Aligning Your Supply Chain Planning Message with Your CEO
In my first blog post in 2014 (What Drives Your CEO in the Corner Office) I reported that a Gartner survey showed that CEOs prioritize growth over cost savings. I advised supply chain leaders to ensure that their initiatives were seen by chief executives as engines for growth. Fast forward three years and it’s just as true today.
"Growth and new products have spiked as the top priorities for CEOs and supply chain intensive industries when compared to 2016," Gartner reports in its 2017 CEO Survey: What CEOs’ Emphasis on Growth and Digital Business Means for Supply Chain Officers.
Other experts agree with Gartner's findings. KPMG’s CEO Outlook survey says "Global CEOs are taking more aggressive growth approaches… When it comes to the top strategic priorities and challenges of CEOs, growth plays a factor in every single one—from ensuring greater speed to market to strengthening a brand and becoming more data-driven." Consultancy firm Bain says "the scales have now tipped in favor of accelerating growth." (Stop Focusing on Profitability and Go for Growth, the Harvard Business Review).
Bain offers one explanation of why growth gets such a high priority. "On average... the value created by accelerating growth by 1% far exceeds the value created by increasing pre-tax margins by 1% on a sustained basis," they say. "In fact, the multiplier of value created by growth versus margins is more than four to one."
Gartner recommends that Chief Supply Chain Officers take on dual roles— operational caretaker and growth partner. Much like CEOs themselves, supply chain executives should both mind day-to-day operations and look for ways to grow the business. On one hand serving “as the primary guardians of profitability, efficiency and quality." On the other demonstrating that their supply chains are engines for growth.
One way to do that is by both using IT to support core infrastructure initiatives, but also as a strategic differentiator. As the supply chain executive at one consumer goods company said about his supply chain systems, "I want muscle at the core, but innovation at the edges."
Spinnaker, a supply chain consultancy, offers an example. They say that few companies track and understand the magnitude of lost sales or use it to prove a business case for supply chain improvements. They say that it’s also uncommon for supply chain planning business cases to include a revenue component, as supply chain managers are not measured that way.
Spinnaker says that SCM-based growth spurts can come from creating “delivery performance asymmetry” between you and the competition—a vital growth enabler in an age of online commerce and customer impatience. A fast-moving, technologically adept chain can forecast better and deliver products faster in the decisive product launch phase, before the inevitable competitor catch-up and price and margin erosion—crucial for growth in an era of short product lifespans and frequent new product introductions. More capable supply chains can also maximize revenue when demand exceeds aggregate production across competing suppliers.
Spinnaker cites an example of a vendor that lost business due to poor supply chain performance. After implementing collaborative planning, forecasting and replenishment technology, the supplier increased order-fill rates to 97.6% and in-stock rates to 96.5%. The customer redirected orders its way, reviving growth.
Gartner concludes, “get involved and be visible to ensure you have a hand in creating growth and innovation rather than becoming a casualty of the complexity it will generate.”