Tyndall Says:

Not nearly enough awareness is present in the executive suites and boardrooms about the value of SCM. What do you say? Send us your comments here

Expressing views about a class, or category, of business leaders, or about any kind of people for that matter, is risky, difficult, and opens one up to be accused of stereotyping.  My intent here is certainly not to convey any such representation as a generality, but rather to voice my judgment in where we stand with CEOs, and boardrooms, with respect to Supply Chain Management (SCM) today.

I do this because the subject is being discussed more frequently, especially since Prof. John Langley and I co-chaired a panel discussion on the subject at an annual CSCMP conference a few years ago.   And, the excellent research by Prof. Karl Manrodt and team for CSCMP was published shortly thereafter.  It seems now there is no shortage of opinions, questions, and judgments about the presence or value of CEO/board leadership to a company’s supply chain excellence, and its impact on business performance.

First, let’s please recognize that we have come a long way since SCM was first being used as a term in the 80s, and then more recognized in its broader sense in the 90s and early into this decade.  Those of us then, who were proselytizing this “new religion” were often unable to get C-level attention, much less commitment.  My first article in CEO magazine, co-written with a president of Becton Dickinson in the mid-90s, was hardly embraced by the CEO world.

Today we have numerous examples of strong CEO leadership for supply chain transformations, for SCM, and for its impact on shareholder value.  To name just a few --- Wal-Mart, Dell, IBM, The Limited, Tesco, Zara, Samsung, Procter & Gamble – these  CEOs not only understand SCM, they act on it every day as part of their busy executive agendas.  There are several more such examples.

In general, most CEOs today understand the costs and economics of supply chains….buying, making, moving, storing, distributing, and selling goods costs money.  If nothing else, we have raised this awareness, inasmuch as the total costs can easily amount to 65-85% of the operating costs of the business.  And, the rapidly expanding globalization of sourcing and distributing processes have heightened this awareness.  CFOs have largely brought this higher cost awareness to C-level and board attention.

However, not nearly enough awareness is present in the executive suites and boardrooms about the value of SCM – what it can do to differentiate the business, to increase revenues and/or market share, and impact shareholder value in dramatic ways.  Only the top supply chain companies – and not even all of these – have CEO and board-level understanding of this untapped power.  Most recent surveys, for example, find no more than 25% of the larger companies have a “Chief Supply Chain Officer (SCO)”, which is one good indication that the CEO/board sees value in their supply chains.

I, and others, have written and talked about why this is….ineffective communications, CEO backgrounds, other perceived higher priorities, perceptions that SCM is too operational and not strategic, etc.  We can often see the gaps in the company’s culture, its organization, its lack of adequate return on invested capital, its capital efficiency, and other metrics that can demonstrate supply chain leadership.  We can even more clearly see the gaps in customer satisfaction, in lack of speed or velocity, and in lack of “better,” even though the company operates “cheaper” and maybe even “faster.”

Some might say that as long as the CEO/board do not constrain or limit important SCM improvements, then perhaps it doesn’t really matter?  And, yes, we can find companies with excellent supply chains where this is the case.  But, this fails to acknowledge that any supply chain can be improved, that CEO leadership is a key to innovation, and, as Jim Tompkins so eloquently puts it, leads to “bold moves” that separate leaders from followers.

Risk aversion is not the path to excellence or innovation; nor is 100% focus on cost reduction, continuing resistance to change, just copying others, or “if it ain’t broke, don’t fix it.”  These are decisions that only the CEO can make, with board concurrence.  I hope we can get to SCM leadership and innovation levels with more CEOs, so that more companies can achieve their true supply chain potential.  This is especially critical as companies in the western world face increasing competition from Asia.  We all need to keep working at this, in my view.

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