The Supply Chain Shaman's Journal - Winter 2013 - A Focused Look at Supply Chain Leadership

The
Supply Chain Shaman’s
Journal
A Focused Look at Supply Chain Leadership
Volume 1 - Issue 2
Winter 2013

TM

by

—1—

Lora Cecere

The
Supply Chain Shaman’s
Journal™
A Focused Look at Supply Chain Leadership
Volume 1–Issue 2
Winter 2013
by

Lora Cecere
author of
Bricks Matter – The Role of Supply Chains
in Building Market-Driven Differentiation
SUPPLY CHAIN INSIGHTS LLC, BALTIMORE

Copyright 2013
All rights reserved. Published December, 2013
ISBN # 978-0-9889376-1-1 PDF version

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Insights on Supply Chain Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The End of a Fairy Tale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Change the Conversation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
How Is Your Supply Chain Chutzpah? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Changing Mental Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Training for the Next Triathlon. Insights for You? . . . . . . . . . . . . . . . . . . . . . . . 19
Herding Geese. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
A Day of Firsts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
.
What I Have Learned About Supply Chain Excellence . . . . . . . . . . . . . . . . . . . . 26
The Supply Chain Plateau. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
.
Unilever and Colgate: Two Bookends?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Evolution of the Supply Chain Organization. . . . . . . . . . . . . . . . . . . . . . . . . 35
Frequently Asked Questions on Supply Chain Organizations. . . . . . . . . . . . . . . . . 36
Organizational Alignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Taking the Hill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Why?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
How Can I Move Forward If I Cannot Align? . . . . . . . . . . . . . . . . . . . . . . . . . 49
Scream… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Learning from the Past. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Out of Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Supply Chain Talent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
What Do We Do Now?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Supply Chain Talent: The Missing Link in Your Future?. . . . . . . . . . . . . . . . . . . . 64
Yes, Abby. There Is a Santa Claus!. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Interviews with Leaders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Colgate: A Closer Look at Supply Chain Excellence. . . . . . . . . . . . . . . . . . . . . 69
P&G on Supply Chain Excellence. A Foreward to Bricks Matter . . . . . . . . . . . . . . 77
Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Supply Chain Insights Training Sessions. . . . . . . . . . . . . . . . . . . . . . . . . . 80
Supply Chain Insights’ 2014 Global Summit. . . . . . . . . . . . . . . . . . . . . . . . . 81

Introduction
The Supply Chain Shaman’s Journal is a collection of blog posts written over the course of the last
four years. I love to write. I find the Supply Chain Shaman blog fun. Many of these posts are inspired
by working with clients.
Working with clients normally involves travel, and business travel is tough. Many of these articles are
written hunched over my laptop in an uncomfortable position in a seat on an airplane. To make the
time pass by faster, from wheels-up to wheels-down, I try to inject humor and color into the stories. It
makes the trip go by faster. I hope that you will enjoy my wry wit and stories from the road.
The Journal should be read like a collection of short stories with each individual post sharing a unique
set of insights on a specific topic. Keep this in mind as you read this journal. If not, as a collection of
blog posts, they may seem disjointed.
While the first journal focused on Sales and Operations Planning (S&OP), this second journal is
focused on the evolution of leadership in supply chain organizations. The articles are organized
around five sub-themes:
• Insights on Supply Chain Leadership
• Evolution of Supply Chain Organizations
• Organizational Alignment
• The Impending Talent Gap
• Interviews with Leaders
Read and enjoy. Share with your friends and let me know your feedback.
I wish you all the best in your supply chain journey,

Lora Cecere, a.k.a. the Supply Chain Shaman
Founder of Supply Chain Insights LLC

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Insights on Supply Chain Leadership

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The End of a Fairy Tale
Originally published on January 14, 2013

Usually, in a fairy tale, there is a big, bad wolf, or a hairy monster… One that is going to eat you up!
In the development of supply chain management processes, we have spun a fairy tale. It is a story
where people believed that functional excellence delivers supply chain superiority. As a result, year
after year, well intentioned people have toiled against programs and improving metrics that reduced,
not improved, the effectiveness of the supply chain.
An example of misaligned metrics is an organization with a strong focus on Return on Assets (ROA).
We find that a strong focus on ROA may actually degrade operating margin. For the supply chain
traditionalist this may seem counterintuitive; but for most companies, it is true. ROA is no longer a
good proxy metric for total supply chain costs. There is a need to manage the supply chain crossfunctionally to drive end-to-end cost management. In distribution-based companies, distribution costs
outstripped manufacturing costs in 1991. A blind focus on functional excellence will cause the supply
chain to become out of balance.
So, what is the big, bad wolf? The big, bad wolf that is swallowing up the supply chain is the continued
investment in multi-year Enterprise Resource Planning (ERP) projects. The big, bad wolf is usually
most prevalent in a functional organization, and ERP systems are usually very focused on driving
functional metrics.
Please do not get me wrong, I believe that companies need an ERP implementation; and that they
need to do it ONCE and do it well. The big, bad wolf raises it head, when the ERP project grows arms
and legs and becomes a multi-year project to solve everything. It also becomes the big, bad wolf when
the system is focused on local optimums and functional metrics.
There is an opportunity cost to multi-year ERP rollouts for the organization. When I see a company
working on their third, or fourth, ERP upgrade and look blindly, and only, at supply chain planning and
analytics from their ERP vendor, I see the big, bad wolf at play. The argument that I want to make here
is that the supply chain problem has changed, but we are implementing the same old technologies
without stopping to realign against new goals. Let’s look at this more closely:
Based on recent research, today, over 90% of companies have an Enterprise Resource Planning
(ERP) system and an Advanced Planning System (APS). These technologies are mature. They are
in the evolution phase: being refined by user-based enhancements. The consolidation of this industry
has served the technology providers well, but has largely stymied innovation. Yet many manufacturing
and distribution companies are still investing millions of dollars in ERP upgrades expecting to improve
operational excellence. I feel that many of these technologies are now legacy and that it is time to slow
down the upgrades to upgrade only for mandatory system upgrades.
The opportunity cost for multi-year ERP project deployments to an organization is huge. Based on
the analysis of financial ratios, we can clearly see that companies with the best results on revenueper-employee have strong ERP systems, but they have implemented once and have avoided multiyear evolution projects. ERP is valuable to improve transactional accuracy, but continued investments
have not reduced inventory or improved cash-to-cash cycles. The ERP and APS systems that were
developed in the 1990s are now largely legacy applications. As a result, we believe that companies
should stabilize their investments in these technology areas and begin to push the acquisition of
technologies that can better align with the organization’s need to reduce operating margins, absorb
volatility and drive agility.
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For most companies, the use of supply chains to redefine business models is not a current reality.
Instead, they see supply chain as a function within the greater organization; and do not see the endto-end supply chain process as a way of doing business. They do not have the power to redefine
business systems to be an Apple, Amazon, Dell or Zara. So, to use these examples “as points of light”
to help companies go forward is a bit like saying that Lora Cecere will be the February cover girl model
on Vogue magazine. You got it! It is a low probability that this will ever happen.
To understand this point, let’s take a closer look at the food manufacturing sector.
A Case Study
As a researcher, due to merger and acquisition activity, it is getting harder and harder to compare
companies. The peer groups are growing more and more complex. I do not believe that you can put
companies from all industries in a spreadsheet and shake them up and gain insights about supply
chain excellence. Instead, I think that the best insights come from comparing peer groups. In Table
1.1 we compare ten year averages (2001-2011) for food manufacturing companies. In this industry,
operating margin has decreased by 1%, Return on Assets has decreased by 2%, SG&A margin
has increased by 1%, and days of inventory has increased by 3%. As shown in Table 1.1, the food
manufacturing industry is a tough market, and supply chain excellence matters. The only good news
for the industry is that revenue/employee has improved by 29%.
Table 1.1 Ten Year Averages – Food Manufacturing Companies

The answer for this industry is not to copy the supply chain from Amazon or Apple. Instead, I think
that the answer is to be more like General Mills. Note in Figure 1.1 how General Mills has improved
operating margin for the past three years whereas Kellogg has gone backwards. Over this period, the
cereal business has been hard-hit by commodity price increases and private labels. Corn and fuel oil
have tripled in cost. Both commodities are more volatile.
So why has General Mills been able to increase operating margin, and Kellogg has not? General Mills
has side-stepped the big-bad wolf. General Mills implemented ERP once and well, and Kellogg has
had multiple ERP implementations. General Mills is more aligned on cross-functional metrics and has
made more progress on the implementation of horizontal processes.

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Figure 1.1 Metrics Comparison of the Kellogg Company vs. General Mills, Inc.

