|Today it is equally as important to be moving the information, knowledge, and value as it is to be moving the physical product. But I see logistics as a legitimate, well-needed, required function of the company, but it is not supply chain management.
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The thinking man’s supply chain executive.
That’s been my impression over the years of Nick LaHowchic, who first gained industry prominence as head of supply chain for medical device maker Becton Dickinson, where he led a dramatic supply chain transformation before most companies had any real notion of the potential of supply chain to drive corporate success. More recently, he was Executive Vice President of Limited Brands, Inc. and President and CEO of the Limited Logistics Services, where he also drove many innovations, and remained very active on the industry speaking circuit. He semi-retired in 2007.
I spent an hour recently speaking with Nick about a variety of topics, which I’ll summarize in part here. The full transcript of our discussion is available on our web site (See Nick LaHowchic Interview Transcript, Part 1); the second half will be available in a few weeks.
A continuing theme of LaHowchic’s career and message has been moving supply chain from a “functional” orientation to one that not only sits at the executive table with other company leaders, but is truly a driver of company strategy and success.
Supply chain “needs to be a much more integrated discussion and execution within the management team, rather than a discussion of what a supply chain function can do. It needs to be about ‘How we can operate at a high level and how can we come together to do something extremely difficult to make us more successful?’” he told me.
One question I’m known to ask many people is the difference between supply chain management and the concept that preceded it – logistics. I thought LaHowchic’s response was worth noting.
He said that the best way to think about it is that logistics doesn’t really apply for service businesses – it really is about the physical movement of product.
But, he said, “If I was in the business of insurance, I would still have a supply chain. If I was in banking or brokerage, I would still have a supply chain.”
He noted that part of the difference is that “today it is equally as important to be moving the information, knowledge, and value as it is to be moving the physical product. But I see logistics as a legitimate, well-needed, required function of the company, but it is not supply chain management.”
Of course, these changes mean the skill sets need to change for people at every level of supply chain management, from senior executive to traditional functionaries in distribution or transportation.
“The skills today are also much different even if you are just moving boxes from A to B, just because everyone in the transaction continues to use new technology,” he said. Today, “You have to have a much bigger appreciation for the role of technology in doing that more effectively.”
It’s interesting, because when you talk with LaHowchic, technology and information are constant threads, and in a substantive way – and that frankly is not common in my discussions with most senior executives. Intertwined with that is the theme of time – and how to use it more effectively.
For senior leaders, LaHowchic told me, a key challenge is “how to govern an enterprise organization that is now operating in a time dimension that is so different than even the recent past.”
What’s that mean? “Today,” he said, “you have the ability to know everything from what just rang up at the register to where everything is in your business system to where everything is in your supplier’s system, and what’s running on a production line.”
Managing in this parallel information universe, versus the sequential, hierarchical information flow that was the rule until just recently for almost everyone and still the case for many companies, is the number one business challenge and opportunity, he says.
“Capturing the important information from end-to-end and understanding how to orchestrate an organization that uses supply chain management as its overriding framework is what is now key,” he says. “You can make things happen that in years before would have been sequential activities trying to self-correct themselves. Now, rather than doing that, you are able to more navigate your organization and possibly your supply chain channel rather than continue to forecast it positioning resources based on those outdated estimates.”
We also turned to the subject of the role of supply chain management – and how in many organizations it is still really all about costs.
“I think part of the question of how you think about supply chain management is really where does it fit in the strategic discussion of the company? If it is not sitting at the table talking about where and how to take the company forward, but rather as a second thought that means after we figure that out, we’ll look for the supply chain functions to come up with ways to either produce more value or reduce more cost, then you will forever be in that cost-focused paradigm,” he observed.
I think that really sums it up well. Is supply chain truly involved and playing a key role in crafting company strategies – or is it handed those plans and simply asked to execute?
“Cost you can pound out forever, and people will do that,” he added. “The real question is: Where does the customer or consumer perceive value, and how does supply chain management support that?”
He also noted how they had really used supply chain management to drive innovation and differentiation starting with his days at Becton Dickinson.
“We went beyond just selling syringes to managing the inventories of syringes from our factories right to hospitals, and building and executing supply chain physical models that had financial cash flow models in them that really drove profitability across customers and suppliers,” he said. “Our Supply Chain Management organizations would never have that discussion if they were viewed just a back end function, focused on finding a lower cost to transport syringes.”
That’s all I have room for. I know you will enjoy the full LaHowchic Unplugged, Part 1 transcript. The thinking man’s supply chain executive indeed. I’d welcome your thoughts on LaHowchic’s views.
What’s your take on LaHowchic’s perspectives? Where do you agree or disagree? Are most supply chains operating on this higher level plane – or stuck in functional mode? Let us know your thoughts at the Feedback button below.