In the oil and gas industry example, supply chain will operate most effectively as a shared service to the commercial, engineering and operations organizations. It may also support other shared services in the business through strategic sourcing and procurement. The question to answer is: ‘How does supply chain create a culture that allows it to thrive as a shared service and create a competitive advantage?’ To address this, businesses should follow a set of steps to operate a successful shared service.
1. Treat Core Business Functions as Customers—Though the term ‘core capability’ has been used to categorize the organizations that supply chain supports, a more natural way to think of them is as your customers. Shared service organizations that have this perspective will align their service offerings and vision to building this type of relationship. Shifting to this paradigm will allow everything else to fall into place.
2. Practice Humility—This is all about how you approach your customers. Humility isn’t weakness. It demonstrates an awareness of the shared service relationship you have with your customers. It also shows your commitment to the company’s success above and beyond your organization’s own successes.
3. It’s Not Just What You Deliver, It’s How You Deliver It—Supply chain has insight and perspective that its customers may not have. Assume the strategic sourcing team is undergoing a sourcing initiative on safety services. They will uncover information that supply chain’s customers do not have and provide a more complete picture for future buying decisions. This can lead to strategies that will have a positive impact on the company. That said, how this is delivered is as important as what is delivered. Supply chain needs to take this information to its customers and ask for their perspective and direction. The customer’s insight into the category from an engineering and operations perspective can completely change the sourcing strategy. Trying to dictate sourcing decisions will fail and your customers will work around you.
4. Track Your Performance—As a shared service, performance management tracking is critical to demonstrating value. Work with your customers to define metrics that will be used to measure your performance. Don’t define them in a vacuum.
5. Highlight Successes—The answer to the question, ‘If a tree falls in the forest and no one is there to hear it, does it make a sound?’ is No. Don’t presume that your customers are aware of your successes. Take your successes to them. Promote your successes internally at all levels.
6. Pick Your Battles—Some outsourcing may be inevitable as it may align with overall corporate strategies that are driving the core business. An oil and gas company may determine that capital investment in pipeline and processing plants offers a higher ROI than investment in inventory management and distribution capabilities. The lesson here is to fight for the functions in your supply chain organization that have a track record of creating value. At the same time, work with your customers to determine if there is a business case for outsourcing any particular supply chain function. This behavior creates credibility with your customers.
Differentiate your supply chain
Rethinking how your organization interacts with your company’s core functions can change the prognosis for your organization. This shift can become a differentiator amongst your peers and give your company a competitive advantage. There are many companies in the market that are looking for opportunities to run some or all of your supply chain functions. They look at your company’s core functions as potential customers. And you should do the same.
Greg Tilley is a consultant at RAS & Associates with more than 18 years of experience working with companies around the world to streamline their supply chain and IT processes. He has extensive project and program management expertise and developed and delivered training and education courses related to a range of topics including project lifecycle management, software training and rapid sourcing methodology and practices.