Supply chain planning maturity also matters. One of the core reasons for the difference is General
Mills is good at supply chain planning. They are at the top of their peer group in forecasting, and they
use their forecasting analytics to drive better plans. They have become best-in-class at network design
and they are very active in the use of advanced technologies for inventory optimization. Unlike many
companies that buy technologies for a project and then do not use them, General Mills has built the
teams to actively model demand and supply and drive better results. They had the courage to give up
ROA to drive better operating margin.
Where to Invest?
So, if you are a supply chain leader, what do you do? Where do you invest? I feel strongly that the
answer lies in the use of new forms of analytics for network design, demand and supply sensing,
supply chain visualization, demand orchestration (horizontal orchestration of demand and supply
variability for price, material substitution, and alternate sourcing), and the use of listening posts to
better understand unstructured data from the channel. The adoptions of these new technologies
cannot be a fad. Instead, it needs to be part of the DNA of the organization.
For example, multi-tier inventory optimization was a fad in the last decade. It was overhyped and the
projects largely under-delivered. Unfortunately, I see that many companies have invested in inventory
optimization and have not reduced inventories. The answer is a lot like why people do not lose weight
on diets. It takes commitment, hard work, and discipline. These three characteristics elude many
organizations.
In closing, I want to leave you with a couple of thoughts. There are many technology vendors that will
knock at your door today, and ask for your time. Stay focused on what matters. Our goal in the supply
chain is to reduce costs, improve customer service, reduce inventories and drive growth. Over the
course of the last decade, most companies have gone backwards not forwards. I think that we need to
hold ourselves accountable to improve financial results. I think that it takes new forms of analytics, and
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cross-functional thinking, to push us off of this supply chain plateau. However, it has to be part of the
organizational DNA to evolve and take advantage of new opportunities. You cannot be held hostage
by the big, bad wolf, and it cannot be a fad diet or the program of the month.

— 10 —

Change the Conversation
Originally published on October 29, 2013

It is Monday morning. As the sun rises, I find myself on the 6:00 AM train drinking coffee. I am giving
thanks that I am able to do what I do.
There is nothing like a cup of coffee at this time of morning. As I hold the warm ceramic mug in my
hands, the horizon rolls forward with the rhythmic sounds of the train on the track. I love the sounds
of the train. I am lost in thought about the client that I am going to spend the day with. It is the end of
a long project, and I am excited to share their data. There is such power in being able to pull together
quantitative data with financial benchmarking analysis and qualitative interviews to help them see new
insights. It is great to pull back the covers and help companies see the new trends and insights on
supply chain excellence through research methods.
In work with clients, I find that they have good intentions and they want to be more outside-in and
demand driven, but they get caught in traps, because they have not changed the conversation. This
will be a primary focus of my session today.
Volatility is rising, supply chains are becoming more important and complexity is making resiliency
tougher. All are good reasons to have the conversation….
Here are the sticking points that I see:
• Focus Less on Perfect Numbers. Embrace Demand Error. Demand volatility is increasing
and the technologies to manage demand are maturing. In this transition, it is more critical to
learn to use demand data than to make the demand number perfect. As a result, the discussion
needs to be less about the “demand forecast number” and more about the probability of
demand. Companies need to try to reduce demand error to the extent possible, but realize that
demand error is a reality of managing a supply chain. As a result, leaders need to drive the
effort to embrace demand error and design the network to drive the same cost, quality and
customer service levels given the level of demand error. This requires using new forms of
analytics for inventory optimization and network design and doing less on spreadsheets.
• Help Others to Understand the Impact of Complexity. Nine out of ten companies are
stuck in their ability to make progress on operating margin and inventory turns. To understand
this, good places to start are the measurement of the forecastability of the products in the
demand plan and understand how this is changing. Track the impact of rising complexity on
forecastability and the impact on the inventory plan.
• Reduce Bias and Error. If only companies could sell what they forecast. Most companies have
a large and positive bias. To counteract this, actively use Forecast Value Add techniques (FVA)
to reduce bias and error. Communicate progress on a monthly basis. Push to help leaders
understand the impact of demand bias on customer service, safety stock and slow and obsolete
inventory.
• Help Others to See the Options. Actively Design the Network. As you do, focus less
on the levels of inventory and more on the trends and right sizing of the forms and function
of inventory. (The form of inventory is the state of inventory and includes decisions for raw,
semi-finished goods and finished goods. The function of inventory is the role that the inventory
plays in driving the right supply chain response. The function of inventory includes cycle stock,
in-transit stock, promotional stock, safety stock, seasonal stock, etc.) Actively model and help
peers to understand the impact of rising complexity on the form and function of inventory. As
— 11 —

you design the network, build push/pull decoupling points and buffers.
• Focus Forward. Finance and accounting use largely backward measurements. Push the
executive team to focus forward in the design of measurement systems. Lead teams to focus
on forward-looking business flows through the channel. Align the flows to maximize customer
service taking ownership for sell through the channel not just sell-into the channel. Don’t
stumble and get hung up on only measuring backward-looking measures.

— 12 —

How Is Your Supply Chain Chutzpah?
Originally published on September 24, 2013

Chutzpah: A personal confidence or courage that allows someone to do or
say things that may seem shocking to others
Merriam Webster
If you are fluent in Yiddish, you know chutzpah, meaning nerve, is akin to the Spanish word ”cojones”
meaning courage, but without an anatomical context as in tener cojones.
So, as I sit in this uncomfortable seat, fighting sleep, winging my way to Chicago, I am asking myself a
simple set of questions. My circular logic goes like this. The supply chain world is dominated by men.
Men have cojones. So, why is it that in this male-dominated world of supply chain there is very little
chutzpah?
In short, I think that it is because we want to please. Commercial teams are paid to sell. Marketing
teams have an agenda to increase market share. The supply chain team takes and ships orders.
Everyone claims that they care about the customer, but the system is ineffective.
The supply chain team with chutzpah has courage. They build the end-to-end value chain outsidein and align commercial and operational strategies. They focus on improving value to the customer.
Those without any chutzpah define the “supply chain” as an organizational function that focuses only
on distribution, manufacturing and procurement. The later definition fits most organizations that I see.
So, how do you increase your chutzpah? Here is my six step plan:
1) Help Commercial and Business Leaders to See the Supply Chain as a Business Process
That They Are a Part Of. Many supply chain teams have aggressively cut costs to fund an
organization’s growth. Sometimes, in this process, they have cut muscle, not just the fat. This limits the
potential of the supply chain to balance costs, inventory cycles and complexity.
How can companies do this better? I work with an organization that is using a mobile network design
application in their S&OP meetings. When the commercial team makes one of those eye-rolling, offthe-wall requests, the team quickly shows the group the impact of this hairy, audacious go-to-market
plan on the base business. They then say, “We can do that, but here is the impact.” And, of course,
the commercial team quickly sees the relative importance of their request. The visualization of the
impact to the commercial teams on base business helps to drive alignment. Without the visualization,
the commercial teams see the supply chain team as a bunch of whiners. This approach lets the
commercial teams actively participate in the decision.
2) Build a Strong Center of Excellence. While 37% of companies have a Supply Chain Center of
Excellence, most define it too narrowly. As a result, only half of the Centers of Excellence meet the
business expectations. The Center of Excellence is successful when it SERVES the business. It fails
when it becomes ACADEMIC. The greatest chance of success happens when the Supply Chain
Center of Excellence is built with a goal in mind of building cross-functional alignment. Use the work
in the Center of Excellence to help drive a holistic cross-functional understanding of the supply chain
as a complex system outside-in (from the customer back). Use the team to facilitate a cross-functional
understanding of trade-offs. When the Center of Excellence is defined to drive alignment there is 3x
greater alignment between the finance and marketing teams.

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Figure 1.3 Success of Supply Chain Centers of Excellence

3) Say Yes and Mean It! The supply chain team is pressured to say “Yes” to commercial plans.
However, trouble brews in Dodge City when the promise cannot be delivered due to reliability issues.
When given the choice between fast and reliable, choose reliable. Actively design the supply chain to
say “Yes” and mean it.
4) Challenge the Status Quo. Last week, I was with a client that is working with SAP to run their
supply chain planning system, SAP APO, on SAP’s HANA platform. I asked them “Why?” They looked
surprised. I believe that there are many wonderful uses for HANA like visibility across multiple ERP
instances, but I question on why to continue to invest Advanced Planning System (APS) logic, like
APO? The basic footprint of APS was defined when planning was constrained by 32-bit architectures.
Computing power has increased 100X since the 1990s, but the definition of APS remains unchanged.
I think that our new opportunity lies in redefining planning not just making old approaches faster. The
supply chain team with chutzpah asks hard questions.
5) Build Supply Chain Potential. I recently interviewed Daniel Weber, leader of the Beiersdorf
supply chain team for the Supply Chain Insights Podcast Series Straight Talk with Supply Chain
Insights. Listen carefully to Daniel’s story as he shares how he used the need to improve customer
service as the means to convince the company to REDUCE inventory. This starts with the belief that
you can improve the potential of this complex system called supply chain to both improve customer
service while reducing inventory.
6) Build Muscle at the Core and Innovation at the Edge. The supply chain leader with chutzpah
has the courage to invest in new technologies for the supply chain. They actively lead efforts to test
and learn through new forms of analytics. They understand that there are no “best practices” that
come out of a software box; instead, they realize that they have to learn from others to tailor processes
to fit their needs based on a clear supply chain strategy.
— 14 —

Figure 1.4 Food Manufacturers’ Progress on Cash-To-Cash Versus Revenue Per Employee

For example, I love Hershey’s results. Check out their impressive results in Figure 1.4, and give Jason
Reiman, leader of the Hershey team, a “Congratulations!” on his new promotion to Vice President.
Jason Reiman and Daniel Weber have both increased the potential in their supply chain to manage
trade-offs. Many, unfortunately, just do not believe that this can be done.
So, what do you think? Do you think it is appropriate for me to ask for my family to lay me to rest on a
small grassy knoll at my farm underneath a small marker that says, “Here lies Lora Cecere. She was a
small-town girl with lots of chutzpah?”
You needn’t send me replies on this one...

