Tuesday, December 20, 2011

The Power of the Process

imageEarlier this year, coming out of my book on supply chain strategy, I was highly focused on exploring what constitutes competitive advantage? How do companies build it and how do they sustain it? I believe superior processes lie at the heart of creating such advantages: Because a superior “process” not only creates a capability with a competitive advantage, but it is also what makes it repeatable and sustainable in the long run.  

Wednesday, November 16, 2011

The New Global Supply Chains: Shorter, Nimbler, Local

imagePast couple of decades have generally seen supply chains stretching ever longer from one end of the world to another. As manufacturing started becoming heavily concentrated in China, more and more companies found it was just cheaper to build or buy in China and ship it to their factories, assembly plants, and markets rather than maintaining traditional domestic sources. The volatility in energy prices and growing awareness of the cost of supply chain disruptions might just change that.   

 

Thursday, November 3, 2011

From Fashionable to Foundational

imageSustainability has been slowly gaining traction. This may be the year when it becomes mainstream theme for a majority of companies. While most companies adopted sustainability as a tool to enhance their corporate brand, a lot of them have discovered that it can also affect their bottom-lines. The sustainability seems to be going mainstream within the corporate culture and is being adopted as a business strategy to drive Growth, Return on Capital, and even Risk Management. That is the message from a recent survey from McKinsey Quarterly.

Tuesday, October 25, 2011

Big Data, Bigger Opportunities

Big data is here: The tools, technologies and the opportunities for gathering and analyzing large-scale data have finally evolved where most technology-savvy businesses can think of leveraging such data for competitive advantages. While retailers are focusing more on understanding the customer preferences to better manage their merchandise and enhance the business profitability, there is a definite play on leveraging the big data in supply chain functions as well to enhance operational efficiencies and reduce costs.

Thursday, September 29, 2011

IT: The Savior?

imageCan IT be your business’s savior? Can IT propel your business, grow it, and give it the competitive edge it sorely needs? Information technology is generally not seen as the savior: Mismanaged IT projects, failed ERP implementations, piles of consulting bills, and too much drama – all of this has given bad rap to a discipline that can become the core strategic engine for your business. But whether you wield IT as a competitive weapon or as a tool to bleed the business, that is a choice you make explicitly.

Thursday, September 15, 2011

What do Your Financials say About your Supply Chain?

imageWhat can a financial analyst tell about a company’s future by looking at its supply chain? What should they be looking for? How should they analyze such data? How does the supply chain competency affect the financial prospects of a company? These were some of the topics I discussed with Sherree Decovny of the CFA magazine a couple of months back. The interview is published in their Sep-Oct 2011 issue as an article on what should financial analysts know about the corporate supply chains to make better assessments of their financial future.

Thursday, August 25, 2011

Are Your Advantages Expired?

Unfortunately, competitive advantages do not come in the prescription bottles with clearly displayed expiration dates. But advantages do expire: Competitors adopt them so it is no more a differentiation, the capability becomes too commonplace that it simply becomes a basic expectation, it gets commoditized and loses its value. Understanding that the competitive advantages have a window-of-opportunity can help corporations better prioritize their capital investments targeted at creating new capabilities. 

Tuesday, August 2, 2011

Mastered TCO? Now Learn TVO.

The total cost of ownership or TCO has long been the focus of sourcing and procurement  A new report from Accenture says the pioneers are now moving towards total value of ownership or TVO. Just semantics or real evolution: Decide for yourself though there are definite ideas that are worth emulating.

Thursday, July 28, 2011

Making Capital Investments Matter

Too many projects chasing limited capital to invest: Almost all of us are familiar with this scenario. Most large corporations go through the annual rigmarole of creating proposals for capital investments, replete with justifications, projected savings, return on investments, and so on. Asking these two simple questions and plotting it on a simple graph may make this process simpler to make the final choices.

