How Supply Chain Drives Business Value
World-class companies such as Apple, Cisco, Amazon, and Unilever have found a way to foster strong collaboration between their supply chain and commercial teams to execute business strategy, and this is a key driver in their success.
So what are the key requirements to build these high-performing alliances? Supply chain teams can work on two key enablers to drive business value.
1. Understand the commercial strategy and support it. Understanding the business and its key execution requirements underpins proactive and focused support of the strategy. Without this understanding, the supply chain-commercial partnership reverts to a reactive, transactional interaction in which the supply chain is seen as a low-value back-office provider.
Building this understanding requires the supply chain team to explore the following questions with their commercial colleagues:
Where does the business really need to win? What are the must-wins? Which products across the portfolio are critical for short- and long-term success? Are specific regions or customers crucial?
How do we win? What is our competitive strategy in the must-win areas? For example, are we driving a premium product strategy? Is price our differentiator? Or is strong leadership in a key market segment a success factor?
How do we work together to ensure we win? Proactively explore the value that the commercial strategy aims to deliver to customers and identify how supply chain capability influences this. How can you address quality, service levels, or costs?
2. Build a partnership of equals with the commercial team. A culture in which the supply chain is seen as a back-office provider solely required to react to demands from the commercial team does not support a high-performing business model. An important foundation for a strong supply chain contribution is a partnership of equals with the commercial team. An environment that allows the supply chain function to both challenge and support the business is critical.
Optimizing operations to drive business in the short term, and innovating to underpin and enable new business models and growth streams for the future, require a high level of openness, trust, and engagement between teams. It can seem an almost impossible challenge to shift the perceptions and behaviors in both commercial and supply chain teams. But a supply chain team proactively and assertively seeking a productive relationship with their commercial colleagues can have a huge impact.
The supply chain team can start to create this sort of partnership by focusing on three key areas:
Engage commercial stakeholders proactively. Adopt a practical approach using the three questions outlined earlier to start a dialogue and, importantly, to move rapidly to tangible proposals for supporting business priorities.
Build supply chain awareness in the commercial team. Investing time to engage commercial staff in both the challenges and opportunities of supply chain management helps build understanding and trust across teams.
Adopt an enterprise-level focus. Demonstrating the alignment of the supply chain function to business outcomes is the key mindset for the team. It is easy to become focused on metrics or key performance indicators, which have limited significance across the wider business. But translating them to business outcomes allows other teams to engage with and support them.
This is not an easy journey for the supply chain team to take, and it requires sustained commitment. But as so few businesses are able to master this challenge, the potential value in building competitive advantage is huge.