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Supply Chain and Other Hidden Tools for Outperforming the Competition

By Suman Sarkar | Three S Consulting | 5/31/2017
 

Like in a car, what’s under the hood makes you win the race. The same is true in business. If you peel the onion, you will find thriving companies have excellent operations management, that includes supply chain and sourcing.  

Take Zara for example. While competitors were shutting stores, Zara's highly responsive supply chain made it the most valued company in the retail space, and made its founder the richest man in Europe. 

Likewise, the success of TJX, Amazon, Starbucks and Airbus is fueled by supply chain and sourcing. When CEOs think about the supply chain, it’s usually to cut costs. That’s because most of them have a background in sales, marketing or R&D and have a limited understanding of operations. But the smartest leaders see supply chain and sourcing for what they can truly be: hidden tools for outperforming the competition.

From a CEO’s perspective, there are four important priorities to drive shareholder value: increased revenue, reduced corporate risk, improved profitability and increased sustainability of results. Supply chain and sourcing can provide help in all these areas. 

Let’s look at some common questions that I receive while discussing supply chain and sourcing with my clients.

How can supply chain increase revenue? Isn’t this the responsibility of sales and R&D?  

Successful companies use supply chain to drive revenue in collaboration with sales and R&D. There are three ways supply chain can drive revenue. In all these areas, historically supply chain and sourcing organization involvement have been ignored by leadership. 1) Improve customer loyalty by developing service models that are difficult for competition to match. 2) Increase revenue by quickly taking innovation to market and then meet growing customer demand. 3) Improve alliance success by developing a win-win relationship and then having an effective day-to-day relationship management program. 

Most companies view corporate risk as finance’s responsibility. How can supply chain help?  

Most leaders don’t involve supply chain and sourcing in corporate risk management, but they are critical to managing these two risks effectively. 1) Operational risk: I often hear about companies having trouble meeting customer and regulatory requirements because of trouble with their suppliers and in-house capabilities. The way to fix this problem permanently is to simplify customer engagement, the planning processes and communication with suppliers. 2) Overhead costs: Take a look at the speed at which brick and mortar stores are closing. Sourcing can reduce overhead cost by being smart about buying these products and services.

How can supply chain help with the sustainability of business results? 

Driving towards excellence in business is valued for a long time. Companies can’t achieve excellence by only focusing on in-house processes. With a significant portion of work at any business now being performed by suppliers, suppliers and sourcing organization have an important role to play in achieving excellence.

What changes are required from the supply chain and sourcing organization?  

Most supply chain and sourcing leaders are trained to be risk averse. Years of experience have taught them that their failure is highly visible and newsworthy, whereas their successes are buried deep inside financial statements. To help supply chain and sourcing organizations step out of their comfort zone, incentives need be changed. The right incentives will drive the right behavior. It will take time for these organizations to contribute to their full potential.

Are there pitfalls to this approach?  

Like any transformation program, if implemented improperly, a company can wind up with a real hangover. Leadership sees initial benefits from these programs, and then they take their attention away. It results in significant failures. A step-by-step approach can provide significant competitive advantage to companies.

 

Suman Sarkar is a partner with Three S Consulting. His mission is to deliver business excellence through supply chain and sourcing to help clients achieve a competitive edge in the marketplace. With more than 20 years of international consulting experience, Sarkar has a proven track record delivering an innovative and strategic approach to the supply chain and sourcing practice with outstanding results. AMACOM will publish Sarkar's book, The Supply Chain Revolution, in June 2017. It has more details on the topics covered in this blog.

Categories: Business Growth (71)

 

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