Friday, July 15, 2011

Strategy, Governance and Risk

With the recent financial melt-down, deep economic recession, and continuing drag on revival and growth, the logic would dictate that companies will focus on their business strategy to identify what makes them a winner, where does the value come from, and also focus on governance to promote risk awareness and planning. However, McKinsey Quarterly finds otherwise: In a survey of the company directors, they find that boards neither understand their company strategies any better, nor have they improved the governance.

Thursday, June 30, 2011

Good Strategy, Bad Strategy

An UCLA management professor identifies the attributes of what he calls “bad strategy” and lays out a three-step process to build effective business strategies.

Tuesday, June 14, 2011

The Cost of Supply (Chain) Disruptions

Source: WikiMedia CommonsAccording to Dun & Bradstreet, the business cost of disruptions due to earthquake and tsunami in Japan will be $209 billion in sales volume. This potentially affects 86,418 businesses, 311,934 employees and is spread across 715 industries. Manufacturing durables tops the list of number of suppliers based in Japan that are potentially impacted. Globally extended supply chains mean that this group of suppliers will affect many more businesses across the globe. 

Thursday, June 9, 2011

The Customary Top 25

Gartner’s Top 25 supply chain list for 2011 is out. The surprises are not in who is in, but who is out! But the financial analysis proves once again that supply chain competence matters, even in a recession. 

Monday, June 6, 2011

Consumer Trends Trump, but Business Strategy Catches On

Between 2009 and 2011, successful execution of business strategy gained the highest momentum among retailers perception of risks. Retailers are less worried about the consumer spending, however, the consumer trends still rule: Retailers still want to know what interests consumers most and how to translate that into their merchandise on the shelf. imageAnother significant finding from the BDO USA’s report on retailers’ perception of risks in 2011 reveals that they are much more focused on defining and executing a successful business strategy. The report is based on SEC 10-K filings of the 100 largest US retailers.   

Thursday, June 2, 2011

Leverage Your Demand Forecasting

Not having a good demand forecast can create business inefficiencies from sub-par price realization, higher inventory costs, higher replenishment costs, and significant lost sales. But the same is true when companies have too many (disparate) demand forecasts driving these functions. What is an enterprise to do? Create a single demand forecast that addresses their various needs, across functions and across time, and create plans that are fully aligned with each other.

Friday, May 20, 2011

Technology: Enabler or Inhibitor

In their enthusiasm to cut costs during the great recession, American corporations cut spending across the board. These cuts included major reductions in capital spending, of which information technology is a substantial part. The result: Companies are now feeling constrained by the ability of their (obsolete) technology to enable new strategic business functions.

Friday, May 13, 2011

Sustainability Gets Wholesome

image“We do not believe there is a conflict between sustainability and profitable growth”, says Paul Polman, Chief Executive Officer of Unilever. The words may be different, but similar sentiments are now reflected in more than one companies business plans. Sustainability seems to have found its (business) footing. And more and more companies seem to develop an understanding of what it means for their survival and growth. It is not constrained to saving energy in the stores or fuel in distribution, it now touches all aspects of the business: A wholesome rethinking of the corporate business.

Tuesday, May 3, 2011

Is Bigger Better?

imageBigger may not necessarily be better: Not when it comes to companies’ ability to grow and make money. So says the CFO magazine (Too Big to Succeed, Gregory V. Milano, CFO magazine, April 29, 2011). But what is a big corporation to do, when the conventional growth strategies fail? Innovate!  

Thursday, April 21, 2011

Technology: The Fall Guy

imageMost IT projects that do not enable business capabilities mandated by the business strategies will fail. The blame, however, is usually attributed to the technology, which is simply an enabler and not the driver! If this reflects your company, there is reason for introspection and review of the process leading to capital IT investments.

Tuesday, April 19, 2011

How was Your Consumer Experience?

imageMeasuring customer satisfaction has been a core strategy for retailers trying to improve it and they do it in all possible ways. Most depend on asking consumers questions about their latest interaction with the retailer and how well it went.

