges) and ask, “What’s wrong with our supply chain?” Other executives see the problems and ask, “How do we fix our supply chain issues?”

There is no simple answer or magic bullet, but there are some potentially contentious issues that must be addressed. For example, before asking, “Do we have the right people?” a company should first ask, “Do we manage our supply chain and transportation activities in a transactional or strategic manner?”

Some C-Level Executives want to believe that they are acting strategically, but are really operating in a transactional manner that focuses on costs first and strategic issues second. If companies are serious about being strategic in addressing their supply chain issues, here are important questions to consider:

Does your company have:

  • A written strategic supply chain and / or transportation management plan that defines how supply chain activities are managed and quantifies the investments that must be made to address your supply chain requirements?
  • Written goals and objectives for your supply chain and freight activities?
  • Written supply chain or transportation Key Performance Indicators (“KPIs”) that get reviewed on a monthly or quarterly basis with other C-Suite Executives?

If the answers to these questions are “No,” then C-Level Executives have a choice: Fix the issues or accept the fact that your supply chain will continue to have ongoing problems. These issues will not disappear or get better with the passage of time. Presidents and CEOs really do get the supply chains they are willing to live with.

CEOs who want great supply chains don’t blame people; they focus on these key issues:

First, your company’s supply chains will change when you decide to change how you view your supply chains. Specifically, they understand the following differences between transactional versus strategic supply chain approaches. Transactional supply chains tend to be:

  • “Living in the firefighting moment,” because they perceive their supply chains are too chaotic
  • Focused on the cost side of the equation
  • Unaware of how their suppliers’ and customers’ patterns impact their business

Strategic supply chains:

  • Look at things holistically
  • Focus on how their customers’ and suppliers’ patterns and requirements impact their supply chain activities
  • Operate with a proactive fire-prevention (versus fire-fighting) mode and constantly evaluate their processes and practices in response to changing market conditions

Second, great supply chains have “outcome” mindsets. Specifically, these companies know what they want to see happen and have properly defined their expectations and objectives for their supply chain teams.

Third, you must understand what is really at stake with your company’s supply chain activities. Recently, as a panelist at a global supply chain conference for C-Level Executives, the moderator had us address this statement: “Companies don’t compete, supply chains compete.”

A fellow panelist concluded that the extreme volatility in the transportation marketplace can either represent an opportunity or threat to your company. You can either beat your competitors by having a superior supply chain or be beaten by competitors whose supply chains are superior to yours.

Hoping your supply chain issues will magically disappear is not a strategy! So let’s close with this question from my presentation: If CEOs and Presidents get the supply chain they are willing to live with, what kind of supply chain are you willing to live with?