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02/22/2011

The Priority of the Chief Supply Chain Officer Is Strategic Supply Chain Planning

alyst Insight: The chief supply chain officer's (CSCO) role provides a way for the supply chain to earn a place in the board room and drive strategic decision making. The CSCO has emerged as a key stakeholder in the company to make supply chain transformation happen. Supply chain planning is an important approach for CSCOs to create value for their enterprise. In fact, 86 percent of respondents indicate that their management team has asked them to review the supply chain process in order to find opportunities to improve their company's supply chain planning processes, and 71 percent of respondents have indicated the same for supply chain technology improvement.

–Nari Viswanathan, vice president & principal analyst at Aberdeen Group

The following functional areas within supply chain planning can be described as process capability Level 1: demand forecasting, demand collaboration, supply planning and inventory management.  (See Strategic Supply Chain Planning: Priorities of the Chief Supply Chain Officer, September 2010). These are areas which provide the ability for companies to improve their inventory turns, forecast accuracy and customer service level metrics. However, these functional areas do not address the strategic time frame planning of their companies.

Whereas when it comes to more advanced capabilities such as simulation, network design, risk management, etc., Best-in-Class companies do not have a significant advantage over all other companies. These functional areas can be described as process capability Level 2. These are the crucial ingredients for companies to manage long-term supply risk and long-term sustainability goals through simulation, predictive analytics and other similar approaches. The reason why even Best-in-Class companies do not have a higher capability level in these areas is the fact that mastering these process areas is difficult – they involve the need for solution capabilities that go beyond the traditional supply chain planning solutions.

Recommended Actions

The following are the three key priorities that CSCOs should have in terms of supply chain planning:

Supply-demand-finance balancing is critical. Even though demand forecasting is a key area of implementation plan for companies in this survey (46 percent), the respondents have expressed intent to invest time and effort towards constrained supply chain planning (49 percent) to simulate different scenarios based on predictive modeling approaches (50 percent) and the ability to design risk management into the system (42 percent).

Outsourcing is creating new supply chain dynamics – time and speed are critical. Thirty-seven percent of respondents indicate that they are making major updates to forecast at a frequency of less than a month, and 80 percent indicate they are making major updates to forecast at a frequency less than or equal to a month. Forty-seven percent of respondents indicate that they are making major updates to supply plans at a frequency less than a month and 77 percent of respondents indicate they are making major updates to supply plans at a frequency less than or equal to a month.

The reason for the increased frequency of planning is due to the increase in uncertainty and lack of visibility due to outsourcing. Outsourcing results in an increase in variability and increased lead-times. In order to manage these variables, companies are trying to perform constant planning and re-planning.

Create a Chief Supply Chain officer or similar role. Sixty-four percent of respondents indicate that they don’t have a chief supply chain officer role in their organization.

The Outlook

 

Clearly, companies without someone in the chief supply chain officer seat is at a disadvantage. They should reconsider their current thinking and explore adding a CSCO (or similar role). That will provide the strategic impetus that the supply chain needs in the organization.

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