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First Thoughts
  By Dan Gilmore - Editor-in-Chief  
     
   
  March 6, 2008  
     
 

Pulling Your Supply Chain

 
 

If you are not in the process of transforming your supply chain to meet the demands of today’s market dynamics and the realities of a world that is now flat, your company is going to be in serious competitive jeopardy.

That, in a nutshell, is the message of Start Pulling Your Chain – Leading Responsive Supply Chain Transformation, an outstanding new book by two of the most well-known names in supply chain management: Nick LaHowchic, former supply chain executive at Becton Dickinson and The Limited Brands, and Michigan State University’s Dr. Don Bowersox.

In many ways, I wish I would have read the book before writing last week’s column on The New Supply Chain World Order, which has generated quite a bit of reader feedback. It certainly would have added to my perspective, as LaHowchic and Bowersox cover in part very similar ground, arguing that traditional approaches to supply chain processes, organization, and information flow are simply not suited to this new supply chain era.

I liked this quote from Ralph Drayer, former chief logistics officer at Procter & Gamble, in the book’s introduction: “Successful companies in the 21st century will be those that exploit web-based information technology and drive the use of collaboration to more strategically transform their supply chains.

Gilmore Says:
For LaHowchic and Bowersox, a Responsive Supply Chain is built on six pillars: consumer connectivity; operational excellence; integrative management; real-time responsiveness; leveraging the network effect; and collaboration.

What do you say? Send us your comments here

LaHowchic and Bowersox say it this way: “We believe that traditional business organization models and leadership behavior can and must radically change to survive and prosper in this new order of global affairs.” I am glad we all agree it is “a new order” of some kind.

In reality, many “supply chain transformations” come when a company has its back to the wall – deteriorating financial performance, major customer dissatisfaction or defections, etc. The powerful message of this book is that consumers, customers (e.g., channels), and supply chain networks are evolving so rapidly, across a global tableau, that even companies that today have what might appear to be well functioning supply chains need to begin a new process of transformation right now to position themselves for success in this shifting landscape.

How? In this limited space I can hardly do justice to the full scope of ideas and models LaHowchic and Bowersox present, but here are some of those that seemed most important to me:

  • It’s not a new idea that we’re much better off with a “pull”-oriented approach to supply chain than the traditional “push” models, but LaHowchic and Bowersox say that changing technology (e.g., the web, visibility) and a greater understanding of how to build a more responsive supply chain organization can finally make a true pull-based model a reality.
  • Companies must therefore build their own versions of a “Responsive Supply Chain Model” – one that in most respects simply wasn’t possible without the flow of information now available. For LaHowchic and Bowersox, a Responsive Supply Chain is built on six pillars: consumer connectivity; operational excellence; integrative management; real-time responsiveness; leveraging the network effect; and collaboration.
  • The reality is few companies and even senior supply chain leaders know well how to apply these principles to achieve a new type of supply chain organization and performance. That’s understandable – the changes in technology, virtualization, and global competition have come rapidly, and traditional vertical/functional views of supply chain management are very hard to unwind. The world is simply changing faster than most of us can keep up with.
  • Whatever your business or industry, it is critical to deeply understand end consumer consumption. To get there means significant investments in connectivity.
  • I loved the chapter on Operational Excellence. LaHowchic and Bowersox make the great point that one key to developing true operational excellence is to “de-average” most of our traditional supply chain metrics – which often hide significant performance issues. Most supply chain executives “would be shocked to find that firms across a variety of traditional industries completely serve fewer than 50 percent of all orders. Reality gets lost in averages and statistics related to channel complexity or in a supply chain journey half traveled.”
  • In the consumer packaged goods-to-retail supply chain, is there any better indication of the progress we still need to make than to know that the highest level of shelf-level stocks outs in grocery stores is during the peak shopping period of Sunday afternoon – in other words, when the revenue penalty is greatest for manufacturers and retailers. But the problem persists.
  • The pervasive belief that there exists an ironclad trade-off between operating costs and customer service levels is in reality often a mirage, masked by metrics that fail to capture the real costs of service failure.
  • One of the biggest challenges to transforming into a Responsive Supply Chain is developing an understanding of how to process information coming from multiple levels on both the buy and sell side about what is happening right now. This is radically different from the hierarchical, linear flow of information most of us grew up with, and represents a real challenge – but may be less of a paradigm shift for the new generation of supply chain managers at the center of today’s connected world in their personal lives.

Several years ago, I came to the conclusion that in the end, the only sustainable competitive advantage almost any company can have is the ability to consistently react to market opportunities faster than the competition. A company’s products, engineering, proprietary manufacturing processes/technologies or even a powerful brand simply no longer confer long term, sustainable advantage.

But those who can build superior Responsive Supply Chains have a real chance.

The book can be found at its own web site – Start Pulling Your Chain. I encourage you to have a look.

What’s your perspective on the key ideas of LaHowchic and Bowersox’s new book? Are most companies prepared to make this kind of transformation? What do you think the keys to success are? What about the barriers? Let us know your thoughts at the Feedback button below.

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