SUPPLY CHAINS TO ADMIRE // 2022
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Trends and Insights
We found commonalities and similar patterns in our prior interviews with companies making the Supply Chains to Admire list. Leaders have five characteristics. We share these in Table 5.
Table 5. Characteristics of Supply Chains to Admire Leaders
Outperforming Companies Are More Likely to be:
Underperforming Companies Are More Likely to:
More aligned organizationally. Smaller gaps between Commercial and Operations teams and Finance and Operations.
Embrace IT standardization.
Smaller and younger organizations.
Believe that traditional practices are "best practices."
Product innovators in their sectors.
Reward functional behavior with less clarity on corporate governance.
Driving process innovation agendas.
Be more dependent on services outsourcing.
Actively designing supply chain flows.
Have attempted to grow through M&A.
Focused on managing complexity and aligning the organization in Sales and Operations Planning (S&OP). Recognizing and managing supply chain flows based on rhythms and cycles. Not treating all products are treated the same.
Focus on tight integration of the budget to supply chain flows in S&OP. Manage the supply chain as a homogeneous process— treating all items the same.
Winning companies have longer tenure of their leadership teams, focusing on driving long-term outcomes. There is an avoidance of supply chain fads and multiple consulting-based projects, with a constant emphasis on supply chain excellence. Complexity throws the supply chain out of balance. In business, there is both good and bad complexity. It is analogous to cholesterol. Good complexity increases market share and drives growth with a minimal impact on margin, while bad complexity does not improve share but has a significant detrimental effect on margin. Leaders actively manage complexity through robust horizontal processes: a focus on revenue management, Sales and Operations Planning (S&OP), new product launch/innovation (NPI), Corporate Social Responsibility, and Supplier Development. These cross-functional programs align strategy with execution. Through the processes, there is a conscious choice to manage and actively reduce bad complexity through cross-functional processes. The issue? Only 1/3 of companies have a supplier development program, and more S&OP processes are out of alignment (65%) than aligned organizationally. New product launch and Corporate Social Responsibility programs all have great aspirations, but operate in silos. The gap in performance between process-based and discrete industries widened over the last decade. The smaller discrete companies started strong and developed even stronger supply chain practices in the face of declining margins. The strongest S&OP, NPI, and supplier development processes are in fast-moving discrete industries. We feel this is one of the reasons many process-based companies are regressing on the Supply Chain Metrics That Matter.
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