Overcoming Supply Chain Complexity: Align for Success

Prioritization and Incentive Alignment
We asked leaders to assess importance versus performance across 10 key areas. As we might have expected, leaders indicated prioritizing the customer, cost management, and building a leading team among the most important. Interestingly, rated least important was organizational alignment. Leaders responded that they were most effective in areas they found to be most important, but least effective in reducing complexity, enabling champions, and in digital transformation. These responses are largely consistent with our experiences working with supply chain teams. However, in too many cases we have seen organizations emphasize customer prioritization but fail to measure customer service performance. This is echoed by the responses in our survey with only 10% responding that tracking service metrics is a top priority. Furthermore, we have seen the lack of emphasis on organizational alignment manifest itself in suboptimal software implementations, delayed project timelines, and inefficient planning cycles.

Organizational alignment is a key pillar that is often overlooked, but when recognized and prioritized is a successful driver of growth. When asked about alignment within the supply chain team itself, less than 40% of leaders responded that their teams were very aligned. This percentage falls as we expand the scope to be between the supply chain teams and the overall organization. Alignment within the supply chain team is not an easy feat considering the different metrics and incentive structures at play. Plant managers care about unit cost, transportation managers care about utilization, planners are worried about forecast accuracy, inventory levels, and so on. Traditional incentive structures expect everyone to continually improve their part and often fail to account for the whole system and the tradeoffs between functions. These alignment issues are only exacerbated when viewing the complete organization. When organizational alignment suffers, the ability to implement change within an organizational also suffers.

Technology and Implementation
A major change that businesses have been navigating, through recent heavy investment, is implementation of advanced supply chain technologies. Despite this investment, respondents suggest the return has been relatively muted. Leaders responded with a roughly 70% satisfaction rate on these investments. Still, firms anticipate investing further in these technologies. Over 80% of respondents reported having ERP system upgrades either ongoing or planned in the near future. Meanwhile firms acknowledge that training and enabling employees to adopt new technologies has been a top problem. In the area of supply chain planning, about 45% of Supply Chain leaders either do not currently have advanced tools in place, or their planning team is unable to fully leverage their advanced tools. As a result, they are using Excel as the default despite this investment. Additionally, only 40% of respondents placed systems training as a priority over the next 24 months. A link is missing between the decision to invest in new tech and the incentives and drive for complete implementation and value capture.

Supporting these difficulties in implementation and technology value capture, leaders report that adopting new technologies and training or upskilling have been the two most significant challenges for employers in the past 12 months. The ability to construct an ecosystem for employees with the support and focused training to adopt and leverage new technology and new capabilities as an enabler to achieving operations goals will be paramount for Supply Chain leaders. Additionally, 60% of the respondents cited insufficient resources, difficulty in cascading change through the organization, or organizational alignment as a barrier to implementing change. An increased focus on the people-centric elements of change management will smooth necessary transitions and allow businesses to leverage capabilities and capitalize on their investments.

"Leaders need to look at their S&OP efforts as an opportunity to address misalignment. By focusing and understanding pain points and key trade-offs, they will bring in supply chain functions as well as other organizational units together to improve overall performance. Systems investments need to be focused on enabling the aligned processes with sufficient focus on training and continued education of the team to sustain results and enable continuous improvement – Steve Vielmetti, Creo Managing Director

Looking Ahead
The next wave of supply chain technology is right around the corner. Over 25% of respondents indicated that they have implemented Artificial Intelligence (AI) and Machine Learning (ML) into their processes. Nearly 45% of respondents indicated they have an AI or ML project underway. While these tools may seem as though they reduce the human element, detailed planning, processes, and careful implementation and will play a huge role in delivering the tech's full value to the enterprise. Additionally, the talent in place will be crucial. Problem solving, adaptability, and digital literacy are three of the top four reported qualities for hiring managers, showing that they understand who will be able to capitalize on this wave of supply chain tech innovation.

Conclusion
Supply chains are becoming more complex. They are becoming increasingly data-intensive with new and unfamiliar formats and tools. The speed of change and change adoption must be differentiated due to customer and shareholder needs and expectations. Next generation leaders will need to adopt next generation technologies to be able to handle these problems and sustain improvement expectations. Before they do, they need to align on the people, capabilities, and processes that are going to get them there.

About Creo Advisors
Creo Advisors is a value creation advisory firm that partners with ambitious Management teams, PE Firms, Boards seeking to achieve superior performance. Client success is our 'North Star'. We help clients 'create' sustainable value by identifying, focusing, and executing on key levers to deliver peak performance. Creo Advisors provides Strategy, Growth, Supply Chain, and Human Capital services to companies across multiple industries. Please visit our website at www.creoadvisorsllc.com

SOURCE Creo Advisors LLC