Supplier Diversity

Maintaining Best-in-Class Internal Supply Chain Management

Supply chain management can no longer put strategies in place and call it a done deal. It is important to improve the operation by taking periodic stock of what is working and what is not working for the good of internal stakeholders and the organization as a whole.
— By Debra Jenkins

Sometimes it is necessary to look inward when it comes to supply chain management. Supply chain managers understand the importance of strategies capable of meeting continuous change in a dynamic marketplace, but sometimes they need tweaking or major change.

Change starts internally. A poorly functioning supply chain internally will ripple throughout the supply chain externally, leading to higher inventory levels or inability to meet organizational needs, excessive costs, inefficient product planning, and a lot of frustration among internal customers and suppliers

Strategies need periodic review to ensure there is no value slippage and the needs of stakeholders are being met in the most optimized manner. Supply chain professionals also need to develop and maintain their cross-functional skills in areas like specifications development and value analysis, and relationship building and management to improve performance, accountability, efficiency, and value.

Now a Cross-Functional Function
Many business aspects impacting the company's supply chain have changed in response to technology and consumer-driven buying. Product life cycles are more complex and shorter today, so companies are under pressure to produce innovation in products without changing existing products that continue to perform.

Category managers need technical and other skills to take advantage of procurement programs that push ordering out of a central location. Supply chain professionals must work with engineering, sales and marketing, meaning the ability to develop cross-functional relationships is crucial to supply chain success.

Supply chain management has never been more complex and is always faced with changing organizational needs. The many discussions on continuous improvement and the need for flexibility to meet competitive pressures reflect the dynamic business environment. As organizations embrace change, there is a direct impact on supply chain management.

Continuing to meet the needs of internal customers depends on keeping procurement (sourcing and purchasing) aligned with the business goals. Periodically stepping back to review current skills, policies, procedures, and technologies is important to ensuring organizational needs are efficiently met and at the lowest cost. It is critical that internal customers not lose sight of the importance of utilizing diverse suppliers.

Using Supply Chain Management Competencies as Assessment Guide
To understand the high-level skills needed and complexity of management of the internal segment of the supply chain, one only has to look at the Institute for Supply Management's Mastery Model for a strategic approach to professional development.

This model is a comprehensive set of competency-based standards comprised of 16 core competencies needed and steps to reach mastery. Many of the competencies directly address internal customers and processes. The competences reflect the areas supply chain management should assess during periodic reviews.

Every supply chain leader should ask this question: Do I know for sure that all the needs of internal customers in alignment with business goals are still being met?
The first listed is business acumen and includes building relationships, business intelligence, change management, communication, decision-making, leadership, stakeholder development and more. In evaluating how well supply chain management is addressing the needs of internal customers, some critical questions must be asked and answered. For example, does the supply chain process consider the requirements of internal stakeholders, and their strategic imperatives? Is there holistic strategy development in support of business objectives? Does the supply chain management drive business value beyond initial goals and ensure all work aligns with goals?

Many companies have category managers, and they, too, must regularly evaluate their effectiveness. Do they coordinate cross-entity spend to reduce costs? Category managers should be experts at developing joint goals, ensuring category strategies are aligned with business strategies, and contributing to efficient product flow and lower working capital requirements associated with payables and inventory.

These are just examples of the extensive knowledge and competencies supply chain managers need today. They are key players in the company's ability to meet social responsibility, financial goals, project goals, and quality standards.

Professionals must know how to ensure the best technologies are used and internal users keep skills updated. There are requirements around the use of data, supply chain analytics, and holding people accountable for the results.

Imperative Role Responsibility: Maintaining Alignment With Business Goals
The challenge is keeping sourcing and purchasing always aligned with business goals.

In one example, a U.S.-based appliance manufacturer needed to stop rapidly increasing development costs and streamline a manual development process. A product life cycle management process was developed, and key contributors were the internal supply chain professionals who worked with internal customers on issues like increasing parts re-use and reducing new product development costs. The company implemented web-based collaboration with suppliers and contract manufacturers and online engineering document mark-up.

Collaborative strategic sourcing is a critical strategy for successful supply chain management. Over time, as a company changes, people get left out.

Stepping back to review the supply chain process internally includes ensuring internal customers are actively involved in decision-making. Supply chain leaders should solicit feedback about their goals and strategies and assess them against the current sourcing and procurement system. In some cases, it may be whole functions like accounting or safety that should be brought into the system.

Achieving supply chain maturity and excellence remains an elusive goal for a number of companies, and one reason is that the system is not regularly evaluated for alignment. Best-in-class organizations have flexible supply chain operations that work closely with internal customers to remain adaptable and cost-effective. In some situations it may require a complete re-organization or the introduction of state-of-the-art technology. Perhaps logistics or demand planning needs shifting to under the supply chain leader. Such changes require developing the business case, which in turn requires input from internal customers.

Asking the Right Question
There are also situations in which no changes are needed. There is no way to know without the periodic review. One of the most important steps during the review cycle is assessing the skills of supply chain staff and category managers. Skills frequently need updating because of the dynamics of the competitive environment and employee changes.

Every supply chain leader should ask this question: Do I know for sure that all the needs of internal customers in alignment with business goals are still being met?

Finding the answer is the only way to maintain a best-in-class supply chain.