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  • Writer's pictureZsofia NAGY

Supply chain is the bloodstream of businesses

supply chain is the bloodstream of businesses

In my most recent post about supply chain leadership and their responsibilities to ensure governance and controls are in place in their supply chains, I mentioned a few clear points on how to make it happen.

In this follow-on piece, I'm going to dive into the general root cause and how leadership in supply chains doesn't necessarily get enabled by both the board of directors and the C-level leadership (let alone having SC representation at that level).

The point why we continue discussing the topic is really simple:

The complexity and volatility of operating international supply chains (let alone full fledged global ones) are increasing and the impact on your supply chain depends on one key factor.

Your ability to see your supply chain as the bloodstream of your business.

Just like our whole blood circulation system is the lifeline of our body, the supply chain in every company is the lifeline of the business.

As a business owner you have 2 choices, looking at your supply chain:

  1. See it as the bloodstream of your business, nourish it accordingly and let it bring you top line business as well as stability through appropriate control

  2. Starve it to constant firefighting, sub-par operation or failure by thinking of it only as a cost sinkhole and let it bring you more struggles than you should normally have as a business

Now, it is quite easy to see which is beneficial for your business.

In fact, all your business functions are part of this symbiotic system where none of them can be seen as just a cost sinkhole where resources are constantly reduced against expecting continuous growth at the same time.

This is true for all of those functions as well which you already outsourced or off-shored (or about to nearshore).

That's why when we talk about strategic business advisory and defining which capabilities your business needs (which are considered "core"), we need to take these seriously.

I've seen so many companies that it hurts my eyes to see the same mistakes again and again.

Which mistakes are these, which are still very much present in today's organisations?

  1. Offshoring and outsourcing without establishing adequate oversight and bi-lateral or multilateral control mechanisms, as it is being considered externalised (non-core) and hence not "our problem" anymore, other than the set service level KPIs

  2. Launching process improvement projects where the processes linked outside of the supply chain were simply not taken into consideration (or only to a degree to make them fit in / adapt instead of having been checked for true bottlenecks or hard requirements that cannot be changed)

  3. Cutting supply chain workforce YOY (year-on-year) despite expecting revenue increase or further improvement beyond BAU (business as usual) without consideration of the pillars that uphold the core processes in place (as they were working without a problem, so now it can be simply cut back…)

  4. Specialising roles to the death of the sub-function and siloing the organisation further as they fall victim of perfectionism instead of overseeing and managing the entire flow, having their pulse on the pace of the business

  5. Improving processes in silos which have clear negative impact on other processes as incentives had been set siloed as well, despite clear signs that these work against each other (or applying blatant disregard for these then being surprised that the adjacent functions complain 6-9 months later)

  6. Forgetting to monitor and manage risk in a consistent and relevant manner and focusing only on risks max 3-12 weeks ahead, basically causing a bull-whip impact within the organisation for no reason

  7. Not including either environmental or social impact in business cases as all these had been externalised before, then forgetting to reverse engineer old business cases that are being compared to new sustainability related business cases

  8. Over- and at the same time under-spending on functional IT systems, network and people skills related, which results in vulnerability towards cyber crime or accumulation of low quality data

  9. Buying IT systems to standardize processes and forgetting that not every single process can be changed to fit the cookie cutter and ending up doing more workaround than using the system bought, which could have been avoided with a bit of foresight

  10. Not changing people in position when it is 100% clear that they are not fit for the role and waiting till a bigger mess up happens, then spend 10-20x more on cleaning it up

  11. Not keeping motivated and qualified people with entrepreneurial attitude as they speak up and demand "too much" from the leadership

  12. Not listening to people who bring problems forward as they are being perceived as the problem itself

If anyone thinks these are a thing of the past, they are highly mistaken. I haven't even brought up how these look from my side as an external (that could be a separate article).

I don't even have to bring examples from companies. Enough that you look at employee forums where they bring these examples themselves to let their frustration off (including professional peer forums).

My problem is that I see these every day, when these employees complain to me as an external.

I see it at C-level and board level as well, just from the other side. By seeing a blank look, disinterest and annoyance when it comes to the topic of supply chain. Despite the recent pandemic and disruptions.

I recently went to an event full of business owners and leadership level attendees (not supply chain necessarily, but a mix of all).

Only one person's eyes lit up from finance, when I mentioned what I do (supply chain). The rest were like "ok, hear you, not interested"…and changed subject as they had neither knowledge nor interest in actually discussing supply chain as a topic, which given that many of them were from companies that have products/services, they should have been.

This is where we arrive back to the main point: if you don't know, don't care how your supply chain is being run, then I can 100% assure you that it is run to the ground (or into a wall) sooner or later, simply by lack of attention, control and misalignment.

As a business owner and a leader, you have to have a profound understanding of how the bloodstream of your business works and ensure that it is well nourished.

Otherwise you end up in the ER (emergency response) for businesses where the cost of haemorrhaging will run so high that it will jeopardize the life of your business.

I hear business leaders discussing shipment route disruptions again….due to the recent attacks on cargo ships and how bad that disruption will become soon.

Those who actually take care of their supply chains, have already made their move to solve the problem (or solved it already from their point of view) and they think about their next strategic supply chain move that will bring their business in an even better position (purely driven by the entrepreneurial attitude of people on board).

Before anyone says that I'm only advocating for overspending on your supply chain, I'm not.

I'm all for optimisation and efficiency.

However, that efficiency cannot result in rendering your supply chain to a human equivalent of a brain dead body assisted by robots.

To avoid that, you need to invest wisely:

  1. In your own supply chain knowledge as a business owner and leader

  2. In ensuring that no matter what is being done or changed (from org structure, to incentives, to processes and systems), it is done knowing how the different aspects link together and why (for all 3 impact areas: people-planet-profit and for all functions)

  3. In building organisational structure and roles which enable people to see point No. 2 here and enable them to progress in their professions

  4. In not getting too far away from your own business operations, which will enable you in return to see small cracks before they become craters

  5. In setting up a governance and control structure that has its pulse on the business and can truly anticipate and act

  6. In keeping people and information long enough in your business, thus ensuring business continuity

  7. In having relevant and useful systems that help your teams, not according to the hype cycles and shiny object syndromes (or worse, according to how you change leadership)

  8. In communications and communications training to foster higher level of understanding of different point of views

  9. In longer-term thinking and ways of working (just like healthy nutrition and lifestyle change)

  10. In overall business and functional knowledge across your whole company to ensure full cross-functional alignment and action

The choice is yours as the owner and the top leadership of your business. A healthy business requires prudent investment and attention, so do healthy supply chains.

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