The FOUR Supply Chain ENABLERS. (2024)

What's needed to implement a successful supply chainmanagement program? The first answer that springs to mind is technology.But as this survey of supply chain professionals makes clear,there's more to SCM than technology--and more to technology thaninformation technology alone. Four key enablers Come into play. And allmust be leveraged fully to make the promise of supply chain management areality.

Discussion about implementing supply chain management (SCM)initiatives tend to focus upon information technology (IT)solutions--sometimes to the exclusion of other considerations. ITproviders and the consultants who help facilitate their solutions oftenlead you to believe that technology is the critical enabler in realizingthe abundant benefits of supply chain management implementation.

Yet in the seminars and workshops conducted at the University ofWisconsin (UW), we've heard a slightly different story--both fromthe supply chain professionals in attendance and the guest instructorsfrom industry. They have noted that the "soft" side of SCMimplementation is at least as important as (and usually more difficultto deal with than) the "hard" side of information technology.Furthermore, they point out that technology encompasses more thaninformation. It also includes the physical materials-handlingtechnologies associated with sourcing, making, and delivering productthroughout supply chains.

The discussions that took place in the university's executiveprograms led us to the research effort described in this article. Theobjective was to identify, classify, and prioritize key enablers thatsupply chain practitioners must leverage to capitalize on the benefitsof SCM. As the research progressed, a flip side to the enablers becameevident--these are the barriers to effective SCM that arise when theenablers are not in place. The challenge for companies is to leveragethe enablers while overcoming the barriers.

Research Design

Working in conjunction with a select group of industrypractitioners, a University of Wisconsin team of graduate andundergraduate students in the fall of 1998 set out to identify the keyenablers of effective supply chain management. The effort proceededalong these steps:

1. Search secondary sources of information--journals, magazines,newspapers, the Internet, promotional materials for educationalofferings, company advertisem*nts.

2. Analyze secondary search information obtained in Step 1.

3. Determine the primary research needed to aid practitioners inimplementing supply chain management initiatives.

4. Conduct the primary research among practitioners, theirlogistics services providers, and other supply chain members.

The Four Key Enablers

Analyzing the data and information derived from secondaryliterature searches as well as the input from UW program participantsand practitioner instructors, the study team developed the followinglist of SMC enablers:

* Organizational infrastructure--how business units and functionalareas are organized; how change-management programs are led andcoordinated within the existing organizational structure.

* Technology--how technology (not just information technology butalso the "physical" materials-management technologies formaterial design, operations, and materials handling) affects acompany's operational and strategic supply chain processes.

* Strategic alliances--how external companies (customers,suppliers, and logistics-services providers) are selected as businessallies; how intercompany relationships are built and managed.

* Human resources management--how job descriptions aredesigned', how positions are filled, how people are recognized andcompensated, and how career paths are directed.

The research team surveyed a group of supply chain professionals todetermine their ranking of the four enablers identified. The surveysample was drawn from past attendees at UW seminars as well as fromother companies, including logistics-services providers, with provenexperience in implementing SCM programs. Approximately 200 responseswere tabulated.

The survey findings contain a few surprises. As Exhibit 1 shows,the respondents clearly felt that the organizational infrastructure andits associated attributes was the most important enabler of successfulsupply chain implementation. It was ranked considerably ahead oftechnology and the other two enablers. (In our survey, a higherranking--with a "4" being the highest--indicates an area ofgreatest concern.)

These results run somewhat counter to the current literature andconventional thinking that IT solutions are the critical enablers tosupply chain management. Yet our findings suggest that the threeenablers ranked almost equally below organizationalinfrastructure--technology, strategic alliances, and human resourcesmanagement--should be addressed after the organizational issues areresolved.

Attributes of the Supply Chain Enablers

Each of the enablers has its own set of attributes. These are thecritical components of each enabler that need to be in place if supplychain initiatives are to succeed. The attributes identified fororganizational infrastructure, technology, strategic alliances, andhuman resources management are discussed below.

The attributes are listed in order of frequency of mentions. Surveyrespondents were asked to review a list of attributes associated witheach enabler, add additional attributes they felt were important, andthen select their top two attributes from the list. Each of the twomentions was assumed to be equal in importance. (The percentages in thecharts below indicate the frequency distribution of results for eachattribute.) The study team gained additional insight and informationfrom interviews with SCM implementation leaders, as identified in thebusiness press and other sources.