Temkin Ratings now brings us a new term: Consumer Experience, more accurately reflecting what the retailers have been trying to measure. Temkin defines consumer experience along the three dimensions of functional, accessible, and emotional parts of the interaction. 

Monday, March 21, 2011

IT is Everybody’s Business

imageIn May 2003, Harvard Business Review printed “IT Doesn’t Matter” by Nicholas G. Carr. It was wrong then and it is wrong now. IT matters. A lot. And will continue to matter for the foreseeable future. Carr’s comparison of IT with infrastructure from the industrial age just does not cut it, it never did.
Of course, the time has provided all the evidence:

Thursday, March 17, 2011

New Channels, Old Problems

Multi-channel retailing is all the buzz, but familiar problems lurk. There is hardly a retailer who does not operate an online channel, some operate several. To that, the new emerging mobile channels as well as the social media-based sales channels (remember, Delta just enabled their Facebook channel so you can buy Delta tickets without ever leaving Facebook, check out for yourself at: www.facebook.com/delta) and of course the old mail catalogs. You get the picture.

Tuesday, March 15, 2011

Compete to Win: Align Your Process and Technology to Your Business

It is logical: to get the best of your investments in technology, align them with the business processes they are enabling, and align those business processes with the business strategy. Common sense, may be, but it is easier said than done.
A new study from RSR points out the common misalignment between business & technology groups, but also offers some pointers to solve the issue. In a report titled, “Pandora's Box? The Impact of New Technologies on Retail IT”, RSR identifies the following.

Monday, March 14, 2011

Innovation at P&G: Advantage through Process Focus

P&G’s ex-CEO, Lafley, believes that “The heart of a company’s business model should be game-changing innovation”. With that belief, Lafley started to build a sustainable culture of innovation at P&G and establish innovation as a process that was superior to its competition. A process that is scalable, repeatable, sustainable, and hence superior to its competitors. The result: P&G’s continuous success as a profitable and growing business. This is the gist of an article on “P&G’s Innovation Culture” by strategy+business magazine.

Thursday, March 10, 2011

Understanding Advantage

imageIn several of my articles on supply chain strategy, I have emphasized that capabilities are the origin of all competitive advantages. So what must a capability deliver to create such competitive advantage and contribute towards achieving the goals of the business strategy?
In simple terms, a firm will have a competitive advantage, if its products are superior or if it provides superior customer service and so on.

Tuesday, March 1, 2011

Supply Chain Innovations Add to GDP Growth

While this article from McKinsey is about the relationship between productivity and jobs growth, one of the graphics caught my attention. See below the exhibit from the referenced article which is available at: https://www.mckinseyquarterly.com/Why_US_productivity_can_grow_without_killing_jobs_2748.
McKinsey believes that the biggest potential growth in GDP, to the tune of 1.2%, can come from “Next-wave innovation – e.g. enhanced supply chain integration, cloud computing”. While innovation would have been an expected GDP driver, as always in the US economy, the special mention of supply chains within the context was somewhat unexpected. This makes two things explicit: Innovation can come from anywhere including things as mundane as supply chains, and the potential of such supply chain innovations towards contributing to the GDP.
image
What could these supply chain innovations look like? RFID, geo-location based services, optimization across processes conventionally planned in silos, integrated process control systems capable of detecting & isolating exceptions, automated exception resolution and escalation, supply chain modeling real-world using probabilistic modeling capabilities, real-time visibility into supply chain process data & statuses, and so on. In fact, what most companies have achieved in managing their supply chains just happens to be just a good start – there is still a lot of runway left to cover and costs to cut while doing so! Happy GDP growth.
Related Articles:
© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

Friday, February 25, 2011

Cost as the Dominant Business Strategy

Reducing costs as a strategy has become a primary strategy for many businesses in recent years. I believe that this trend will continue over the fore-seeable future.

image There are several reasons for this, but the most important reason is that the increasing globalization results in more and more commoditization of products that deteriorate the brand premiums and indirectly deal a blow to differentiation as a strategy. The face of this commoditization in America is Wal-Mart and its assortment of cheap functional products that address the utilitarian functions without the brand premium. But this process is not limited to America: it is widespread across the globe, with the growth of the middle class in China and India and their aspirations to match the lifestyles of developed countries at a fraction of the cost. Both of these phenomena, that of Wal-Mart driving down costs to expand its market share and of developing countries providing new markets for cheaper utilitarian products, have propelled cost as a strategy to the forefront of the three fundamental strategies suggested by Porter.

