First of all, the doctor would like to point out that he’s thrilled with the level of supply chain coverage that Industry Week has had of late. the doctor realizes that it’s a drop in the bucket compared to the focus they put on manufacturing overall, but it’s better than no drop in the bucket at all. Late last year they published an article that asked What are the Critical Skills of Supply Chain Leaders that the doctor had to read, especially since the doctor spends a significant amount of time trying to answer this question when formulating the seven savors and the seven scruples of a sourcing sensei on the e-Sourcing Wiki.
According to the article, supply chain leaders embody five critical skills:
- Hire the Best and Brightest
This syncs well with the third savor – team builder – so the doctor has to agree with this one. Great leaders surround themselves with the best and brightest. Only charlatans insist on hiring those that they can wield their inferior superiority over. Furthermore, the best will also recruit actively during times of recession – since this is when their team can make the greatest impact.
- Metrics Driven
This syncs well with the first scruple – analysis – so this is another winner. They are also focussed on regular benchmarking, so they can set meaningful, realizable, goals.
- Performance-Reward Orientation
This syncs well with the third scruple – team recognition – so this one gets two thumbs up. They reward performance against goals, and especially those who take action that benefit the whole firm and not just themselves.
- Technology Savvy
This is the sixth scruple – technology – so this is right on the money. Great leaders embrace technology advances that can support more sophisticated supply chain management. They know the difference between real analytics capability and static reports and also when, where, and why to apply decision optimization. They also understand that while technology can enable a good supply chain, it can’t fix a broken one and know when to apply process re-engineering.
- Resist the Urge to Surge
Supply chain leaders understand that end-of-quarter sales surges are disruptive and costly and push to avoid these types of practices. They realize that surges depend on a cycle consisting of inventory buildup for a long period of time – which costs dollars, as well as unprofitable use of capacity – which costs more dollars, followed by a deep discount, which resulted in a lot of sales but the need to temporarily increase capacity – which resulted in overtime costs. And unless you’re producing holiday themed items, chances are this demand can be afforded by pricing your products more appropriately. Consider the example given of a diaper manufacturer who thought that a quarterly sales pattern of “low-low-high” was the natural demand pattern. the doctor surmises that the CEO never had children. Infants and toddlers don’t go through 6 diapers a day for two months and then suddenly double to 12 diapers a day for one month and then suddenly drop back to 6 diapers a day for two months on a quarterly cycle. Demand for diapers is relatively consistent. The only reason the pattern was low-low-high was because the retailers knew that the end of the quarter brought deep discounts, and they could save money by ordering an entire quarter’s supply at the end of the previous quarter, since their inventory costs, relative to the manufacturer’s, were minimal when you consider they could distribute the supply to each of their locations for which they paid overhead for regardless of inventory level.
This skill is important, but it’s actually a critical component of the second scruple – strategy. Because if you happened to specialize in holiday decorations, then you have to surge to make money. The trick is not to resist the urge to surge, but know when it makes sense. If the item is seasonal, or it’s a new product launch, you have to sell big and do it fast, and this will require inventory build-up. (Or you could be a Sony and lose hundreds of millions of up-front sales because you didn’t have enough units to satisfy initial demand.) However, if it’s a staple, or non-seasonal commodity, surging is much more likely to be costly than profitable. You need to know the right strategy for every item you’re sourcing for.
In other words, this is a great set of skills, but it doesn’t necessarily cover all of the skills that you need. They missed the following scruples:
And even though you can delegate compliance to a senior risk management practitioner, the doctor just don’t see how you can be a great sourcing leader unless you have an eye on sustainability and another on innovation at all times.