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Changing Mental Models
Originally published on May 21, 2013

Healthcare is at a pivotal transition point. I firmly believe that supply chain leadership can make a
difference.
Over the last decade, power shifted in the healthcare value chain. Originally healthcare suppliers sold
to physicians. At the dawn of the decade, the supplier had the power. In the last five years, while the
physician is still important, the buying decisions transitioned from the supplier to the care provider. It
is now shifting again. With the introduction of managed care, the transition of power is to the payer.
It needs to shift to the patient. Here are some of the quotes from the workshop I led yesterday that
helped me to better understand the industry:
• “A process born out of chaos is chaos. The problem is us. We have to change the mental model
of our organizations to move forward.” Medical Device Manufacturer
• “Does everyone realize how bad the problem is? We cannot process map ourselves out of this
problem, it requires new thinking.” New Supply Chain Leader of a Regional Children’s Hospital
• “We have used Lean process systems and ‘swim-laned’ ourselves to death. Today, we are
efficiently swimming in the lanes without alignment on value-based outcomes.” Supply Chain
Leader of a Large Hospital
• “We are a large part of the problem. We cannot drive change without taking a hard look at
ourselves. It starts with redefining our processes and what we reward.” Supply Chain Leader of
a Large Hospital
No one questions the statement that managed care will dramatically affect the healthcare value chain.
The change will not be incremental: It will be a step change. Hospital receivables will lengthen and
supply chain roles within the hospital will become more important. The traditional focus on efficient
sickness will shift to health and wellness. It requires a redesign, from inside-out to outside-in, based on
value-based outcomes. The change in accountable healthcare will give more voice to the patient. Data
driven discussions on patient satisfaction, re-admittance rates and hospital-induced infections will be
transformative.
The question in front of us is “How do we get started?” Hospitals are fragmented. They are small
regional players. While processes have matured, it is hard for individual healthcare providers to get
traction.
Suppliers now have a dance partner. But, the tune has changed, and they are unsure how to dance
together. Hospital supply chains have matured. Seventy-five percent of hospitals have a supply chain
organization. The average tenure of the supply chain professional in the hospital is six years. Hospital
supply chain teams have 1/3 the tenure of the supplier’s supply chain organization. The most common
reporting relationship in the organization is to the hospital’s Chief Financial Officer (CFO). The most
common reporting relationship in the supplier organization is to a leader of supply (focus on logistics,
distribution, materials sourcing and customer service). The focus has been on sourcing and managed
costs. They lack the greater understanding of planning and value network design. While hospital
supply chain organizations have made progress in the last decade, the gap has widened between
the supplier sectors of pharmaceuticals and medical device manufacturers and other manufacturing
industries.

— 16 —

For suppliers, the focus has been on the supply chain organization as a function, not the building
of end-to-end processes. Both sets of trading partners have concrete mental models that define
the supply chain. For the hospital, the focus has been on materials management and negotiating of
lower costs. While 72% have a value analysis team, they have not matured to assess value. These
processes are still in their infancy. They are primarily focused on cost management on new purchase
decisions. By and large, they struggle to gain cross-functional alignment on process redesign to
improve outcomes. They lack the understanding of continuous improvement programs and struggle
with alignment.
Figure 1.5 Healthcare Cost-Cutting Programs: Importance Versus Performance

Most care providers are working to get physician and clinical alignment to focus on the right balance
of standardization, product utilization, and innovation. The historic practice of incentives for direct
payment to physicians drives bad behavior that is hard to control. Through employee downsizing and
consignment-based sales, they have shifted costs to the suppliers. These costs now lack controls. The
answers to healthcare are about much, much more than process mapping.
In contrast, suppliers are large and global players. Over the course of the last five years, they have
fought the shift in power. In fighting for every sale they have become very sales-driven. They have
taken on consignment-based sales without redesigning processes outside-in. (In exchange for
acceptance of a consignment model, suppliers could have redesigned processes to enable better
sharing of daily usage and case scheduling on a daily basis.) The mental model is one of supply.
For the supplier team, they see the supply chain as a function. They struggle to define end-to-end
processes. The teams fight for recognition to participate in top-to-top meetings. In the evolution
of supply chain excellence over the last decade, the gap in core capabilities to drive supply chain
excellence has grown between healthcare suppliers and other industries. They have lost core talent
while the industry is facing a talent shortage.

— 17 —

There are new challenges:
• With managed care, in the United States, the hospital will bear the costs of infections from
hospital stays. The standards for accountable care are evolving.
• 63% of hospital operating room costs are implantable devices. The supply chain for implantable
devices is complex and immature.
• Pharmaceutical products are growing more complex. Cold chain capabilities and serialization
require a redesign in product handling and supply chain execution.
• The industry has created the most complex rebate incentives of any industry value chain.
The administration of bifurcated trade is a barrier to the improvement of trading partner
relationships. The changes in reimbursement make this even more complex.
• Pharmaceutical companies are facing a patent cliff with a 24% decline in operating margins
over the last decade.
What Should Companies Do?
This cannot be about process mapping and improvement of the current state. It requires a shift in the
mental model and leadership. New models are required. This is both an opportunity and a risk for
existing organizations.
Table 1.2 Next Steps

The good news is that trading partners want to get started. There is a compelling event to move
a fragmented industry forward. The challenge is changing the mental model to move from
supply‑centered processes focused on transactions to more holistic supply chain thinking based on
value-based outcomes.
— 18 —

Training for the Next Triathlon. Insights for You?
Originally published on March 4, 2013

I have never been an athlete. At the age of 58, I buried my mother in November 2012. She died of
complications from Alzheimer’s disease. It was a long hard eight-year struggle that was tough on my
family. One of the sad outcomes of the disease is that you don’t know how to grieve. The victim of
Alzheimer’s slowly slips away. The person that you bury has very few resemblances to the person
that you love. So, as I buried her, I became obsessed with learning how I could reduce my chances
of getting the disease. As a daughter of a mother with Alzheimer’s, I have a high risk of getting the
disease (35%). This landed me in an intense discussion with my trainer and my doctor about blood
flow into the brain through endurance training, and how that might reduce the risk of me getting
Alzheimer’s.
My long-term blog readers may remember that two years ago, when I left AMR Research after the
acquisition by Gartner Group, that I became more serious about my health. I started training six hours
a week and lost 37 pounds. Those of you that know me personally also know my frustration with trying
to drop another twenty pounds. It has been a goal for the past two years. While I have lost 22 inches
through diet and exercise, and improved my Body Mass Index by 11%, I have not dropped weight.
So, with the death of my mom, and the discussions with my physician about fighting the probability
of getting Alzheimer’s, I started training with a new vengeance over the holidays. My goal is to live
better for the rest of my life. It is hard. My trainer is unmerciful. He has set new targets for heart rate
monitoring for me, and I have kept up the training. Last week, I ran and completed my first triathlon.
Yes, it was ONLY a sprint triathlon (10-minute swim, 30-minute bike and 20-minute run), but I finished
it. I never thought that I would do a triathlon. A year ago, I could not run to the mailbox; but I not only
finished the event, I was at the middle of the overall rankings as an overweight 58-year-old woman. I
finished despite cramps in my calves and a tough travel schedule getting to the event. So, why do I tell
you the story?
I see a lot of parallels in the training that I did for the triathlon, and the work that I am doing on financial
ratios. To write the book Metrics That Matter, we have been analyzing 20 years of supply chain
financial ratios and looking at the trends. As I look at the preliminary analysis results for the e-book,
I see many parallels to my triathlete experience. It has been fascinating for me to study the financial
results of clients that I have worked with for the past twenty years and to see how their supply chain
— 19 —

strategy documents translated (or did not translate) into financial results. I spoke more about this
during my European Book Tour for Bricks Matter.
• Balance. When I first started training, my muscles got as stiff as a board. Through aging, I lost
flexibility and balance. I now spend an equal amount of time stretching to improve balance, as I
spend on weights in the strength training. I am amazed how strength training reduces balance.
Similarly, in the evolution of supply chain practices in the past decade, I feel that we have not
had a sufficient focus on balance and flexibility. The evolution of tightly integrated ERP solutions
to BI and APS has created tight and inflexible links. As part of the training plan, for supply chain
excellence, companies need to focus on balance and flexibility. Only 10% of companies today
are happy with their “what-if” analyses and the ability to understand change. We need balance
between front and back office activities and we need to understand the implications through
“what-if” analysis to drive flexibility. It is about much more than short cycles. It needs to be
deliberate. I think that we have taken tight integration of supply chain applications to ERP too far
and lost balance and flexibility.
• A Clear Plan. I am a strong swimmer and a weak runner. While I can swim 75 minutes and
enjoy the time in the pool, I have to force myself to run. To complete this event, I had to focus
on what I did not like to do, and I had to learn how to balance my energy and body motions to
finish the run. Likewise, in today’s supply chain environment, I find that supply chain leaders
favor a single function of logistics, manufacturing or sourcing. They have not forced themselves
to learn all three. To complete the race for supply chain excellence, the company needs to be
good at all three and have a strategy on how to reach balance between the functions in dayto-day operations. It requires a plan. Too few companies have a clear supply chain strategy.
While the answers to quantitative surveys that we complete at Supply Chain Insights state that
over 60% of companies are comfortable with their supply chain strategy, I find that only 5% of
companies truly have an adequate plan that drives a clear road map to help the organization
transition from business strategy to supply chain strategy. (And, for clarity this is not a strategy
for the supply chain department. Instead, it is the design and implementation of a value chain
strategy that gives a plan to create differentiation from the customer’s customer to the supplier’s
supplier.)
• Measurement. Over the last decade, the only metric that we have improved in the supply chain
is revenue/employee, a measurement of productivity. Only the high-tech industry has been able
to effectively make improvements on the effective frontier of supply chain management–the
balance of growth, productivity, cycles and complexity–and drive resilience out of the Great
Recession of 2007-2009. Companies that are not looking holistically at metrics are stuck. What
do I mean? The process industries have mistakenly viewed Return on Assets (ROA) as the
proxy metric for reducing operating costs. In many ways, it is like my focus on weight in my
training for the triathlon versus the BMI or inches. The measurement of the BMI is harder. It is
easy to hop on a scale and know your body weight. It is harder to understand lean body mass.
Similarly, only 23% of manufacturers can easily measure profitability. And, in my research on
profitability models for manufacturers, I cannot find a good packaged solution for companies to
easily model profitability in building market-driven value networks. As a result, companies will
be forced to build it themselves using technologies for “what-if” analysis on strategic modeling
from network design tools. However, it is worth it.
• Need for a Coach, Leadership and Grit. In the study of financial metrics, I find an inverse
relationship between companies that have had a strong dependency on supply chain
consultants and results. Instead, the companies that have done it the best, have driven supply
chain excellence based on internal leadership. This does not mean that the organization
— 20 —

