Supply chain — the competitive differentiator

Business leaders need to understand the value that an effective and well executed supply chain management philosophy can bring to a company in terms of improved productivity, competitive differentiation and tangible, measurable economic benefits.

By Mike Croza

Jayson Myers, senior vice-president and chief economist for the Canadian Manufacturers and Exporters observed at the end of 2007 that “with a cheap dollar you could afford to be inefficient.”  He is also quoted as saying, “we now have to speed up our adjustment to becoming world-class in our production methods, supply chain management, logistics and customer relations. That’s the only way to keep your customer.”

Keeping that customer means staying in business — even in the face of a tumultuous economic climate.

A year-end study by National Bank Financial concluded that “with the loonie at parity with the greenback, industries accounting for nearly half of Canadian manufacturers’ sales, and with a relatively high net export ratio, cannot compete with the corresponding U.S. industries.”

But, Canadian business can compete. By adopting and completely committing to an integrated supply chain management approach, productivity can improve greatly with supply chain excellence. Not surprisingly, survey results in the July 2007 issue of Supply Chain Management Review showed that 93 per cent of CEOs identified supply chain management as either “critical” or “very critical” to their success. But at the same time, many CEOs may not fully understand how economically beneficial a well designed and effectively implemented supply chain could be.

Supply chain means different things to different people and those meanings morph from industry to industry. To be clear though, at its heart, a supply chain first starts with ensuring that the company understands customer demand for its product and that all of the upstream integrated planning and execution processes such as procurement, production, inventory management, and efficient logistics are lined up to best fulfil that customer demand and generate a positive financial result. While simply stated above, supply chain for most companies has inherent complexities.

Another reality is that Canadians have not properly invested in productivity. Gone are the days of lagging behind our American friends and remaining viable. The time to close the gap has come. And the way to do that, the proven way, is for a company to look at its supply chain as the competitive weapon it has the potential to become. Some high-achieving organizations not only have a vice-president of supply chain or a chief architect of supply chain — positions unheard of fifteen years ago — they’ll have those key players working alongside the CEO and the CFO playing a pivotal role in corporate strategy and senior-level decision making. Their skills and experience in areas like logistics outsourcing, supply chain execution, risk management, global sourcing and logistics are red hot and they’re in demand.

Where are these people?

The last two decades have seen the flattening of organizations. Many multi-national and North American companies have centralized supply chain functions in the United States, leaving Canadian organizations with frighteningly limited resources. In many cases, the technical and experiential supply-chain skills needed to effectively manage a company’s supply chain is lacking. This lines up with a recent Conference Board survey of North American CEOs which showed the shortage of skilled labour as a top concern. Another area of concern is the reality that there are too few younger workers to replace the baby boomers as they retire.

Statistics Canada predicts that over the next five years, over 100,000 supply chain executives will be needed to meet the demand for new or vacant jobs in all sectors of the economy. With the dearth of supply chain talent out there, individuals without necessary and specific backgrounds are finding themselves in positions of power, leading supply chains — often without the much needed internal skilled and developed resources.

Specific areas of the supply chain, such as transportation and logistics for example, are becoming increasingly more strategic to a company’s overall supply chain success yet many companies simply don’t have the technical focus, tools and resources to best address that area of the business. We see examples where companies may have handed these key parts of the supply chain off to a third party but are not seeing the performance nor economic results they should be seeing. Procurement of logistics services is a “buyer beware” marketplace. Getting the right advice and aligning with the right resource has emerged as an organizational imperative. 

The role of the business leader

From the overall business vision, create a well-defined supply chain roadmap (or review the one that’s already in place) that identifies the sequenced activities, projects and capital (people and technology) that will enable continued productivity and performance gains, cost savings and core competence capability development. (Outsourcing opportunities is something that a company will need to consider in this process).

As part of the roadmap, identify initial cost-saving initiatives (i.e. transportation, logistics, and procurement) that can concurrently raise the performance bar as well as create near term bottom line impacts and free up dollars that can be used to fund investments in the longer term supply chain management plan.

Focusing on creating supply chain management as a core competency will go a long way toward being able to counter any productivity gaps with our neighbours to the south, navigate the storm and stay in the game, profitably.

Mike Croza (mcroza@supplychainalliance.ca) is the founder and managing partner of Supply Chain Alliance Partners — a management consultancy practice. Mike brings over 25 years of progressive supply chain experience from both his corporate and management consulting background to the Schulich School of Business as a lecturer and program speaker. 

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