Enabler #1: Organizational Infrastructure

Considering the heavy emphasis placed on this enabler, it iscritical to understand the specific organizational characteristicsconsidered essential to successful SCM implementation. The researchidentified the following list of organizational attributes, which thesurvey respondents ranked in the following order:

Organizational Infrastructure Enabling Attributes

32% Having a coherent business strategy that aligns business units toward the same goal.15% Having formal process-flow methodologies to enable the SCM improvements.14% Having people committed to and responsible for cross-functional processes.13% Having the right process metrics identified to guide the operating units' performance toward the strategic organizational SCM objectives.10% Having cross-functional design teams implement change.9% Having business processes shared within the organization vs. being owned by functional units.7% Having one business function driving the SCM initiative.

The first attribute listed--a business strategy that alignsbusiness units toward the same goal--was named significantly more oftenthan any of the others. The need to have a sound process-managementmethodology in place was ranked second in importance.

But how does a company align business units and manage itsprocesses effectively?

The top-management process flow chart presented in Exhibit 2 helpsanswer this question. It represents a phased step-by-step approach toSCM implementation developed by UW in conjunction with industrypractitioners, in particular representatives from 3M. We first developedan academic model and then meshed it with 3M's supply chainplanning and operations procedures to create the nine-step processimprovement plan shown in the exhibit. Note how the four enablerspermeate the implementation process.

Because of the central importance of the organizational enabler,the study team conducted a secondary research project to identify howwidespread the "supply chain" title had become inorganizations today. We felt this would yield some insight into howdeeply the concept of integrated SCM had permeated large organizations.The research found that among those attendees at UW seminars, only 10percent had a person with a supply chain title in his or herorganization. Despite this low number, 59 percent said that they wereinvolved in supply chain initiatives.

The study team also randomly sampled 25 pages from the 1998membership directory of the Council of Logistics Management (CLM), aleading professional association for logistics and supply chainprofessionals. Among the 837 names reviewed, only 2.5 percent had supplychain in their title. Given that companies whose employees attend UWseminars and join CLM are generally large and comparativelysophisticated in their supply chain activities, one might logicallyexpect that the percentage of "supply chain" managers would bea lot higher. And although the numbers of such titles is rising at bothour seminars and within CLM overall, the rate of increase has beennowhere near what many observers had predicted.

Our research suggests that many companies are talking supply chainmanagement, but comparatively few have progressed beyond that. Inparticular, they have yet to define SCM as a specific area of"application" knowledge that calls for an executiveresponsible for championing SCM initiatives. The implication is thatcompanies may have difficulty in implementing initiatives if topmanagement does not understand the supply chain opportunity and appointa leader to capitalize on that opportunity.

Enabler #2: Technology

When technology is mentioned in the context of implementing SCMinitiatives, most people immediately think of information technology.But as our research got under way, a number of supply chainprofessionals reminded us that technology went beyond information. Theypointed out it also related to how products were manufactured andhandled throughout the supply chain. These solutions are extremelyimportant in meeting customer needs and in increasing inventoryvelocity. Accordingly, the survey questionnaire was revised to addressthese manufacturing and materials-management issues as well.

In line with the revised research approach, the discussion ontechnology is presented in two parts: information technology andmanufacturing and materials-management technology.

Information Technology

Before assessing, IT as an enabler, we first had to define thescope of information technology within the supply chain context. Thestudy team created the following IT classifications to provide thatdefinition. Respondents were asked to consider these areas as theyevaluated the relative importance of IT as an enabler to supply chaininitiatives.

1. Data coding and structures--ANSI, EDIFACT, CPFR, data identifiers.2. Data capture--keyboard, bar coding, RFID, OCR, imaging, voice, POS/POU capture.3. Data collection--hard wired, RFDC (spread spectrum and narrow band), satellite, GPS.4. Materials manufacturing, handling and routing connections.5. Database management--portable, front-end controllers,servers, mainframe, ERP, GsIT.6. Electronic commerce--EDI, Internet Web-based systems between business partners.7. Decision-aiding tools--warehouse layout and dynamic re-warehousing, work force scheduling, regression analyses, routing, sales forecasting, charting, value-added operations, geo-spatial analyses.8. Management reporting--tabular plus graphical, control, and geographical charts.

Keeping these eight categories in mind, respondents ranked thefollowing key attributes on their importance in enabling SCMinitiatives.