does not need a coach; but, there is no substitute for internal leadership, discipline and true
grit. In the words of a supply chain pioneer in the book Bricks Matter, “No true supply chain
transformation can happen in less than three years” and “There is no substitute for leadership.”
The coach needs to be carefully selected based on the training needs, but is there to guide the
plan, not to do the hard work.
• Compelling Event. I would not have done this without a compelling event. My mother’s death
and the probability of dying a similar death is a compelling event. I am trying to fight back.
Likewise, in the history of supply chain management, over the course of the last twenty years,
more success has happened through failure than success. Company transformation usually
happens following a deleterious event.
Anyway, long story short, finishing my first triathlon was exhilarating. I had no idea that I could do it!
I am now in training for a longer and tougher event (1/2 mile swim, 15 mile bike ride and a 5K run.)
I have built a one year plan, and I am working hard with my coach. I am monitoring my heart rate,
BMI and time. I am also focused on building strength, flexibility and balance. Each of these elements
requires hard work for this gal that has never been an athlete, but I am trying hard to fight back the
momentum of time. I think that there are insights here for the supply chain leader. What do you think?

— 21 —

Herding Geese
Originally published on December 11, 2012

Geese fly in a V-shaped pattern and walk in single file. There are well-established patterns of
leadership. Smaller flocks fare better than large ones. When they lose their leaders, many liken it to a
wild goose chase. But, can they be herded?
Last week, I visited Steve Keifer, who gave me a copy of his book, Herding Geese. Without thinking, I
thanked him and put it in my bag. I get a lot of books. I did not think much about it.
Later that night, I started thumbing through it. The book is a good read. < For supply chain leaders,
let me requalify the recommendation, it is a great read.> I am often asked for a list of good books on
supply chain, and I don’t have many on my list. I will add Steve’s. I like the grounded reality and the
sense of humor used in the book. Both of which, I find sadly missing in today’s market.
Steve’s book chronicles the rise and fall of the promise of B2B connectivity. I remember the hope
and promise of yesterday’s initiatives like it was yesterday. I remember the go-go years of XML, B2B
Trading Exchanges, RFID, CPFR, and Global Data Synchronization. They were overhyped and I think
that all would agree that they largely under-delivered on the promise. We could easily dismiss the
importance of B2B connectivity, but Steve’s math shows that it has grown twice as fast as the much
more overhyped traditional software market. We laughed together at the new cadre of overhyped
terms like Big Data, Hadoop, and Omnichannel Retailing. I was encouraged.
Insights
In many ways, Steve and I are “birds of a feather.” We are both, in our own way, attempting to herd
geese in the software industry. Many would see this as a lost cause. Over the course of the last year,
we have seen more and more vendor consolidation and less visionary leadership from the suppliers
of technology. I remain firmly convinced that the only people who win in software consolidation are
the shareholders of the software industry. There are too few examples where merger and acquisition
activity has added value for the line-of-business user. In fact, I struggle to find an example.
As a result, I believe that the first generation of supply chain applications was based on best-of-breed
leadership. Successful technology companies in this era had a visionary leader and the company was
fueled by passion. These best-of-breed solutions gave way to the rise of the extended ERP platform
implemented largely by consultants that understood transactional feeds, but lacked an understanding
of planning. Ironically, as computing power increased and machine learning accelerated, the supply
chain technology market has been slow to respond. However, I think that the third generation of
technology will be owned by new best-of-breed providers.
As shown in Figure 1.6, Supply Chain Leaders are loosening the purse strings on IT in 2013, but there
is confusion on what to buy. The primary focus is on demand management: the ability to sense and
shape demand. Companies are more serious about demand and are looking at new options. These
include cloud-based solutions and they are openly looking for new forms of analytics in the demand
space. While there is a high level of confusion, it is about more than traditional demand forecasting.
A rising issue is the ability to get to data to drive new forms of analytics. The gaps in technology are
compounded by the lack of understanding of the supply chain by the executive team. In Figure 1.7,
which represents individual pain of the respondent, we see that after two decades of technology
implementation, teams are still trying to get at data to use it.

— 22 —

Figure 1.6 Expected Change in Technology Spending to Improve Supply Chains

One of the primary issues is that most implementations of technology were implemented in a vertically
siloed approach without looking at the extended supply chain from the customer’s customer to the
supplier’s supplier outside-in. Too few companies have charted a look at how to build the end-to-end
supply chain outside-in using advanced analytics. In this study, 40% of companies were not clear on
supply chain strategy.
Figure 1.7 Levels of Business Pain for Supply Chain Leaders

— 23 —

When geese fly, there is a clear leader. There is a bird at the head of the pack and when it gets tired
they alternate and stay in the V-shaped formation. They are clear on the goal and have a clear plan. I
strongly feel that the answer here is leadership. I feel that it is time for the supply chain leader to clarify
the end-to-end vision and chart the course.
However, it requires enlightened business leadership on new technologies and questioning traditional
paradigms. The lack of clarity of what defines supply chain excellence permeates the organization
and the traditional approaches do not lend themselves to being able to get to data for clear decision
making. We believe that it will mean a return to best-of-breed providers. Let’s just hope that it does not
lead to an overhyped market around meaningless terms like Big Data and Omnichannel retail. If so, we
are probably involved in a true “wild goose chase.” I sadly hope not.

— 24 —

A Day of Firsts
Originally published on September 24, 2012

Today, was a day of firsts.
My first book is edited. Today, the book Bricks Matter went to the printers. We have completed the
editing of the first press run of Bricks Matter. Oh my, what a job! With the help of my assistant, Jill, we
have now read 411 pages, and checked 72 graphics over 25 times. The book is scheduled to publish
the beginning of December.
What did we find?
The high level summary is:
• Consumer Packaged Goods Companies Have Stronger Supply Chains Than Other
Process Industries. (e.g., CPG when compared to Food and Beverage, Chemical or
Pharmaceutical manufacturers show greater year-over year improvement.) Why? The supply
chains were more resilient through the economic recovery of the Great Recession and they
showed less gyration in year-over-year results. P&G is the clear winner based on balance and
resiliency of the global CPG companies of Colgate, Kimberly-Clark, Kraft, P&G, and Unilever.
• The Companies with the Best Scores on Gross Margin Were Less Resilient through the
Economic Downturn of 2007-2009. These companies tend to “Sweat Assets” and throw their
supply chains out of balance. In our analysis of five process sectors, only Colgate has been
able to remain resilient with best-in-class gross margin (no substantial change in inventory or
cash-to-cash cycles).
• Inventory Everywhere. Only high-tech and electronics companies have made TRUE progress
on managing inventory (improved inventory turns). For the rest, progress on cash-to-cash
cycles has been largely driven by squeezing the procurement relationship and improving
the Days of Payables Outstanding (DPO).We have rewarded supply chain leaders in the last
decade for pushing costs back in the value chain. When DPO is squeezed too hard, there is
an adverse effect on Gross Margin. With the rise of Corporate Social Responsibility (CSR), I
predict that this will be less prevalent.
• Flat Growth. The last decade was a race for global expansion and new product innovation.
With flattening growth, and declining margins, supply chain excellence will matter more
than ever. I think that the next decade will see the rise of the “T-shaped Manager” to lead
horizontal end-to-end processes, and that superiority in supply chain leadership will transfigure
relationships to drive new business models and allow companies to improve the Supply Chain
Effective Frontier. Over the past decade, we have seen that the fastest progress in supply
chain management happens when margins are tight, product cycles are short, and metrics are
aligned across the organization to balance the supply chain holistically (growth, profits, working
capital, customer service, and forecast accuracy) as a complex system.
This analysis is hard work, but it is fun. And it is rewarding.

