Executive Memo: The Supply Chain Disconnect

What CEOs want from their supply chains

In a recent survey of nearly 500 CEOs at midsize and large enterprises, 93 percent of the top executives said they believe that supply chain management is critical or very critical to their companies' overall business strategies. That is good news for supply chain executives looking to raise their function's profile in the enterprise.

So what's the bad news? While 75 percent of the CEOs in the survey said that they are primarily focused on top-line growth, 82 percent said that their supply chains are focused on cost reduction, indicating, as the co-authors of a report on the survey put it, that chief executives "are struggling to align supply chain strategy initiatives to help drive their company's growth strategy."

The authors — Donald D. Eisenstein, professor of operations management at the University of Chicago's Graduate School of Business, and Richard H. Thompson, a partner with Charter Consulting in Chicago — also asked the CEOs about their supply chain challenges. Interestingly, the hot supply chain topics that you might think would be top of mind with the chief executives did not lead the list:

  • Just 2 percent cited terrorism;
  • Only 6 percent mentioned RFID adoption;
  • And a mere 16 percent named globalization.

However, a plurality, 36 percent, cited collaboration with customers and suppliers as their top supply chain challenge.

"Collaboration seems to be one of the key ways that CEOs are trying to move their supply chains toward a growth strategy," Eisenstein says. And yet, when asked separately to rate their companies' overall level of collaboration with suppliers, a majority (52 percent) gave their efforts only a passing grade of average, which suggests that CEOs are still struggling to crack this nut. "Nobody has to argue that collaboration is a good thing," notes Thompson, "but the real question that a lot of CEOs are still asking is, how do you do it?"

Based on follow-up interviews with several of the surveyed CEOs and on their own personal experience, Eisenstein and Thompson offer several "key success factors" that they believe can help CEOs introduce more collaboration into their supply chains, with both suppliers and customers. The co-authors urge CEOs to break down the "linear" processes that have predominated in most enterprises. Traditionally, the sales organization has operated as the exclusive contact with the customer, "throwing orders over the wall" for the supply chain function to fulfill at the lowest cost. In this scenario, Supply Chain is isolated from involvement with the customer and may not, through no fault of its own, deliver the value that the customer expects. "A more holistic approach is required, that begins by documenting and quantifying the value chain economics starting with the customer and then working 'backwards' to design the operational processes needed to optimally deliver or execute in the most profitable manner," Eisenstein and Thompson write.

And that, perhaps, is the key message of the survey: CEOs that want to drive profitable growth — as opposed to growth at any cost — must be willing to invest in the people, processes and, yes, the technology necessary to support end-to-end collaboration throughout the supply chain. That may require more than a significant investment of financial resources; it may take a substantial investment of the CEO's own time and clout to ensure that the necessary transformations are made and take hold.

How does your CEO view Supply Chain? Is collaboration with customers and suppliers top of mind in the C-level suites at your enterprise? Feel free to send your thoughts to me at [email protected]. I'll look forward to hearing from you.

— Andrew K. Reese, Editor, Supply & Demand Chain Executive