SCMs are the unsung heroes of the business world, responsible for controlling crucial costs, ensuring customer satisfaction and keeping the wheels of business turning. They have a finger on the pulse of company performance, customer satisfaction, business continuity and the state of all departments within the organization.
IT needs the SCM's support in managing the flow of information through the supply chain, while HR looks to the SCM to ensure timely staffing of operations. Finance depends on the SCM for optimizing the cost of serving customers and inventory management, while Sales relies on the SCM to deliver on customer promise through timely and accurate deliveries. If they don't, you guessed it: emergency meetings and firefighting frequency rise.
But despite their crucial role in driving success, the SCM's tasks often seem limited to operational work. To maximize profitability and predictability in supply chains, involving SCM in strategic decision-making is imperative. Unfortunately, only a few organizations have a dedicated supply chain and logistics strategy that aligns with and supports their overall strategy.
Supply Chain Management Concerns Everyone
Today's common perception is that logistics is a consequence of Sales doing their job. It's a paradox that logistics is often seen as a secondary activity when you think of all the incoming and outgoing orders that rely on the efficiency of it. In addition, you have to take into account all internal interactions.
Progressive organizations have already started combining customer success and logistics into a single function, giving the SCM more responsibility. Considering delivery is both the number one complaint from customers and a critical touchpoint with customers, this strategy is becoming increasingly contagious.
Any CFO would benefit from focusing more on measuring efficiency gains, customer satisfaction improvements and the competitive advantage potential of delivery, rather than just the isolated cost of logistics. But looking at logistics and supply chain as secondary and consequential activities, this could prove difficult.
If costs related to logistics and supply chain are seen as pure expense items, which any CFO naturally wants to reduce, you limit yourself from unlocking potential margins. This way of thinking is often the result of how companies measure costs related to logistics and Supply Chain – as a ratio to turnover.
So dear CFO: Invite your SCM to the table, and invest in analytics and digital tools. Allow the SCM to take corrective measures before the crisis occurs! You might save yourself and your organization a lot down the road – especially on customer satisfaction.
It is of little help for the SCM to say, "what did I say" when a delivery stops due to a bottleneck in the supply chain when you haven't had the resources to prepare sufficiently. But how can the SCM and CFO find common ground between responsibly tying up capital and reasonable safety stocks?
Plan for the Best, Prepare for the Worst
If there’s one thing that recent years of unrest in the world's supply chains have taught us, it's that we live in uncertain times. The uncertainty applies to both considerations of finances and access to supplies. In an ideal world, the SCM has an extensive safety stock, Just in Case (JIC), which the CFO doesn't have to finance. Unfortunately, this isn't the case. Uncertain sales forecasts make this costly because the capital is locked up.
The CFO, on the other hand, wants as little capital tie-up as possible. In this scenario, the SCM must deliver the needed goods, when needed, Just in Time (JIT). This approach requires predictability and reliability in all supply chain aspects. Unfortunately, that's not how the world works either.
So how can we find this utopic middle ground that safeguard both interests, hence the business? The key is as constructive as simple: Work more innovative together.
There is no perfect logistics and supply chain solution, as constant changes require necessary adaptations. Your best chance is to use available data and find the best practice for your organization. The key to working more innovative is to compromise between JIC and JIT. This way, you can turn your logistics strategy into value-creating activities.
The Importance of Investing in your Supply Chain Manager
In Norway, we often see that the logistics manager or SCM has a background from the operational side of logistics or supply chain. Although their hands-on experience is valued, they’re usually not included when invites go out to executive meetings. If we look at large international corporations, however, it looks quite different.
"All" large, successful international companies have an outright focus on the supply chain and include it in their strategy from the very beginning. IKEA? A supply chain-based strategy. Amazon? Supply chain as a primary business idea. Apple? One SCM per product category (even for the iPod!). What these companies have in common is that not only do they have supply chain high on their priority lists; they cultivate the roles of their respective officers.
It's important to acknowledge that academic qualifications are only one indicator of a manager's competence in logistics. Experience is worth its weight in gold, albeit somewhat underestimated. The future will require an increase in traceability requirements, and organizations must meet that future with higher investments in competence within the supply chain. Most of all, the knowledge in the organization's logistics department should be shared with and anchored throughout the rest of the organization.
In many large international organizations a logistics or supply chain management background is a prerequisite for becoming a COO, CEO, or other high-ranking positions. They regard insight into, and knowledge of the company's money, goods, and data flow as so vital that it is considered essential for the commander-in-chief to master.
Achieving Supply Chain Resilience Through Visibility
To achieve supply chain visibility, the SCM and CFO must work together. The SCM is responsible for managing the logistics and operations of the supply chain, while the CFO oversees the financial aspects. By collaborating, they can make data-driven decisions that ensure a smooth flow of goods and prevent economic losses.
Investing in the right tools and technologies is critical to achieving supply chain visibility. The SCM can monitor shipments in real-time with suitable sensors and tracking devices and identify potential delays or disruptions. Using data analytics to analyze this information, the CFO can make informed decisions about inventory levels and production schedules to prevent excess inventory or stockouts.
At Kinver, we provide the tools and expertise needed to achieve supply chain visibility and optimize operations. Our data-driven insights can help the SCM and CFO work together to improve supply chain performance and reduce costs.