Information Technology Enabling Attributes

30% Having operations, marketing, and logistics data coordinated within the company.27% Having data readily available to managers, not embedded in legacy systems.18% Having operations, marketing, and logistics data coordinated between companies.10% Having SCM linked to ERP systems.8% Having state-of-the-art systems in place.7% Having state-of-the-art IT thinking.

More than half of the respondents said that the ready availabilityof coordinated internal data on operations, marketing, and logistics(attributes 1 and 2) was the key IT attribute in implementing supplychain initiatives. The ability to link those systems to the businesspartners was considered the next most important attribute.

From these responses and follow-on research, it became clear thatcompanies needed to define their SCM data and system performancerequirements before selecting their software solution. Another keyfinding was that they needed to first integrate their systems internallybefore attempting systems integration with their partners.

Manufacturing and Materials-Management Technology

The other side of technology relates to how products aremanufactured and handled as they move through the supply chain--that is,the "physical" technological influences. The study teamcategorized these as follows:

1. Basic research & development--How to design products and services for flow-through supply chain efficiency.2. Process research & development--How to make the right volume to meet customer needs. How postponement and modular manufacturing can be used to speed up the processes to meet customer requirements while keeping inventories low.3. Logistics process flows--How to move products between links in supply chains.4. Aftermarket flows--How to manage the flow of parts and returned goods, including possible use of returnable containers.

With an understanding of these categories, respondents were askedto rate the importance of the following materials-managementattributes' to SCM implementation. Their rankings are shown below:

Technology--Manufacturing and Materials-Handling EnablingAttributes

53% Having products (including materials, parts, components, and features) designed for production flow-through and inventory velocity.23% Having physical production processes (including equipment design, layout, and automation) designed to facilitate SCM initiatives.12% Having products designed for state-of-the-art packaging, unitizing, and materials handling to facilitate flow-through inventory velocity.12% Having products designed and unitized for manufacturing efficiencies

Overall respondents showed considerably less awareness andrecognition of these technologies than they did of the informationtechnologies. Yet among those attributes considered, the design ofproducts and physical processes for supply chain efficiencies topped thelist. Perhaps these results would have been different if respondentswere primarily located in manufacturing, or if we had drawn our surveysample from the APICS membership. Had the survey sample been different,we possibly could have measured concepts such as lean manufacturing andergonomic and environmental design in support of SCM. Similarly, had wehad more multinational companies, transnational manufacturing issuesmight have been addressed as well.

Enabler #3: ,Strategic Alliances With Supply Chain Members

Alliances are critical to supply chain efficiency. Many companiesalready have made considerable progress toward dismantling thefunctional silos within their organization--in effect, forging internalalliances. Now, it's time to achieve that same kind of integrationwith the other members of the supply chain.

If organizations are to achieve the full benefits of SCM, they mustintegrate and streamline the flows of products between supply chainpartners. This entails the development of flow-through transportationsystems and intermediate assembly and distribution facilities toincrease inventory velocity and meet differentiated customer needs. Oneproven approach is to start with the key accounts, which typicallyrequire the greatest attention, and then move on to the other customersegments.

Here's how the respondents ranked the attributes that enablestrategic alliances across the supply chain.

Strategic Alliances Enabling Attributes

48% Having expectations clearly stated, understood, and agreed to up front.18% Collaborating on supply chain design and product and service strategies.9% Having top management of partnering companies interface on a regular basis.8% Having compatible IT systems.8% Having top management communicate why strategic alliances are important and being pursued.4% Agreeing on a process to incorporate business changes.4% Developing an alliance partner-selection process.1% Having lead persons responsible for building alliances on the job for at least one year.

The enabler receiving the most mentions by far centered onunderstanding the expectations of the alliance partners. The second mostimportant factor cited was the ability to partner and collaborate withtrading partners on supply chain design and product/service strategies.The message here is that shippers and receivers alone cannot get the jobdone. Strategic alliances that embrace outside suppliers, customers,third-party logistics providers, and other facilitating intermediariesmust be part of the supply chain planning and execution processes. Acollaborative approach to these activities is crucial to the success ofthe individual enterprise--and the collection of enterprises that makeup the alliance.

All too often in the past, the dominant players in the supply chaindictated solutions and used their leverage to get low prices for"their" solution. In the new era of supply chain management,however, performance requirements and solutions need to be jointlydeveloped among the alliance partners--users, suppliers, customers, andthird parties. To maximize the success of the alliance, the goals,metrics, and solutions must be continually monitored. Any correctiveactions needed must be taken immediately.

