If there’s one thing the pandemic taught us, it’s that a strong supply chain is central to corporate success. As transport costs rocketed, container ships lined up at ports, and customer satisfaction suffered, CEOs kicked themselves for not having built more resilience into their supply operations.
So it’s surprising that many leaders still haven’t taken the logical, and crucial, next step of giving supply chain executives a seat at the top table.
In a recent survey, only 21% of logistics executives reported that their company had a chief supply chain officer (CSCO). While another 38% said they had C-suite executives with similar responsibilities, that still leaves at least 40% of companies without a supply chain leader taking part in key decisions.
I would argue that every CEO, almost regardless of their industry, needs to appoint and empower a strong CSCO.
Despite recent events, there’s still a tendency for CEOs to view supply chain management as essentially a back-end function needed to ensure that products get made and shipped on time. By contrast, they should be treating it as absolutely central to their company’s strategy, growth, and profitability. That requires skilled champions sitting alongside the CFO, CMO and other C-suite occupants.
Break down silos
One of the chief roles of a CSCO should be to break down silos across the organization. They should ensure that supply chain considerations are woven into every decision, whether they’re new product innovations or fresh marketing campaigns. Finance, marketing and sales should constantly be asking for and receiving input from the CSCO on how supply chain operations can improve their performance.
Without that strong voice in the room, company processes quickly become divorced from the reality on the ground, resulting in the kind of delays and snarl-ups that became all too familiar in recent years. If marketing is working on an assumption of delivering $1 billion worth of product when the reality is that only $500 million can be produced, the result will be customer dissatisfaction and, ultimately, lower growth and profits.
The CSCO also has a valuable role as a police officer who stands up for the integrity of the supply chain amid pressure from other sources. Companies that allow order changes after an agreed period, for example, may be hurting their long-term performance by blindly following a “customer is always right” approach.
Many companies are still trying to get by with a chief procurement officer, who focuses more narrowly on acquiring supplies. Another common approach is to wrap supply chain responsibilities into the broader operations function, even though COOs have enough on their plate and are focused on internal processes rather than the external relationship-building that is an essential part of good supply-chain management. Both these approaches miss the point that a dedicated CSCO is now essential to ensure that the supply chain operation has a champion and takes its rightful place as a true end-to-end process from order book to customer fulfilment.
Other companies think they can achieve their supply chain goals by buying technology platforms. These products can be useful but are no substitute for a supply-chain leader who understands how to harness the technology to meet bigger strategic goals.
Proof it works
One sign that these skills are starting to get their due recognition is the appearance of more corporate bosses with supply-chain expertise. Apple’s Tim Cook and GM’s Mary Barra are two common examples. Another leader is R.S. Sodhi, the managing director of India’s largest dairy producer Amul Milk.
Under Sodhi, Amul managed to thrive amid the pandemic by taking a far-sighted view of demand and keeping supply flowing even as other food and beverage companies shut down their operations. By keeping supply at capacity, Amul was primed to meet rocketing consumer demand as lockdowns kept people in their homes. The company also reaped the benefits from a strategic partnership with a systems integrator to digitalize its supply chain, end to end. This enhanced Amul’s ability to respond to and coordinate operations at its factories, trucks and farms.
The ESG effect
When considering why they should hire a CSCO, CEOs should also take into account the broader social and economic changes afoot that make it a wise choice.
One underappreciated role for CSCOs is as a brand ambassador who can help their company get aligned with climate change goals and the growing involvement of governments in supply chain resilience.
Supply chain operations generate around 60% of global carbon emissions, making them a big target as companies strive to meet tougher emissions requirements and attract more ESG-focused investment. But less than a fifth of respondents to a 2016 survey said they had a comprehensive view of their supply chain’s sustainability performance. That gives the CSCO a critical role in helping companies achieve one of today’s most important corporate missions.
The CSCO should also be the point person for ensuring the company takes advantage of the growing political and regulatory interest in supply chain issues. The joint Supply Chain Resilience Initiative launched last year by India, Australia and Japan shows how governments are moving to reduce risks and gain an economic advantage by coordinating on supply chain management.
Given these broad, positive impacts that a CSCO has on a company’s competitiveness, any CEO today needs a very good reason not to have one in their inner circle.
By Arindam Mukherjee, a Supply Chain Operations Architect for Digital Transformation Initiatives at Juniper Networks.