If cost is the core strategy of choice, then supply chain becomes the core business function that can help corporations realize that strategy. Examples of creating and maintaining competitive advantage through supply chain capabilities abound, with Wal-Mart being the most obvious and visible. Due to the large scope of business operations controlled by the supply chain processes, they directly control the cost of goods and hence the ability of a company to deploy cost as a strategy.

Strategy+Business published a Data-Points study, A Big Change in Emerging-market Spending showing the above trend clearly. It projects that in emerging markets percentage of total spending on essentials (food, beverages & tobacco) decreases from 61% in 1990 to 25% in 2012. During the same period, the total spend increases from a mere 823 billion dollars to 6.1 trillion dollars! That is a lot of money chasing the utilitarian products to raise the quality of life for the newly emerging middle-classes in the emerging economies (Brazil, China, India, Indonesian, Malaysia, and Thailand). And a lot of opportunities for businesses everywhere to leverage using a cost-focused strategy.

 

Related Articles:

Thursday, February 24, 2011

What is Your Strategy Doing for You?

Around half the executives believed that their strategies simply were directed at matching industry best practices & delivering operational imperatives – that is the finding from a McKinsey survey conducted online in November 2010.
Matching industry best practices is not quite the realm of strategy – since the most it can do for you is to bring you at par with what the industry is already doing or what is generally an expected capability in the industry. That does not create any competitive advantages nor does it guarantee long-term survival/growth and it definitely does position any company for a long-term leadership position.
imageThe second aspect of delivering operational imperatives is even more immediate from the focus point of view and can hardly be seen as strategy. With the increasing advent of computerized systems and automated processes, operational excellence also has become more of “must have” capability to compete rather than a capability to provide any distinct competitive advantage. 
Part of the reasons behind such short-term focus on business has to be the recent recession which had everyone focused on short-term survival, but another part could very well be the Wall Street culture of focusing on the next quarter! On the other hand, however, just over half of the executives (53%) did emphasize that their strategies were based on creating advantages over their competition – which is the core domain of strategic planning in business. That is good news for these companies since these will be the leading corporations of tomorrow.

Related Articles:
© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

Wednesday, February 23, 2011

Improvising on Drucker: Measure What Matters

Peter Drucker famously gave us the quote, “what gets measured, gets managed”. That is precisely why companies must carefully plan what they measure. Measure the wrong thing and you will soon have a company with poor performance but very successful individuals performing their best.

Michael Hammer’s (co-author of Reengineering the Corporation) new book, “Faster, Cheaper, Better” now officially lists the seven sins of (performance) measurement. This book is really about lists – there are 9 levers for changing how work gets done, there are 7 principles of process design, there are 5 key values for a process culture, and so on. There is all kinds of advice – some practical, some philosophical, but I liked the following list of seven sins of measurement the best. Here is a quick summary, but you can read a more comprehensive report in this article from Strategy+Business magazine.

image

  1. Vanity. Don’t measure what you know will make you look good and that has no other relevance to the business.
  2. Provincialism. Don’t measure the departmental efficiency, measure the efficiency of the whole business. Optimize, don’t sub-optimize!
  3. Narcissism. Measure from the customer’s point of view, not from your own!
  4. Laziness. Don’t assume you know what should ne measured, establish what is truly relevant and then measure it, not what is easy or what has always been measured. (Of course, that means you must first analyze your business to establish what is relevant).
  5. Pettiness. Don’t measure the parts, measure the efficiency of the whole – as in measure how effective the end-to-end process is, rather than measuring how effective individual parts of a process are.  
  6. Inanity. Measure what matters because metrics drive behavior. (This seems to me similar to the one above under Laziness).
  7. Frivolity. Take it seriously, if you don’t like what the numbers tell, find out why rather than ridiculing or questioning the exercise.