Enabler #4: Human-Resources Management

As a factor in enabling successful supply chain performance,respondents rated human-resources management as slightly less importantthan technology and strategic alliances, and significantly lessimportant than organizational infrastructure. Perhaps this ranking isdue to their limited involvement in this area. Many of their companiesmay not have confronted these human-resources management issues inredesigning and implementing their supply chain processes.

Not surprisingly, the most important--and the mostchallenging-enabling attributes are finding practitioners knowledgeablein supply chain management and finding facilitators to lead theimplementation change process. Apparently, many companies are strugglingwith the difficult task of finding people who are knowledgeable insupply chain theory and practice. Another important human-resourcesattribute, ranked third in importance overall, was having compensationand incentive programs for SCM performance. This can be particularlydifficult considering that supply chain management is inherentlycross-functional by nature--both within and between companies.

Human-Resources Management Enabling Attributes

27% Sourcing, hiring, and selecting skilled people at all management levels.27% Finding change agents to manage SCM implementation.14% Having compensation and incentive programs in place for SCM performance.13% Finding internal process facilitators knowledgeable in SCM.12% Having the appropriate job descriptions and responsibilities.4% Having in place a performance appraisal system for people working in cross-functional supply chain projects.3% Other.

Technology Is, Part of the Whole

The research conducted for this study, coupled with the input ofindustry practitioners who generously offered their comments in thisarticle (see accompanying sidebars), underscores the central importanceof organizational infrastructure and the compelling need forcross-functional processes as enablers to effective supply chainmanagement. It's more than just information technology. Topmanagement must be sold on the importance of supply chain management asa promising means of competitive advantage. For this advantage to berealized, companies must be properly organized and include SCM as partof the total business planning process.

Once the company is organized and is being managed for supply chainimprovement, it can then address the other enabling forces. Existingprocesses need to be documented as a baseline. They then can beredesigned, and the appropriate enabling IT and communicationstechnology evaluated and selected. Along the way, strategic alliancesneed to be formed--not only to execute the supply chain operations butalso to plan collaboratively for greater efficiencies. Finally,companies must remember the human-resource management component. Whenasked to participate in the cross-functional activities of integratedsupply chain management, people sometimes respond that "It'snot my job." Job descriptions and performance measurement andreward systems need to be changed to overcome this resistance.

Companies that recognize the scope of the supply chain managementenablers--and the resulting barriers that can form in theirabsence--position themselves for business success. The leaders in a widerange of industries have proven that convincingly.

Author's note: Many survey respondents expressed an interestin participating in a facilitated two-day program to discuss theresearch results and to network with other supply chain practitioners.Readers interested in participating in such a seminar--or who want tolearn more about the study details--are invited to contact the author atemarien@bus.wisc.edu.

Acronyms Used in Article

ANSI American National Standards InstituteCLM Council of Logistics ManagementCPFR Collaborative Planning, Forecasting, and ReplenishmentEDI Electronic Data InterchangeEDIFACT EDI for Administration, Commerce, and TransportERP Enterprise Resource PlanningGIS Geographic Information SystemGPS Global Positioning SystemGsIT Geo-spatial Information TechnologyIT Information TechnologyOCR Optical Character RecognitionPOS/POU Point-of-Sale/Point-of-UseRFDC Radio-Frequency Data CollectionRFID Radio-Frequency IdentificationRFP Request for ProposalSCM Supply Chain ManagementUW University of Wisconsin

RELATED ARTICLE: John C. Kenny, vice president, worldwidedistribution, 3Com:

Clearly, organizational infrastructure is the number one enablerneeded to implement supply chain management strategies. You can do allthe assessments and redesign of supply chain processes you want. But ifyour top management doesn't recognize how improvements in supplychain processes are part of the business's key strategic plans,your chances of success are diminished greatly. You need to mobilizetheir efforts with the establishment of a top management leadership teamcommitted to solving supply chain problems.

Another key point is that if you don't have in place a supplychain process-improvement model similar to that developed by theUniversity of Wisconsin in collaboration with 3M, then, again, yourprobability of failure increases. Supply chain improvement is similar tomany other reengineering activities. Top management and the functionalunits must have common goals and a shared vision to address supply chainchallenges. If supply chain thinking is shared, then the full-timeresources will be committed for changing critical processes.