— 25 —

What I Have Learned About Supply Chain Excellence
Originally published on August 18, 2012

I go back and forth. At times, I reflect on how fast things have changed; while at other times, I struggle
with why supply chain processes cannot happen quickly enough, and be transformed faster. For me, it
is a conundrum. I have been studying this for the past nine years.
I have decided that I think that it is much like this picture of a man on a moving sidewalk. As we push
forward, the supply chain processes are slowly evolving, and propelling us forward, but we are moving
at a faster pace.
After a year of studying supply chain excellence for the book Bricks Matter, I do not think that we
have BEST practices. Instead, I think that we have EVOLVING practices. Here I want to share my
insights.
What Is Supply Chain Excellence?
After studying supply chain excellence for a year, I do not think that companies can start with
“process.’ I think that the application of generic processes without a sound understanding of supply
chain strategy has been a mistake for many companies.
I believe that the best companies propel themselves forward with a clear understanding of supply
chain strategy, a well-defined multi-year road map, and an unobstructed view of how to make tradeoffs on the supply chain effective frontier shown in Figure 1.8. They invest in talent and they have a
sound understanding that the best supply chain is not the most efficient. Instead, they understand
that the most effective supply chain balances the trade-offs of growth, revenue and costs while
managing working capital, corporate social responsibility and asset strategies. These trade-offs need
to be based on the corporate strategy.
— 26 —

Figure 1.8 The Supply Chain Effective Frontier

Companies that shine and are good at delivering value through their supply chains focus on the tradeoffs at the top of Figure 1.8. This is in contrast with companies that are laggards and only look at the
waste, or the symptoms of poor performance at the bottom of this figure.
Leaders understand there needs to be balance and that the policies for channel strategy, product
portfolio management and supplier development strategies make a difference. They also understand
that supply chain excellence requires the mastery, or the knitting together, of complex processes into a
complex system. It must be managed as a complex system.
My Frustration
In the past month, I have worked with multiple companies that believed that they had a clear
understanding of supply chain excellence, but they were only looking at a limited view of manufacturing
or procurement excellence. I am frustrated because I see poor work, over and over again, on supply
chain benchmarking. I believe that 90% of the supply chain benchmarking projects is fundamentally
flawed in three ways:
— 27 —

1) Self-Reported Data Is Inaccurate: Any time that you have self-reported data on forecast
accuracy, customer service (on-time delivery or perfect order) or manufacturing reliability, expect
problems. Each of these measurements lacks a clear industry standard for reporting; and, as a result,
they are based on very different definitions. In addition, based on real-world experience of supply
chain benchmarking, there is usually a positive organizational bias to overstate results in each of these
areas.
2) Peer Group Is Essential: I believe strongly that supply chains must be compared by peer group.
You cannot put all supply chains in a spreadsheet and shake them up.
3) Apples-To-Apples Comparisons Are Fundamental: The data must also be from the same time
period. It must be current.
Table 1.5 A Study of Financial Ratios to Understand the Supply Chain Effective Frontier

Making Trade-Offs
As a result, I have started studying the financial trade-offs that companies have made in supply
chain leadership by analyzing 25 years of financial balance sheets. To understand supply chain
excellence, we are plotting peer groups at the intersection of these metrics and attempting to tie this
understanding to the maturity models that are built into our research studies. We believe that the
companies with the best supply chains have three characteristics:
1) Positive System Momentum in Peer Group Performance. Each supply chain has its own unique
potential, but the best supply chain has a positive upward momentum while balancing the trade-offs.
2) Balance. Supply chain leaders maintain balance of these metrics against a supply chain strategy.
They show positive momentum in peer group comparisons in each area.
3) Steady, Unfaltering Year-Over-Year Progress. The supply chain journey happens over many
years. The best supply chains are reliable and able to drive year-over-year progress.
— 28 —

A Case Study
Consider the results of two competitors, PepsiCo and Coca-Cola. When comparing year-over-year
revenue/employee to cash-to-cash cycles, PepsiCo (red in Figure 1.9) shows a positive trend (revenue
per employee shows steady progress without swings in cash-to-cash cycles) while Coca-Cola’s
(purple in the figure) results are erratic.
Figure 1.9 Comparing Cash-To-Cash and Revenue Per Employee

And, just remember, we are all on moving sidewalks. Keep in mind that it is a journey not a sprint, and
be clear on the final destination.

— 29 —

The Supply Chain Plateau
Originally published on January 13, 2013

A plateau: a period of stability with no change.
Growth has stalled. To compensate and stimulate revenue, companies increased SG&A margin by
1%. However, the conditions were more complex; the average company, over the last ten years,
experienced a decline of 1% in operating margin, and an increase in the days of inventory of
5%. While cycle times have improved, the majority of the progress has come from lengthening of days
of payables and squeezing suppliers.
While I believe that individual projects may have had these results, it did not make its way to the
balance sheet. I believe that we have reached a plateau and that supply chain performance is
declining. One of the primary issues as shown in Figure 1.8 is the gap in technologies.
Figure 1.8 Gap in Supply Chain Technologies

A Need to Rethink Technologies?
The good news is that companies are increasing their spend on supply chain solutions. The bad news
is that there are major gaps in the solutions where they want to invest. It reminds me of the old Turkish
proverb, “No matter how far you have gone on a wrong road, turn back.” I think that this is true.
The fundamental design of supply chain systems has not changed since the mid-1990s despite the
evolution of greater computing capabilities and the change in the business problem within the supply
chain. The process requirements have changed in five fundamental ways that are not reflected in the
software:
• Vertical to Horizontal Processes. There is a need for automation and new forms of predictive
analytics to power horizontal processes. The need to automate revenue management, social
responsibility, supplier development and Sales and Operations Planning (S&OP).
— 30 —

• New Forms of Analytics. A need for new forms of analytics to sense using structured
and unstructured data. Today’s supply chains respond. They do not sense. As a result, the
response is usually late. There is a need to use unstructured text data mining technologies to
listen and learn.
• Utilize the Cloud. Inter-Enterprise Solutions Using Cloud-Based Computing. The supply
chain is slowly adopting new forms of cloud-based computing to align and synchronize.
• Movement from Inside-Out to Outside-In. The traditional supply chain planning systems
primarily use orders and shipment data for planning. There is a need to redesign the
technologies to use channel data market-to-market to sense, shape and drive a more flexible
response.
• Visualization and Better Use of Data. The traditional definition of supply chain planning
was data intensive and insight poor. There is an opportunity to build a new generation of
applications using new forms of mapping and visualization to drive new insights.
Today, we have the evolution, not the reinvention, of current systems. Vendors are consolidating and
innovation is largely absent. The other day, I was reading about IBM in 1964, and the introduction
of the IBM 360. The IBM 360 was a tough decision for Thomas Watson because it made the prior
computers obsolete. The supply chain APS market needs this type of leadership. I think that there is a
discontinuity and we need to declare the APS and ERP systems of the 1990s obsolete and start again.
I think that they are legacy. What do you think?

— 31 —

Unilever and Colgate: Two Bookends?
Originally published on February 13, 2013

Bookend: to be positioned at the end or on either side of (something)
Oxford Dictionary
As I worked on my last report, I waded through spreadsheet after spreadsheet of data for three
weeks and contrasted the progress of the high-tech, consumer products, food manufacturing,
pharmaceutical and industrial sectors. The storyline of the report is that ONLY the high-tech industry
is making progress on the Supply Chain Effective Frontier (effectively balancing progress on growth,
profitability, cycles and complexity simultaneously). The rest of the industries are either stuck or
moving backwards. Consumer packaged goods (CPG), food and chemical manufacturers are stuck
and pharmaceutical and industrial companies are losing ground and moving backwards.
Table 1.6 Growth by Industry

As I worked with the data, several stories emerged in parallel to the main theme of the report on
supply chain resiliency and the progress (or lack thereof) of companies on the path to supply chain
excellence. One story that stands out for me is the race for supply chain excellence within the CPG
peer group. It is a very competitive set of companies.
Overall, as shown in Table 1.6, the CPG group composed of Church & Dwight, Clorox, Colgate,
Kimberly-Clark, Procter & Gamble, Reckitt Benckiser and Unilever, is facing slower growth. With
rising commodity prices, increasing complexity of the product portfolio, and escalating costs for
transportation, the companies in the peer group are fighting to reduce costs and protect market share.

— 32 —

As an industry analyst, over the course of the last ten years, I have worked with all of these
companies. In the process, because I had not done an in-depth analysis of their progress on what I
now call the Supply Chain Effective Frontier (performance on driving growth, reducing costs, improving
cycles and managing complexity), I saw each of them as equals. They are not.
The analysis is tough. This data is hard to get. I am only able to do it now because we invested in
systems to analyze financial supply chain ratios at Supply Chain Insights.
Who Did It Best?
As I write this, I hang my head. Over and over again, over the course of many years, I have heralded
the progress of Procter & Gamble (P&G) on revenue/employee as a characteristic of supply chain
excellence. As I wrote and pushed forward these ideas, I was challenged by Mark Vollrath, of the
Colgate team, on the analysis that I was doing. He pushed back and asked me to look beyond
productivity. After an in-depth analysis of the data over the course of the last three weeks, on ten
years of financial ratios, I see his point. (I know, I know. I can be hard-headed at times.) I now believe
that the choice of Colgate versus P&G as the winner on supply chain excellence is based on what
is valued. If productivity is valued, the choice is P&G. If the definition is the balancing of costs and
inventory, the winner is Colgate.
However, what is now clear to me is that whatever the evaluative metric, Unilever is at the bottom of
the CPG peer group and should never be seen as a supply chain leader. Unilever is at the bottom of
the list in driving performance improvements in productivity, cost, margin, inventory performance, and
growth. The only improvement was an extreme increase in Days of Payables that improved cash-tocash, but weakened their suppliers.
In Table 1.7, I share insights on progress that the two companies made in the last two years. Unilever
is roughly 4X the size of Colgate. In 2011, Colgate had revenues of $16.7 billion and had 38,000
employees. In contrast, in 2011, Unilever had revenues of $64.6 billion and had 169,000 employees.
They have some commonalities: both of the companies operate global teams and each defined their
supply chain organizations at about the same time. However, as anyone that has worked with both
companies knows, they are VERY different cultures.
Table 1.7 Corporate Performance: Colgate Versus Unilever

