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Is It Time to Decentralize Supply Chain Operations Decision-Making?


Faster, Better Decisions by those On the Shop Floor, Nestle and Kearney Say

Sept. 20, 2023
SCDigest Editorial Staff

The world has changed post-Covid, three researchers say in an interesting column from the Harvard Business Review On-Line, which argues this necessitates a more decentralized decision-making model in supply chain operations.

“Is the traditional command-and-control operations management model — which reigned supreme for decades in an era of relative stability and predictability — finally dead? All the signs we see say it is.”

Supply Chain Digest Says...

Batato, Mesnard and Suketu say that for the operator-centric model at Nestlé to work, everyone also must embrace the same culture and values within a factory wherever it might be operating across the globe.

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So write Magdi Batato, executive vice president and head of operations for food giant Nestlé, and Xavier Mesnard and Suketu Gandhi from consulting firm Kearney, in the HBR piece.

That traditional management model has been waning for many years, the three say, but really unraveled during Covid. That was due to the fact that with all the chaos and volatility from the pandemic-caused supply chain disruptions, companies were forced to loosen the decision-making reins.

“There simply was no time for operations managers to gather data, analyze it, and then tell the operations teams how to respond,” the authors argue,” adding that “Companies just had to act, with the best information they had, and the right people to make those decisions were those closest to the action.”

This has created the need for a new operating mode, Batato, Mesnard and Suketu write, in which the strategy is to optimize how accurately and quickly operations responds to threats and opportunities by pushing decision-making to the points in the organization where it makes the most sense for them to be made. That is often “where the rubber meets the road” on the manufacturing or distribution center floor.

Of course, that doesn’t mean all decisions are decentralized. Decisions in areas such as capital investments, relocating factories, product design, etc., are best made by senior managers and execs.

However, many more tactical supply chain decisions in sourcing, logistics, manufacturing, and distribution should be pushed to the most logical point, which is often at quite low level, Batato, Mesnard and Suketu argue. That includes the concept of subsidiarity, which says such decisions should be assigned to the most immediate or local level that is consistent with their successful resolution.

This will inherently increase a company’s ability to respond rapidly and appropriately to disruptions and changes in the business environment, the authors say.

But there are decisions that need to be made about how to make these decision. Batato, Mesnard and Suketu note that companies must ensure that operators are clear on what decisions they can make for themselves and when and where they should seek support.

The Four Key Enablers

Making such a strategy successful requires adoption of four key enablers, the authors say. They are:

Trust: Managers must be confident lower-level employees can make good decisions, while operators must understand which issues to escalate and how.


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Talent: Employees will have to learn new skills, such as more analytic thinking. Therefore, a robust education and learning effort must accompany decision-making empowerment.

Transparency: clarity on the right metrics, linked to specific outcomes the company desires, is critical, the authors note.

Technology: It helps distribute information and thus can drive transparency, even as there are or will be many opportunities for use of AI to support employee decision-making, Batato, Mesnard and Suketu say.

Nestle Puts the Strategy in Action

The article also offers a short but interesting case study of Nestle’s success with the decentralized model. Nestlé calls its approach the “operator-centric organization.”

The article says that in 60 Nestlé factories globally (soon the be 350), operators use tablet computers through which they can see all data relating to it, including safety features and performance.

They can also control some elements of the equipment from the tablet.

“This gives operators a true sense of ownership of their equipment,” the authors note.

Nestle also uses what it calls “mission-directed work teams” at its factories as well.

These teams understand the boundaries within which they can make decisions. Shop floor operators, for example, know the limits to what they can decide themselves and when they need to refer an issue to the line manager. In the same way, factory managers know when and where they need to contact the technical manager who heads all the factories in a specific geography.

Importantly, Batato, Mesnard and Suketu say that for the operator-centric model at Nestlé to work, everyone also must embrace the same culture and values within a factory wherever it might be operating across the globe.

“The environment in which companies operate has clearly changed — and that has put the final nail in the coffin of command-and-control operations management,” the article concludes.

The full HBR is available is here: It’s Time for a New Model for Operations Management

Any reaction to this call for a new operations model? Let us know your thoughts at the Feedback section below.








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