As strategies are implemented that truly go beyond the firm andinternal functional units to include external suppliers, customers, andthird-party providers, executive leadership becomes even more critical.Common goals and shared visions can now include trading partners.Trust-based strategic alliances that are often "open book"must be developed to address organizational, accounting, and informationtechnology issues.... The consultants will often paint the supply chainpicture as an IT solution. Yet no matter how beautiful the slides andthe presentations, what it really boils down to are top management andtrading partner commitment and shared visions.

RELATED ARTICLE: Robert K. Withrow, general manager, supply chainmanagement, Eastman Kodak:

At Kodak, we are organizing around integrated supply chainexcellence and moving away from a functional focus.... I report to thecorporate VP, United States and Canada, who is responsible for sharedservices across regions. We are the stewards of achieving supply chainexcellence. I agree that organizational infrastructure is the mostimportant factor affecting supply chain implementation. Our presentorganizational structure and the impact of technology are forcing us torethink how we are doing business.

Technology has been a key enabler of supply chain management atKodak. One of the biggest areas of impact has been our implementation ofSAP. We are in our third year Of global implementation. For demand andsupply management, we chose Manugistics software and interfaced it withSAP's order management and manufacturing modules.

Technology also is going to enable the internal and strategicrelationships to develop in this new environment. Human resources andline management will play a big role in "re-skilling" ouremployees in how they do their jobs. We are on a journey that is justbeginning.

RELATED ARTICLE: Steve Lauderbaugh, corporate supply chain manager,3M:

First, it is imperative that a SCM organizational structure beestablished at the highest executive level possible to provide acorporate umbrella for the SCM initiative. The SCM initiative should beone of the top three to five corporate initiatives designated andsponsored by the CEO or senior VP. Reengineering your business processesfor effective SCM is very difficult and painful--particularly at themiddle- to upper-management levels. Thus, there will be a lot ofresistance to making the radical changes necessary to compete in arapidly changing marketplace. This will require top executive leadershipto overcome this resistance.

Because of the many roadblocks to successfully reengineering andimplementing supply chain processes, it is necessary to follow a formalimplementation process that covers all phases of the effort.... Thisprocess should include feedback loops to ensure alignment with missionand resource commitments. Also, communications and feedback capabilitiesfor reporting process-improvement results should be established. A"change leadership" program for all management personnel,including all company' executives, should be developed andimplemented. It really helps to have an outside consultant facilitatethis effort to be able to answer the question "Why should we dothis?"

New skills, training, career paths, and incentives also arerequired to support the supply chain vision. Research has shown thatimplementing reengineered supply chain processes without makinghuman-resources-related changes in job structures, roles, andresponsibilities is a formula for disaster. It's important that newmeasures and incentives be developed. Skill training must include bothdeep functional knowledge as well as broad process/business knowledge.Career paths based on roles within the process team need to be defined.3M is moving toward a "Process-Center Organization" with apilot in one of our major business units. We think this will be thebusiness structure for the future. A process-centered organizationaligns people's jobs along the horizontal axis toward the customer.The functions remain in a vertical position, becoming Centers ofExcellence. They are responsible for developing the expertise inequipment, systems, and products of the future and providing the skilledpeople to work in the process-centered organization.

RELATED ARTICLE: Larry M. Sur, executive vice president, SchneiderLogistics:

Very early in the process of starting Schneider's contractlogistics business, we learned the importance of a mutually agreed uponset of expectations. A statement of expectations (SOE) is a formaldocument that results from a two-way exchange of the needs of eachparty--the customer and the contract logistics provider. An SOE mustcontain detail about each objective to be accomplished and serve as aguidepost for implementation and day-to-day management. It sets thefoundation for a trusting relationship and establishes the base for ametric of performance.

Often, it is necessary to develop an alliance with anotherlogistics provider in order to deliver a complete solution for acustomer. In these instances, you need to be specific about the roles,responsibilities, and the interfaces of the parties. Schneider hasseveral customers that require layers of logistics companies. We havefound the SOE process is the key to making these relationships work in aseamless manner. The lead integrator must be clearly identified. Andhere, again, an SOE can be used as the tool. In general, the moreparties that are involved, the tougher it is to achieve a successfuloutcome. Very few providers, if any, can do the entire global logisticsjob. Therefore, you need to have a lead logistics provider who cansuccessfully manage the duties of each sub-provider.

Edward J. Marien is a professor and program director of executiveeducation. School of Business, University of Wisconsin-Madison. He is amember of the Supply Chain Management Review Editorial Advisory Board.