— 33 —

When I first started working with Unilever in Europe, the teams would laugh and say “that you could
not work at Unilever without the ability to have a spirited debate.” They are right. The Unilever teams in
the United States used to laugh that it was hard for them to sort through all of their “science projects,”
while the Colgate teams were focused on one or two major objectives. The teams are composed of
very smart people; however, they have always struggled to gain the same recognition of supply chain
excellence at the board level that Colgate and P&G were able to enjoy much earlier. Unilever also
relied heavily on strategic consultants and they started many waves of independent projects. Colgate,
on the other hand, was largely driven by internal leadership with a conservative focus on supply chain
basics.
The definition of global was also quite different for the two companies. For Unilever, the regional teams
operated with a strong independent spirit. Each region had a high level of autonomy. As I worked with
them, I watched the Indian Unilever team gain a strong market presence as the market stature of the
United States declined. Colgate, on the other hand, operated with a stronger global hand. The goal
of Colgate was to get regional input, but manage a global brand presence. The focus was far more
multinational.
When the Great Recession of 2007 happened, Unilever restructured the organization resulting in
a number of layoffs. Suddenly, inventory management became very important, and the teams got
serious cross-functionally at the management of working capital. Colgate, on the other hand, withstood
the market shocks better than Unilever, and continued to build talent systems. The Colgate team
focused on a common IT architecture while the Unilever team allowed more freedom for project-based
and functionally-driven IT decisions.
In comparative analysis, I see two bookends. Over the course of the decade, Colgate maintained
margin of 21% against an industry average of 16% and drove a high return on assets (ROA) of 18%
against an industry norm of 11%. The team continued to reduce costs through the recession. The
Colgate team achieved better growth and margins with lower inventory levels than the Unilever team
(the average days of inventory for the peer group is 59). They performed better than their peer group
on growth. In contrast P&G, often touted as the CPG leader, had an average operating margin average
of .18, an ROA average of 9.5%, an average number of days of inventory of 65 with a growth rate of
7%.
This is sharp contrast to the rankings when you study the three companies’ performance on
improvements on productivity over the last decade as measured by revenue/employee. The CPG
average was $443,000/employee. P&G was the industry leader with an average of $532,000/
employee. Colgate was under the average at $352,000/employee, and Unilever was the laggard at
$259,000/employee.
Conclusion
So in conclusion, when I use a more holistic measurement of supply chain excellence as managing
the trade-offs of growth, profitability, cycles and complexity, I believe that Colgate and Unilever form
the bookends of the CPG peer group. Colgate should be given the award for excellence and Unilever
ranks at the bottom of the pack. Sorry, Mark. I think that you are right. This is a much better view of
supply chain excellence than the easier metric that I used previously of revenue/employee.
My take? It is easier to say “supply chain excellence” than to define it. The definition varies by
organization. It also needs to align to strategy. What works for one company, may not be a fit for the
other. However, I find too few supply chain teams stop to analyze the potential of their supply chains
and their progress on the Effective Frontier of managing growth, costs, complexity and cycles.

— 34 —

Evolution of the Supply Chain Organization

— 35 —

Frequently Asked Questions on Supply Chain Organizations
Originally published on November 4, 2013

Supply chain organizations come in many shapes and sizes. While the definition of a supply chain
organization is relatively new, and is still evolving, we get many questions on the design and definition.
In this post we share the answers to the questions that we get most frequently.
What Are the Most Typical Reporting Structures?
Today, over 80% of companies have a supply chain organization. However, they look quite different.
There are normally six functions reporting to the supply chain leader.
In the early days of supply chain evolution, the supply chain group often reported to manufacturing (in
process industries) or procurement (in discrete industries). Today, this is reversed with procurement
reporting to the supply chain organization over 50% of the time, and manufacturing reporting to the
supply chain organization in more than 40% of organizations.
In addition, the supply chain organization is reporting to a higher level within the organization. Over
80% of the supply chain organizations report to a C-level manager or senior vice president. This was
not the case five years ago. These reporting relationships are outlined in Figure 2.1.
Figure 2.1 Typical Supply Chain Reporting

What Are the Stages of Organizational Maturity?
The processes of supply chain execution are more mature than those of planning. In the early stage
of supply chain evolution, the organizational focus is transactional and backward looking with little
appreciation for supply chain planning. In these formative years, they tend to reward the urgent and
not value the need for the important.
— 36 —

As the organization matures, the focus moves from a transactional, backward view to the management
of forward-looking rhythms and cycles based on demand and supply. It is less about absolute numbers
and more about probabilities and planning books. The focus also changes from inside-out to outsidein with a focus on market drivers and ownership of inventories through the channel. It also shifts from
the management of functional silos in operations to the management of the end-to-end process from
the customer’s customer to the suppliers’ supplier.
How Are We Doing on Order-To-Cash Maturity?
Organizations are slowly making progress. In a recent study, we found that roughly 1/3 of sales and
purchase orders are moving through B2B systems hands free. We also found that when the orders
can move without manual intervention that the time to ship the order is reduced by 50%. EDI is still
the workhorse of the industry. The evolution of the portal fell short of expectations to build strong
B2B relationships and we are just starting to take advantage of business networks to enable B2B
transactions more seamlessly through multiple tiers of the network.
Figure 2.2 Status of Hands-Free B2B Orders

How Is the Corporate Social Responsibility (CSR) Defined? What Is a Normal Reporting
Relationship?
The average company has had a corporate social responsibility organization for six years. While the
name may differ, today, there is a Corporate Social Responsibility (CSR) organization in over 90%
of companies greater than $1 billion in revenue. The reporting relationship is more random than that
of the supply chain organization. As shown in Figure 2.3, there is less of a “typical organizational
structure” in the reporting of the CSR function.

— 37 —

Figure 2.3 Corporate Social Responsibility Reporting Relationships

Figure 2.4 Who Does Supply Chain Best?

— 38 —

Who Does It Best?
As you read this report, you will learn that the concept of supply chain excellence is a deep and
complex topic. However, when we ask supply chain leaders who excel on supply chain excellence and
CSR process delivery, we get the response depicted in Figure 2.4.
What Percentage of Supply Chain Organizations Have a Dedicated Human Resources Function?
The average length of time of the supply chain human resource organization is six years. The supply
chain human resource function is found the most frequently in organizations greater than $5 billion in
revenue. Today, roughly 25% of companies have a supply chain human resource organization.
Figure 2.5 Supply Chain Human Resource Departments: Organizational Tenure

What Is the Tenure of the Chief Supply Chain Officer (CSCO)?
At this time, this is unknown. We see that roughly a quarter of supply chain organizations have a
CSCO at this time. Many organizations greater than $5 billion in revenue have had a person in the role
for more than five years. While the data is not conclusive, it appears that the job is much more stable
with less turnover than the CSCO’s counterpart, the Chief Information Officer (CIO).
How Many Companies Have a Supply Chain Center of Excellence? What Defines Success?
Today, there is a supply chain center of excellence in one in three organizations; but only 50% are
rated as effective. They are the most common when the organization is complex by product line or
geography. The gap in performance is typically related to a lack of alignment in supply chain strategy
and the inability to meet expectations in the design and execution of horizontal processes as shown in
Figure 2.6.

— 39 —

Figure 2.6 Importance Versus Performance of the Supply Chain Center of Excellence

Figure 2.7 How Supply Chain IT Decisions Are Made

— 40 —

How Do Organizations Make Decisions on the Purchase of Supply Chain Planning Software?
Most of the purchase decisions of supply chain software are made jointly between the line-of-business
leadership team and the IT organization. As shown in Figure 2.7, this happens over 70% of the time.
The supply chain leader, in this process, must overcome a number of pitfalls and hurdles. In the
selection of IT systems the supply chain leader needs to keep these things in mind:
• Alignment. The Information Technology (IT) group tends to see the goal of technology as
improving transactional efficiency; whereas, the supply chain leader is seeking better visibility
and transparency of flows, rhythms and cycles, and business drivers. Teams see what they
understand. As a result, in the best organizations, companies have built career paths that
enable cross-functional movement and skill attainment between IT professionals and line of
business leaders. This enables a more holistic understanding.
• Define a Clear Business Strategy. A barrier to system selection is a commonly held vision of
supply chain excellence. <This is not a trivial discussion.>
The IT team also believes that the line of business leaders are much more aligned than they
are in reality. The gaps between leaders in source, make and deliver are quite large in most
organizations. Companies that make the best selections on IT infrastructure work first to close
these gaps through the definition of IT strategy. This enables a much more seamless selection
of technologies.
Companies need to work to gain clarity before engaging a technology vendor. Because the sale
of software is both complex and expensive, the sales teams at the technology providers are
trained to sell to organizational factions, often making the lack of alignment worse.
• Avoid Gridlock. Define how you are going to make a decision before you get started with your
selection process. This sounds simple; but it is not. Many, many teams go through months of
deliberation because they were not clear in the beginning of the technology evaluation.
These are the questions that I am asked the most often. Have I missed anything?