Related Articles:

 

© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

Tuesday, February 22, 2011

Taking a Pulse of Wal-Mart’s Suppliers

Wal-Mart’s promise of “always low prices, always” is partly based on the volume of its business with its vendors and hence its ability to command prices that no other retailer can command. This has always created the perception of Wal-Mart squeezing their suppliers to drive the costs out of the system. Myth or reality?

Retailing Today recently released the first ever “2010 Walmart Supplier Survey”. On what makes it so special, Mike Troy, the editor writes, “Well, aside from the fact that it’s never been done before, the opinions of suppliers are particularly relevant at this point in time because Walmart is looking to restore momentum to its business in 2011, and, for the past six months, has sought to re-engage with its supplier community in order to do so”. In part, this fits well with Bill Simon’s strategy to re-engage with suppliers that he articulated after taking over as the CEO of its US operations.

CPFR (collaborative planning, forecasting, and replenishment) and supply chain are among the top concerns of Wal-Mart suppliers. Some highlights:

  • On “Suppliers’ greatest concerns regarding managing their business with Walmart during the next five years”: In the first place, 69% of the suppliers listed “driving profitable sales growth” as their top-most concern. This is followed by “store–level execution” (50%) in third place and “joint business planning and collaboration” (42%) in fourth place.
  • On “Walmart suppliers’ greatest need in the coming year”: In the first place, 46% selected “shopper insights/market research”, followed by 33% selecting “Supply chain management/replenishment”.
  • On “Retailers that suppliers believe represent the greatest competitive threat to Walmart U.S. in the next five years”: “Dollar General/Family Dollar” won the top spot with 63% suppliers votes with “Target” in second spot with 54% suppliers, followed by Kroger (33%) and Amazon (30%).

The report is full of data and charts that would be interesting to those who follow retail/Wal-Mart.

Related Articles:

© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

Monday, February 21, 2011

If It does not Work, Blame the Technology?

Today, most business processes are enabled through technology. That should ideally put technologists (read CIO and their teams) in an enviable position. But the reality is far from it – technology actually gets a pretty bad rap when it comes to such assessment from the business. Most often, from the business’s point of view, technology fails to create significant value, fails to deliver the promised efficiencies and the desired value on the investments. This is true for most major corporate IT initiative, whether they were a result of business driving technology or the other way around. Most supply chain initiatives have a large functional and organization footprint and therefore, often fall into a similar trap. But is technology really to blame for the low returns or is there more to it?

image

When firms invest in packaged business solutions, one of the most common and misguided expectations is that the solution will fully enable their existing processes. This is misguided because the packaged software solutions are built to provide only a certain amount of process support that is (1) common across industries and (2) generally considered the best practice in an industry/segment. None of which ensures that the solution will fully enable their existing processes. To make matters worse, such business initiatives generally do not involve any planned changes in the business process even when the existing processes do not fully support the needs. In fact, most of the initiatives do not involve any capability assessment to ensure that the business processes are designed to support the business strategy and the advantages it seeks to create.

No wonder, a large number of such ill-planned initiatives fail to produce the expected results. Jim Shepherd of Gartner (First Thing Monday column, 2/21/2011) estimated that 30% to 50% of ERP projects are thought to be “failures” by the people who were thinking of implementing one. But he says that this may just be another “urban myth” – because of the unrealistic expectations of the organization from a technology. He think that an ERP should be seen more like an “infrastructure” (enabling transaction processing, data management, process integration and information access) rather than the “streamlined (business) processes”. To quote him, “ERP should be viewed as the stable infrastructure that allows an organization to create and deploy the kind of innovation and differentiation that drives real business improvements”.

