Competitive advantage through supply chain control
Supply chain direction: structuring, optimizing organizing and collaboration within and between
for the
organizations with a view to creating
ultimate customer
in a
added value
cost-sensible way.
“ One of the challenges our organization faces, is how to create more creativity among our and suppliers’ employees and to jointly realize new products, innovative improvements or optimization in the supply chain in an original way.”
The Movement Organization and structuring of supply chains has become more and more complex these recent years; the market has become more dynamic, the customers more demanding, the competition stronger, the performance level higher. As a result more collaboration and consultation between chain partners are necessary to be of service to customers. As concerted action of partners is rather complex, more grip on chain controllability and manageability is required to realize successful collaboration for all supply chain partners and, in the end, for customers. Perhaps, supply chain direction is a topical and much-discussed issue in your organization and among your suppliers too. Anyhow, working with chain partners has an unmistakable impact on the performance and results of one’s own organization. Twynstra Gudde investigated how leading organizations manage their supply chain to achieve optimal return on their effort.
“ Often there is a yawning gap between working together and collaboration! It is a challenge to all collaborative partners to stop this gap realistically.�
The Balance
Organizations want to achieve of a balance between in- and outsourcing, cost reduction and customer orientation, quality and risks. To make a difference for clients now and in future with respect to costs, innovation
and service, more and more companies outsource activities to suppliers. This is why suppliers get more influence on the success and distinguishing power of clients, resulting in a shift from traditionally hierarchic to long-lasting partnerships.
“ We are facing the challenge that customers demand more and more solution-oriented, integrated products and services. So, we have to come up with combined and more complex solutions in the form of service concepts. For the realization of these service concepts we badly need the innovative capacity of our suppliers. Therefore, continuous consultation with suppliers at all levels of our organization is required.�
The Grip
As less direct control is an inevitable consequence of the outsourcing of activities, more consultation is desired, even required. Outsourcing parties should focus on an optimal balance between cost reduction and customer
orientation, reducing risks as much as possible. In this respect it is crucial to recognize that outsourcing companies and suppliers are interdependent, as are suppliers among one another. It may be clear then, that real collaboration becomes a must.
The challenge
How to organize a chain that has a grip on collaboration with suppliers and, above all, is successful in terms of return, performance, efficiency and added value for customers?
The materials
From experience in industry, retail, trade and services Twynstra Gudde identified eight factors that have an impact on the functioning of supply chains. Factors 1 and 2, a clear
business and chain strategy, are decisive for the actual structure of the chain. Factors 3 up to and including 8 should be taken integrally and in connection with each other.
3. Process
3. Process How operational processes are organized and structured in/between organizations and departments.
2. Chain strategy
2. Chain strategy
8. Culture 8. Culture
How a business strategy is applied to the supply chain. Chain direction and collaboration are based on this strategy. Selection of partners fitting the characteristics of the collaboration, is
Norms and values in an organization
an important element.
and resulting behaviour.
1. Business strategy
7. Leadership
4. Structure
4. Structure Allocation of tasks, responsibilities
7. Leadership
and competences.
Typical behavioural patterns of managers at all levels.
5. Management 6. Competences
1. Business strategy How organizations or parts of organizations want to achieve objectives set in advance.
5. Management 6. Competences
Control measures, performance
Characteristics and skills of
standards and incentive structure to
employees.
manage operational functioning.
The questions
In chain structuring many questions, forms, choices and players are involved. It is about innovation, cost management, investments, decisive factors and market and customer orientation. Obviously each
link is driven by self-interest, but in the chain joint interest is put first. For all diversity and complexity, three basic questions must be answered to realize an optimally structured supply chain.
“ One of our most important objectives is facilitating and stimulating collaboration in the supply chain, not based on power, but on mutual strength. Parties in our chain depend strongly on one another and make good use of mutual strong points. Long-lasting collaboration is a must. Key words are intensive communication and information exchange.”
What does the organization aim for? Which is our added value to customers and, as a consequence, which are critical success factors and consequences for our position in the chain? Not only purchase volume is important for supplier selection, but also the match with the organization’s strategy. So, it is advisable to classify suppliers according to their significance and to evaluate how other suppliers’ products may develop in the years to come and what this would mean to one’s own products and services. This leads to questions like: Are suppliers able to grow? What about developments in the market? Is a technological break to be expected or will current technology be still applied in the next years? Are there cheap alternatives, right now or in future?
“ From ‘hard buying’ to ‘smart buying’ is an important principle in the relations with suppliers. Purchase price and matters like reliability, decisiveness, innovativity and societal responsibility of suppliers play an important part. It may be clear, that this requires other ways of working from our employees and an approach that is more directed towards long-lasting collaboration, interaction and appropriate preconditions to optimize the performance of both the internal and supplier organization.”
How to operationalize the chosen direction? The answer is always a tailor-made solution dependent on market, strategy, one’s own organization and position in the chain. After having agreed upon objectives, solutions, etc. the organizations involved face the challenge to make the chosen solutions work in the daily routine. They focus on processes, critical performance indicators, coordination, consultation and communication, not only between their own employees, but also between employees of other organizations in the chain. With respect to human aspects they focus on competences and necessary internal capacity, cultural implications and management.
How to organize a long-lasting solution? In view of strategic interest and continuity the executive board is responsible for active sponsorship. Preferably, the chain should be solid, future-oriented and, in particular, not provisional. Companies should consider existing รกnd desired potential when realizing long-lasting solutions. For the combination of focus, understanding of the effects on the chain, an appropriate solution and matching approach are crucial. Many organizations indicate that a suitable approach of a long-lasting solution often prevents pitfalls and disappointments. Usually, the structure of a chain is designed by multifunctional project teams. It may be clear, that the line organization is leading, with support from the programme organization.
Further information Twynstra Gudde has written a comprehensive white paper (in Dutch) on the subject of chain direction with detailed information on the eight important factors for optimum chain structure, practice cases and research results. If you want to receive this white paper, please, contact us.
Leo Schunck Consultant lsu@tg.nl +31 6 53373236
Twynstra Gudde is member of Highland Worldwide – www.highlandworldwide.com
We work together with our clients to resolve questions by offering new answers, by creating opportunities. This means we listen carefully, dare to probe, always remain inquisitive. Characteristics that define our consultants and managers. Helping you make the right strategic choices. Result: a different, refreshing perspective on your issue, and solutions that really work. Our people support you. Backed by Twynstra Gudde.
Twynstra Gudde
Tel +31 33 4677777
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Fax +31 33 4677666
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info@tg.nl
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