— 41 —

Organizational Alignment

— 42 —

Taking the Hill

Growth has slowed. Profits are sluggish. Complexity reigns and cycles are longer. The challenges
and opportunities of business are greater. We believe that supply chain excellence helps a
company to better balance demand and supply. We also believe that it helps companies to be more
resilient: weathering demand and supply volatility while maximizing opportunities and mitigating
risks. We believe that supply chain excellence matters and is important to improving financial market
performance. After a decade of investment, many companies are asking me, “How do I take this next
hill? How do I push forward? What does the future of supply chain excellence look like?” For many,
despite spending 1.7% of revenue on supply chain applications, the promise of an agile, flexible
supply chain that can respond as the business changes seems like an illusion. As shown in Figure
3.1, companies are struggling to balance growth, profitability, cycles and complexity. We term this the
Supply Chain Effective Frontier.
Figure 3.1 The Supply Chain Effective Frontier

This week, at Supply Chain Insights LLC, we published our 11th report in the series titled Supply
Chain Metrics That Matter. Over the course of a year, we analyzed a decade of financial data to gain
an understanding of how companies and industry sectors are balancing growth, profitability, cycles
and complexity.
To write these reports, we start by analyzing industry sector progress on company growth, profitability,
cycles and complexity. Using our database of financial ratios (shown in Table 3.1), we analyze
company and industry sector progress over the last decade. Financial ratios allow us to analyze
performance across the peer group (large against small companies) and across currencies. We look
for year-over-year improvement. We also look for companies that have out-performed their peer
groups. When we find these two characteristics, we interview industry leaders to analyze why. We
do not believe that there is much value in putting all companies into a spreadsheet and shaking them
up… or looking at singular metrics without analyzing the intricate trade-offs of the supply chain when
viewed as a complex system.
— 43 —

Table 3.1 Financial Ratios Used in the Analysis of the Supply Chain Effective Frontier

Six trends are clear:
1) The Industries Are Not Making Equal Progress. Companies are competitive. They are constantly
asking us “Who does this best? Which industry sector can we learn from?” Through this series
of reports, we now can see that consumer electronics has pulled ahead of the pack. Consumer
Packaged Goods (CPG) and chemical companies are close behind, but they are having difficulty
“taking the hill.” The hospital industry has made progress, while the pharmaceutical and medical
device companies are stalled. Apparel is actually moving backwards.
2) Planning Matters. Companies that are good at planning—use of supply chain design and supply
chain planning technologies—are outpacing other industries. Active management of value networks
and scenario planning makes a difference. When companies look at singular metrics (labor costs or
inventory), they have moved backwards.
3) There Is No Substitute for Leadership. Industries that have formed cross-functional leadership
teams combining source, make and deliver together have made the fastest progress. In parallel, when
supply chain concepts are well-integrated into the design of trading partner relationships by both sales
and procurement, there is an acceleration of value. The trade-offs are easier and the value network
strategies more straightforward.
4) Aligning Metrics Matters. Companies making the fastest progress have designed metrics to
ensure that all functions are held accountable for operating margin, cash-to-cash cycles, growth
and productivity. When this happens, proxy metrics like Return on Assets (ROA), Overall Equipment
Effectiveness (OEE), Days of Payables (DOP), Material Costs, Transportation Costs or Sales and
General Administrative Costs (SG&A) can be discussed and trade-offs can be made easily crossfunctionally. Functional metrics used in isolation degrade corporate performance.
— 44 —

5) The Gaps between Industry Sectors Have Widened Over the Decade. I have studied supply
chain excellence for the last decade as an industry analyst. As I write these reports and work with the
team, I am amazed how much these gaps have widened. It is clear basics matter. Leaders manage
the supply chain as a system and improve the potential of the system to make trade-offs. Laggards let
the supply chain whip them around and make unconscious trade-offs through indecision. The gaps
between the two have grown.
Figure 3.2 Taking the Hill and Overcoming the Supply Chain Plateau

6) Supply Chain Excellence Matters. In our work on the Supply Chain Index, where we are
correlating progress on the Supply Chain Effective Frontier to financial market performance, we can
see that supply chain matters. The leaders that have managed the supply chain as a complete system
are able to achieve better financial market valuations.
In closing, in our writings and our research, we define the term supply chain as processes from the
customer’s customer to the supplier’s supplier. Unfortunately, for many of our readers, the word supply
chain is now a politically charged term. We find this unfortunate and often disheartening. The shift in
definitions can be a barrier to driving progress.
How so? For software application providers, it is often reduced as a subset of applications. I find it
sad, when I attend a conference where the term supply chain is only used to describe supply chain
execution (SCE) or advanced planning optimization (APS). Likewise, I find it sad when I work with a
company that had defined the supply chain organization very narrowly. It is often reduced to be the
Supply Chain Department that has been functionally defined to ONLY focus on a part of the supply
chain like transportation, customer service or distribution planning. These limiting definitions confine
the potential.
The companies that are the furthest along in “taking the hill” have a process manager focused on
managing the “end-to-end supply chain.” For these companies, the mission is clear. There is no
debate on what supply chain means. It is about the company’s ability to manage growth, profitability,
— 45 —

cycles and complexity to improve the potential and capabilities of the company. In the end, isn’t this
what matters anyway? I have little energy to debate the term supply chain. I just want to get on with
driving value.

— 46 —

Why?
Originally published on June 19, 2013

Supply chain management, as a practice in commercial operations, is now thirty years old. Early 2012
marked the end of the third decade and 2013 finds us into the fourth.
When we look backwards, and use the results on corporate financials as a litmus test on supply chain
excellence, we find:
• We Have Made Improvements in Productivity. Due to improvements in connectivity, 90%
of industries have made improvements in productivity (revenue/employee). The chemical and
consumer electronics industries have made the most progress.
• Balance an Issue. Companies are stalled on improving customer service and forecast
accuracy.
• Complexity Increased. It comes in many flavors—increase in inventory, changes in sales
policies, new product lines—all add to the complexity. Supply chains have not morphed to
manage the complexity at the same cost, quality and level of customer service.
• Cycle Management Stalled. The only industry that has made progress in inventory
management is consumer electronics.
Recently, I spoke at the Chief Supply Chain Officer conference in Chicago. When I finished the
presentation, I asked for questions. A person in the audience asked me, “Why do you believe that this
happened? And, why do supply chain professionals believe that they have made improvements when
they really have not?” Here I share my answer:
1) Accountability. When it comes to supply chain processes, companies have not held themselves
accountable to the balance sheet. Most companies are surprised when we share their results on the
Supply Chain Effective Frontier.
2) Definition of Supply Chain as a Function Versus a Way of Doing Business. The original intent
of the supply chain was to build “end-to-end processes.” Over time the term has evolved to describe a
function.” Less than 1% of companies have a leader focused on the building of end-to-end processes.
Most of the opportunity lies in the crevices between functions within the organization and between
companies.
3) Leadership. Many executives lack an understanding of the supply chain as a complex system
and how to manage trade-offs. There is a lack of understanding of the basics of agility and
responsiveness. This manifests itself into a lack of alignment as seen in Figure 3.3.
4) Need for Strong Horizontal Processes. Companies have focused on vertical processes. There is
a need for cross-functional alignment through horizontal processes. Companies with strong horizontal
processes of revenue management, new product launch, Sales and Operations Planning (S&OP),
Supplier Development and Corporate Social Responsibility have higher performance.
5) Alignment. By and large, organizations are not aligned to drive cross-functional performance.
Based on recent research, we find that companies that have invested in Supply Chain Centers of
Excellence, as shown in Figure 3.3, rate themselves higher on cross-functional alignment. The
presence of these centers is relatively new. Without them, the gaps are large.
6) Project Focus Versus Systemic Improvements. I believe that we have made progress on
projects, but that we have not translated these projects into holistic improvements.
— 47 —

Figure 3.3 Organizational Alignment

7) Belief That We Had Best Practices. I strongly feel that we have evolving practices. I have seen
too many companies adopt practices that were not a good fit because they were recommended as
best practices. Examples include one-number forecasting, consensus forecasting without bias and
error accountability, CPFR without measuring forecast accuracy of the downstream partner…. The list
could go on and on.
What do you think? How would you have answered the question? Anything you would add?
Next week is the first time that I am home in three months. WHEW!!! It will be nice to be home and
to have time to write on this second book, Metrics That Matter. If you have a story of supply chain
excellence that you want to share for my book, please drop me a line.