That is a view I fully support – technology is simply an enabler. The differentiation and hence the competitive advantages can be created only through business capabilities that are superior to others. Such superiority is never an accident, but must be a result of deliberate design of business processes that support your strategy. To learn about how you can assess your supply chain capabilities and drive competitive advantage by designing the right supply chain capabilities, continue reading on the subject in my book on supply chain strategy.

 

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© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

Friday, February 11, 2011

Building Capabilities to Win

image The concept of business strategy has existed for a very long time. Pinning down the exact date may be difficult – from The Art of War written about 2,500 years ago to the invisible hand of Adam Smith in the mid-eighteenth century – however, that is not important. The most important part in the continuum of strategy is the actual execution of strategy, because that alone produces the advantages theorized by a strategy. But the execution of a strategy does not produce advantages directly, rather it simply creates business capabilities that in turn creates the competitive advantages enabling a corporation to win.

While a lot has been said on business strategy since Michael Porter came up with his three generic strategies, most of the later concepts are simply variations of these three. The three generic strategies of cost, differentiation, and focus continue to be the true basis of all competitive advantage simply because these are the three lowest common denominators of all business activity that consists of selling (hence the cost) product and services (hence the differentiation) to customers (hence the focus).

The ability of a business strategy to drive the required business capabilities is the key to creating successful functional strategies such as the strategy for supply chains. While the concept of a functional strategy is not quite well main-stream yet, it happens to be the missing link in the strategy continuum for a long time – and this is the crux of my book on supply chain strategy, though lately some other people have also started talking about how capabilities mandated by the business strategy can drive the competitive advantages.

imageIn the winter 2010 issue 61 of the strategy+business magazine, in an article titled, “How The Top Innovators Keep Winning”, the authors argue that it isn’t the amount of money companies spend on research and development that makes them successful, rather it is the particular combination of talent, knowledge, team structures, tools, and processes — the capabilities — that successful companies put together to enable their innovation efforts, and thus create products and services they can successfully take to market. I fully agree with this view point, the capabilities of a corporation are really the only distinct advantages over the competition – specially when seen in their broader context, and these capabilities are created only through a relentless pursuit of understanding what the business strategy mandates and a continuous assessment of “capability gaps” compared to the mandate.

While a lot of supply chain strategy thinking is stuck around the keywords like lean, agile, postponement, speculation, and so on – the real advantages from a supply chain can only be created after a thoughtful assessment of the business mandate and an assessment of existing capabilities. How can one go about doing that? Explore several practical methodologies and real deliverables in my book on supply chain strategy.

Related Articles:

© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

Friday, February 4, 2011

Connecting Strategy to Supply Chain

Going from business strategy development to creating tangible competitive advantages is a long journey. Because no strategy, however brilliant, produces results unless executed.

Therefore, to be useful, a strategy must be implemented. This means that the strategy that establishes the business goals, through which competitive advantage will be created, must then be expanded to articulate actions that will take the business toward its strategic goals. This whole process can be thought of as consisting of three basic steps:

1. Strategy development, that is, the process of evaluating the internal and external imperatives, analyzing the industry, products, and customers, and defining an overriding principle of how the company will try to grow. This is equivalent to defining the ‘‘what’’ and ‘‘why’’ of the problem.

2. Strategy planning is the process of assessing the current state of the corporation and evaluating various alternatives that can be potentially considered to achieve the stated imperatives of the business strategy. This step consists of analysis, evaluation, articulation, and prioritization of these alternatives, in effect defining the ‘‘how’’ of the problem.

