Most boards of directors don't understand the supply chain issues facing them

Most manufacturers’ boards of directors haven’t begun to understand the supply chain issues facing them, according to Mark Shaw, supply chain practice director at consultancy Deloitte. “It’s not just the technology or the potential of modern processes either: they don’t even know that they haven’t got the internal structure or the metrics right,” he adds. “More of industry is understanding the importance of getting real-time information from the customer base back through the supply chain – but making that work properly with good sales and operations planning isn’t being achieved. It isn’t realistic simply to expect suppliers, wherever they are, to react with zero lead time and infinite flexibility. “And the problem is that people in industry, even senior people, still don’t get what a lean supply chain is, much less why it’s important to them,” he continues, “but this is a survival issue. Lean means different things to different people, but at the supply chain level it means ‘optimising’, and today if you can’t do that you’re going to be in trouble. “Look at the geographical shifts – both in the markets manufacturers serve and their supply base. The world is becoming a much smaller place because of technology, but that means physical supply chains are being stretched and expanded.” They’re also becoming more complicated and inter-dependent as inventory, time and costs are increasingly stripped out. So companies’ requirements of information and automation are mushrooming. “I come from the semiconductor industry originally, so none of this has been a surprise for me. But it’s now much more important for manufacturing across all industries. Getting a lean and optimised supply chain should be on everyone’s board agenda.” But there’s more: “Most important, you can’t do any of this without getting the big picture. Manufacturers’ boards of directors need to understand how the detail of sourcing, making, storage, distribution and so on works together, and how the whole could best be transformed to do better. But most don’t: they think only in terms of individual cost reduction projects because that’s how they’re set up. “So when technology is introduced they often use it to speed up the flow around their existing sub-optimal processes: they simply accelerate what they weren’t doing well before. That’s just not the way to make a difference any more.” What should they be doing? “We have to help CEOs see that what they’re doing with their supply chain organisation and management is wrong, and can be done much better. They need to be shown that they’re dealing with the symptoms, not the underlying problems. I guess they need to start with their customer base and be shown the black picture – that some of their customers are walking away and going to competitors that can react more quickly and keep performing well. “Then they need to understand that their process flows can’t do any better as they are. That means they need to have a fundamental review, not only of their information flows but of the organisational structure and their supply network and how it could work better. And that means first reviewing their people, politics and culture. “And another thing: it needs to be driven from the board down because this involves significant change. They need to look at their organisational structure and their people and departmental KPIs end-to-end – not just as islands or mini empires. It’s no good just saying ‘this is too big, we’ll do this for now’. Manufacturers have got to see the big picture and then prioritise their changes. Then they need to review their process flows, and the information flows they need to support them. “ERP is important in all this. The bigger manufacturers are certainly trying to make more of their existing implementations: consolidate where they have multiple instances, take advantage of the newer functionality to take out workarounds and bespoke point solutions.” You can hear Mark Shaw at the MCS Lean Supply Chain Forum on 13 April at Gaydon in Warwickshire (www.mcsforum.co.uk) or tel: 01442 213212