— 48 —

How Can I Move Forward If I Cannot Align?
Originally published on July 12, 2013

For years, as an industry analyst, I have written the statement that “IT and line-of-business teams
need to be aligned.” As I finished a report on organizational alignment, I felt a bit silly ever writing this
statement. Why? The statement is hogwash. The functions within the line-of-business teams are so
misaligned that I cannot imagine that IT could ever align to all of them. In fact, as the research shows,
alignment happens through leadership in horizontal processes.
Last month, we finished a study of organizational alignment with over 200 respondents. We asked the
IT, finance and supply chain teams to self-assess their views of organizational alignment. The supply
chain view is listed in Figure 3.4. As we tabulated the data for the report, what fascinated me was
how differently each of these organizations view functional alignment. For the supply chain team, the
largest area of misalignment is between the supply chain and the sales group. I find it interesting that
the supply chain teams perceive greater gaps between functions than their counterparts in the finance
or IT teams.
Figure 3.4 Organizational Alignment

Why Does It Matter?
Today, for most organizations, things are not going well. Demand volatility is escalating, product
portfolios are more complex, and supplier networks are harder to manage. Supply teams are being
pressured to reduce costs while demand groups are feeling the squeeze to get the “demand plan
right.” The technology investments from the last decade are not meeting expectations. Supply chains
are not agile enough. Finger-pointing abounds. Understanding and problem solving often falls short.
What is an executive team to do?
Supply Chains are complex systems, and are often not well-understood in the organization. In
prior studies, the lack of understanding by the executive team is a major barrier. As a result, it is
incumbent upon supply chain leaders to talk the language of business, hold themselves accountable
— 49 —

for corporate performance (versus functional performance) and learn to serve. To align, we have to
give up our supply chain geek-speak, stop our three- and four-letter acronym descriptions, and help
the organization to better understand the supply chain. In the report, we outline three actions that a
team can take today to deploy these skills.
What Do We Do About It?
1) Define a Supply Chain Strategy and Focus on Agility and Orchestration. In this process,
be sure that the team members understand that the supply chain is a complex system that must be
managed in totality, and that the most efficient supply chain is usually not the most effective supply
chain. Use tools like network design optimization and simulation modeling to help people model tradeoffs. Force finance and sales teams off of spreadsheets that cannot model the complex relationships
of trade-offs. Advance their thinking to use more advanced supply chain modeling tools. Define what
agility is, what it can do for your organization, and show why it matters. Do not talk in abstract terms.
Make it real. It is not short cycles. It is more than that. It is the ability to have the same cost, quality
and customer service given a level of demand and supply volatility. Design the supply chain to perform
at these levels of volatility. Focus the organization on understanding the “probability and patterns of
demand” and how to design push/pull decoupling points, supplier networks and inventory buffers to
improve agility (focusing on form and function of inventory in the supply chain). Use modeling tools to
help teams to visualize these concepts.
2) Build Strong Horizontal Processes Like S&OP. We have completed two studies now that show
Sales and Operations planning improves both agility and alignment. The impacts are profound. Find
a champion within the organization and start working the process. Focus on improving corporate
performance—profitability, cycles, revenue growth, customer service and forecast accuracy—against
the supply chain strategy.
3) Build an Effective Supply Chain Center of Excellence. Unfortunately, only 1-in-2 supply chain
centers of excellence are self-assessed in surveys as meeting expectations. The issues abound, but
we cannot let the problems with execution blind us. The value proposition still holds. Supply chain
centers of excellence help with metrics alignment, and product portfolio alignment, between finance
and the supply chain team, and the supply chain team and marketing. We can see the impact of an
effective center of excellence in this report. Too many companies have let their centers of excellence
lose relevancy and become academic. The best supply chain centers of excellence serve the
business.
In the last seven years of writing reports, this was one of my favorites. I think that we took a new angle
to understand a tough problem. I would love to hear your feedback.

— 50 —

Scream…

scream: v. screamed, scream·ing, screams
v.intr. 1. To utter a long loud piercing cry, as from pain or fear.

The Scream - Edvard Munch
This week, I found myself wanting to scream. Not once, but several times. Imagine that’s me in the
picture going from client to client. Not a pretty sight.
Don’t you just love Edvard Munch’s work The Scream? I think the fact that on 2 May 2012 it broke the
highest nominal price record for art sold at an auction is a metaphor for today’s dilemma for the supply
chain leader. You might say, “How so?” We have spent bucko bucko bucks for supply chain systems;
yet, the satisfaction is low. Many supply chain leaders that I talk to want to scream. Here I share some
insights:
What is this thing called “Supply Chain” anyway?
I am biased. I believe that–for manufacturers, retailers and distributors–supply chain is business.
However, not all see it this way. This is especially true in Europe. Every time that I present at a
conference in Europe, I get a stark reminder that for many, the supply chain is still about trucks and
sheds.
Why are we so siloed? Most companies have only themselves to blame: many supply chain leaders
have not been good business partners. The trappings of acronyms, supply chain speak and functional
views have not served them well.
The slow progress drives me nuts. We will never successfully connect the customer’s customer to the
supplier’s supplier with this parochial view.
I also want to scream when I hear that finance and supply chain cannot talk the same language. I
know. I know. The supply chain team has conventionally spoken the language of “volume” and the
finance team has traditionally spoken the language of the “balance sheet”; but, I believe that it takes
both. They need to be business partners. I also believe that teams need to be aligned to an operating
strategy; and based on research, for 85% of companies this is a problem. They do not have a
successful operating strategy.
— 51 —

Figure 3.6 Challenges in Defining a Successful S&OP Process

In a recent webinar, we asked “What was the greatest barrier to improving Sales and Operations
Planning (S&OP)?” There were three big ones, as outlined in Figure 3.6: the understanding and
support by the executive teams, clarity of supply chain strategy, technologies to support the process,
and the role of finance. In this study, they could only pick one. I believe that if they could have picked
multiple answers, each of these would have had high scores.
Next week I will present at a conference of supply chain leaders working on improving Sales and
Operations Planning (S&OP). There will be a second group in a second room divided by a BIG WALL
that will be discussing Integrated Business Planning (IBP). Most of the people in the IBP room will be
finance guys and most of the people in the S&OP room will be supply chain leaders. See the problem?
As I sit in these conferences, and look at the strong wall that separates the two groups, I am reminded
of The Ronald Reagan speech at the Brandenburg Gate in front of two panes of bulletproof glass, “ …
if you seek liberalization: Come here to this gate! Mr. Gorbachev, open this gate! Mr. Gorbachev, tear
down this wall!”
Later on in his speech, President Reagan said, “As I looked out a moment ago from the Reichstag,
that embodiment of German unity, I noticed words crudely spray-painted upon the wall, perhaps by
a young Berliner: ‘This wall will fall. Beliefs become reality.’ Yes, across Europe, this wall will fall. For
it cannot withstand faith; it cannot withstand truth. The wall cannot withstand freedom.” Similarly, this
functional wall cannot withstand petty bickering between finance and supply chain; but to tear down
the wall, supply chain leaders have got to define the supply chain strategy. Without it they cannot
align…

— 52 —

Here are the issues:
• Cost Versus Value. This week, I had two discussions with two companies considering what
I think is blasphemy. <I know… ask me how I really feel! > They were considering setting up
a profit center for their supply chain functions utilizing transfer pricing. I also spoke to two
veterans that had recently returned from Unilever start-ups trying to implement this type of
supply chain organization. The discussions make me believe even stronger that every time
that the supply chain creates transfer pricing and a profit center, that they are making the wall
between make, source and deliver thicker. Leaders need to break down walls…
• Define Value. The mature supply chain is not just about cost. It is about the delivery of value.
In my work I see that every profit center is a barrier to creating higher value. I know that it might
sound good in some consultant’s backroom, but trust me, in the real world you do not want
to constrain the discussions between the supply chain organization and the other groups by
accounting rules.
• Balance. A couple of weeks ago I wrote that an athlete needs strength, balance and agility. I
feel that the athlete analogy is a good one as companies get ready to run the race for Supply
Chain 2020. They have built strength, but need greater balance and agility. We find that only
20% of companies, as shown in Figure 3.7 have balance in S&OP processes.
Figure 3.7 How Balanced Are Your S&OP Processes?

In the definition of traditional supply chains, leaders focused on improving strength. While
90% of companies responded that they can improve supply chain agility through a mature
S&OP process, they believe that they need leadership, and a clear supply chain strategy, and
alignment to achieve balance. It is not just about strength…. Companies with a well-defined
supply chain strategy and a more mature S&OP process, rate themselves higher on balance.
Companies with greater balance also rate themselves better on a self-assessment of supply
chain agility.) We define supply chain agility as the ability of an organization to have the same
cost, quality and customer service given a level of demand and supply volatility.
In Figure 3.8, attendees at the webinar rated themselves on agility and the ability to improve
agility through the deployment of “what-if scenarios” in planning. Only 8% of companies are
satisfied with their current “what-if” capabilities.
• Hype and Honesty. Last week, I spoke of supply chain purchases as hope and helplessness
due to market confusion. This week, I want to speak of hype and honesty. The evolution of
the tightly integrated supply chain (supply chain planning with enterprise resource planning)
reduced the emphasis on “what-if simulation.” Over the past ten years, supply chain technology
— 53 —

capabilities in this area have not improved, but the need has increased. In the webinar, when
we asked how many companies were happy with their “what-if capabilities,” only 8% responded
positively. When I asked this question in a webinar two years ago, I got a similar response. I
think that it is time we get honest with ourselves. Companies cannot be agile without “what-if”
capabilities to model demand and supply volatility, and the majority of the industry is not happy.
Whether you call this hope and helplessness, or hype and honesty, it is just plain sad.
Figure 3.8 Webinar Response on Agility through “What-If” Planning

Wrap-Up
So, why did I scream? Because so much can be done with supply chain management by those that
understand it. I feel that the efforts are stalled. I see it, but I don’t know how to fix it. As a result, I
SCREAM. Can you hear the SHAMAN screaming?
What are your thoughts? What do you think companies should do? Is there a way that you scream to
help you cope? Let us know your thoughts.

— 54 —

The Supply Chain Shaman's Journal - Winter 2013 - A Focused Look at Supply Chain Leadership

The Supply Chain Shaman's Journal - Winter 2013 - A Focused Look at Supply Chain Leadership

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