3. Strategy implementation is the process of starting and managing the individual projects to implement the favored alternative from step two.

image While most companies have some level of formally defined process for developing a business strategy (step 1 above) and an ongoing slew of projects (step 3 above) creating new capabilities and enhancing existing ones, most do not have a formal process for the activities identified in the strategy planning step. Strategy+business, a management magazine also recognized this gap in a recent article, even though they did not distinguish between the planning and execution phases as above. While the planning phase focus on gap-imageassessment of a firm’s business capabilities, therefore determining what must be done, strategy execution emphasizes the actual execution activities: program management, project management, change management, communication, training, and all other organizational aspects for successful execution. While that is important, the intermediate analysis provided by strategy planning is the missing link in most modern corporations in any recognizable formal fashion. In absence of this planning step, corporations fail to establish and prioritize the execution efforts that are aligned with the goals of the business strategy, and fail to identify and prioritize the filling of specific capability gaps.

This middle step of strategy planning, is what I call functional strategy. This is the step where firms must assess their business capabilities and determine (1) what capabilities they must build that are aligned to their business strategy and (2) how they must build them to create differentiators to create competitive advantage. This is where the business functions such as supply chain fit-in. This is where a firm needs to assess their current and required supply-chain capabilities to identify the gaps and prioritize their investments in building those missing capabilities. This also gets emphasized in the quoted article above.

image

Joining the business strategy to the functional strategy by assessing your supply-chain capabilities is the key to building successful supply chains. The final piece of execution is what I call deployment strategy falls into place when real projects enabling specific process are planned, budgeted, spun off, and executed. Understanding this continuum from the business strategy to functional to deployment is key to successfully creating competitive advantages to support your business objectives. For more on the process of building effective supply chains, read my latest book on supply chain strategy.

Related Articles:

© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

Tuesday, February 1, 2011

Effective Supply Chains and the Organization

In a recent article, McKinsey argues that to be successful, future supply chains will require a rethinking of the internal organizations – where the focus is on collaboration rather than competition. I could not agree more.
The conventional departmental silos in the companies were originally a simple outcome of complex business processes without any intelligent system support. As computer systems evolved, the gap between the complexity of a process and the ability of a technology solution to support the process has narrowed consistently. This has provided businesses with new opportunities to break-down these silos and create nearly integrated (and automated) processes with real-time feedback among processes. Starting with the ERP systems in 1980s, this trend has continued with systems like MRP, DRP, and the current supply-chain systems that have the ability to provide an end-to-end automation of most complex business processes to reduce costs, increase efficiencies and enrich information quality that improves the overall experience for everyone involved in the process – employees, customers, vendors, and service providers.
However, the organizational change to leverage such powerful integrated process capabilities has somewhat lagged behind. Modern supply chains can cover a very large scope of the operations – from demand forecasting through purchasing and manufacturing to the distribution and service of a firm’s products and services. Unfortunately, a large number of companies still view these through the conventional silos of departmental thinking and in doing so, potentially sacrificing some of the efficiencies possible through such systems, though the trend is encouraging. An AMR survey (Supply Chain Gets a Promotion by Kevin O’Marah) found that the number of respondents who said that their supply chain reports to the president/CEO/GM, who owns overall P&L responsibility rose from 51% in 2009 to 62% in 2010. While the integrated view is evolving, 62% is still a long ways to go!
imageIn the referenced article, Is your top team undermining your supply chain, McKinsey makes similar arguments and primarily lists three tensions among organizational silos, supply chain versus sales, supply chain versus service, and supply chain versus product proliferation. I agree with this view – while the availability of packaged software solutions and technologies brings capability parity to an extent, the true competitive advantage is generally a result of a complex interplay of business capabilities, process superiority, and organizational capabilities. To be truly effective, supply chains of the future will not only have to design and build effective capabilities to address ever-evolving business needs, but also effective organizations to leverage such capabilities.
This article is adopted from my book, Supply Chain as Strategic Asset: The Key to Reaching Business Goals. You can continue reading more about the subject in the book.
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© Vivek Sehgal, 2010, All Rights Reserved.

Want to know more about supply chains? How they work, what they afford, and how to design one? Check out my books on Supply Chain Management at Amazon.

Tuesday, January 25, 2011

Book Review: Supply Chain as Strategic Asset

Excerpts from Husdal.com: “Is there something like a Supply Chain Nirvana, where it all comes together and where a firm’s supply chain is perfectly aligned with its business strategy, thus creating the competitive advantage the firms needs to stay ahead of its rivals? Vivek Sehgal may have found the recipe in his latest book, Supply Chain as Strategic Asset. In this tightly packed 300-page volume Sehgal shows how important it is to have a top-down-driven approach to supply chain management and how important it is to link strategy and execution, from the board room to the very last delivery guy. The supply chain is a firm’s core asset, and perhaps its most important asset, and a firm is only as good or as bad as its supply chain. While a bit overwhelming at first, this book is filled with many important real-life lessons, and K-Mart versus Wal-Mart seems to be one of Sehgal’s favorite subjects.”
Read the complete book review by Jan Husdal on the book titled: Supply Chain as Strategic Asset – Key to Reaching Business Goals.
More about the book:
© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

Friday, January 21, 2011

Advantage: Bar Codes (for now)

Supply Chain Digest’s series on Supply Chain by the Numbers for Week of Jan. 13, 2011 cites a Kroger pilot with read rates exceeding 98.5%. The pilot is built around reducing the manual imagetouches during the check-out process. As the products move through the tunnel, their bar-codes are read and accounted for, an OCR (optical character recognition) system supports the bar-code reader by identifying products where the bar-codes may be unreadable. Any items that could not be “read” using the bar-code reader or the OCR device are handled manually at the end of the tunnel to finish the check-out. This was showcased in the recently concluded NRF 2011.
The system can potentially reduce billions of manual touches during the check-our process as well as provide substantial improvements in loss-prevention and inventory accuracy processes. All of which should provide Kroger with definite cost-savings and a much improved replenishment capability in its stores.
Another possible inference? SC Digest says that, “the development of the system is obviously a bet that item-level RFID tags capable of being read en-masse or at high speeds are not coming to the grocery industry any time soon - else Kroger or any retailer would not have made the investment in this UPC-based technology”. This view is corroborated by Kroger’s CEO as well.
Where does that leave RFID at least for now? Well, RFID is in a great revival as well – with a host of retailers adopting RFID technology to manage their store replenishments from their back-rooms as well as to manage their receiving and shipping operations in the warehouses by adopting RFID tags at case, pallet, and/or LPN levels, in addition to renewed efforts to kick-start the item-level tagging.
American Apparel reports 99+% inventory accuracy in their store pilots, Wal-Mart re-launched its RFID efforts at item-level with apparel. J.C. Penney has been another big retailer actively toying with the RFID tags to better manage its supply chain as well as stores. Once the technology matures and item-level tagging becomes mainstream, the POS & check-out processes should also be able to leverage RFID tags!
© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.

Tuesday, January 18, 2011

Supply Chain as Strategic Asset

My second book on supply chain was released over this weekend. It is titled, “Supply Chain as Strategic Asset: The Key to Reaching Business Goals”.
This book investigates the relationship between some of the well-known business strategies and how they affect the selection of the supply chain strategy. As technology is the de-facto enabler of business capabilities in current times, therefore, the book also provides a good overview of the prevalent practices in developing and pursuing effective technology strategy that will best support the business needs.
The objective of this book is to explore the relationship between the three strategies: business strategy that sets the goals, supply chain strategies that define the business capabilities to achieve the business goals, and the technology strategy that enables building the business capabilities effectively. I believe that senior executives who understand this synergistic relationship can transform their companies most effectively by prioritizing the capital investments that are fully aligned with the business goals of the firm and hence provide the best returns on the investments. The book is full of real-life cases from the industry supporting the view points presented to create an effective supply chain strategy.

Next steps:
ReadRead Excerpt- Chapter 1 (PDF)
Read Excerpt- Index (PDF)
Read Excerpt- Table of Contents (PDF)
BuyBuy at Amazon
Buy at Wiley
Buy at Barnes & Noble

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© Vivek Sehgal, 2011, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my books on Supply Chain Management at Amazon.