C-Level Supply Chain Executives

Stephen DeAngelis

October 11, 2011

Half a dozen years ago Lisa Harrington wrote, “Logistics and supply chain management continue to grow in stature within the corporate world. But merely gaining visibility in the boardroom doesn’t make logistics and supply chain equal players at the senior executive table.” [“Logistics at the C-Level. Are We There Yet?Inbound Logistics, June 2005] From numerous articles I’ve read, it appears that supply chain executives are still struggling for a place at the boardroom table. (See my post entitled S&OP: Supply Chain’s Foot in the Boardroom Door) Harrington continued:

“We have made some progress on the road to parity, but CEOs still need convincing—an uphill battle sometimes, but one well worth pursuing. … A CEO’s focus on the supply chain can act as a change agent for the entire enterprise, making it more efficient and profitable.”

Unfortunately, one of the “success” stories Harrington wrote about was the Borders Group, Inc. In 2005, Borders was talking about “a new warehouse management system” and consolidating “its domestic distribution centers” when it should have been worried about how it would position itself for the ebook revolution. In a side bar to her article, Harrington interviewed Karl Manrodt, associate professor, Georgia Southern University, who prophetically told her, “Leaders invest in their supply chains, but what’s scary is that some current market leaders won’t be leaders in three to five years.” Manrodt was co-author of a Council of Supply Chain Management Professionals (CSCMP) report entitled Communicating the Value of Supply Chain Management to Your CEO. The other authors of the CSCMP study were Brian Gibson of Auburn University and Stephen Rutner of Georgia Southern University. Perhaps the lesson that needs to be learned from Borders’ story is that getting the CEO’s ear doesn’t matter if the strategic direction of the company is off course.

 

In another side bar, Gene Tyndall, a partner at Supply Chain Executive Advisors, indicates that “some CEOs understand the value of the supply chain, [but], the majority do not.” He also indicates that the fault may not lie solely with the CEO. He wrote, “Supply chain and logistics managers may be guilty of the following flaws”:

  • “Not communicating in C-level terms and language.
  • “Perpetuating the ‘complexity myth’—what they do is too complex for business leaders to understand.
  • “Not communicating well with peers—sales/marketing, finance, human resources—so that management positions are not in synch.
  • “Continuing to measure supply chains in logistics rather than financial terms.
  • “Not fully supporting growth initiatives or service innovations.
  • “Not completely embracing concerns such as risk management, security, and other business issues.

“The combination of these flaws creates barriers between supply chain managers and their CEOs, which are manifested in the degree to which C-level executives show interest in and support for supply chain initiatives.”

Many of Tyndall’s “flaws” could be overcome through a well-implemented S&OP process. Such process takes a holistic view of the company and helps generate alignment between various corporate silos. Tyndall writes, “The logistics profession is in danger of becoming what IT has become—too technical and specialized for executive support. It’s seen as a necessary cost center, but not a competitive weapon.” That’s an amazing statement since a number of supply chain analysts believe that for many companies, the supply chain is the business. Tyndall concluded:

“It is not too late, but supply chain and logistics leaders must learn quickly how to measure and communicate real value in executive terms. … Logistics professionals must work even harder to define their function in business and value terms. ‘It is not enough for the term “supply chain” to be more present in executive suites. We must convey its meaning to the business, its alignment with corporate goals, and its ability to enable business goals through performance improvement.'”

On a more positive note, Patrick Burnson, Executive Editor of Supply Chain Management Review, reported, “Today, nearly half the retail and manufacturing companies surveyed have a supply chain leader at or above the executive vice president level.” [“New survey points to need for C-level supply chain executives,” 26 July 2010]. As the title of his article clearly states, although there may be more executive vice presidents, there still aren’t enough C-level executives. Bruce Tompkins, Executive Director of the Tompkins Supply Chain Consortium, told Burnson, “With supply chains becoming more dynamic and agile, organizations need to able to keep up with the pace. And these companies are beginning to realize the significance of having a high-level supply chain executive influence their business strategies.” Burnson continued:

“While supply chain leaders are moving up through the ranks and the title of Chief Supply Chain Officer is growing in use, there are still some areas within companies that lack collaboration between these executives and other areas of the organization. For example, … some companies do not have any part of their supply chain organization responsible for setting inventory targets. Likewise, more than a quarter of retail companies and 14 percent of manufacturing companies surveyed have no formal process for aligning supply chain goals. Manufacturing companies tend to achieve goal alignment by reporting to a single executive, and retail companies generally have their common supply chain goals established by senior leadership. ‘These gaps in goal alignment indicate significant opportunity for better communication and integration of supply chain functions,’ Tompkins added. ‘However, companies are discovering these opportunities for improvement, and there is an increasing trend toward resource sharing across divisions and business units.'”

Five years after Tyndall identified lack of alignment, cooperation, and communication as big challenges for many companies, Burnson indicates that things have appreciably improved. Perhaps the most positive sign that companies are starting to appreciate the importance of supply chain executives comes with the promotion of Steve Jobs’ replacement at Apple. Apple has sat atop the Gartner list of the world’s best supply chains for a few years. And Software Advice‘s Michael Koploy insists, “Apple’s new CEO Tim Cook represents a metaphorical coup for a logistics field in a high-level talent crisis.” [“Consumer-Driven Technology Creates the Need for a C-Level Supply Chain Focus,” Software Advice, 13 September 2011] Koploy believes that there is an “apparently unbreakable mantra that ‘supply chains aren’t sexy” and he hopes that Tim Cook succeeds brilliantly because his path to boardroom involved “manufacturing and the supply chain.” He continues:

“Widely viewed as the father of Apple’s best-in-class supply chain, Cook’s success as a supply chain-minded executive is a rare sight – not because supply chain experts lack knowledge or skills. Rather, it’s that the industry is lacking supply chain talent in the first place. Cook’s promotion is a move that other technology corporations should take note of. Why? Because Cook assuming the top spot is indicative of a growing need for supply chain expertise at the C-level. Carlos Cordón, supply chain professor at the Swiss business school IMD, describes this priority eloquently in his whitepaper, The Rise of the Chief Supply Chain Officer:

‘In today’s business world, operations management is the backbone of many companies and efficient supply chain management, that is aligned with business strategy, is necessary to remain competitive and profitable. The effective integration of both internal and external operations is a key competitiveness driver in every company, and designing, refining and implementing new processes are key supply chain activities.’ – Carlos Cordón, IMD

“Given the complexities in supply chain relationships – not to mention the difficulty of streamlining the supply chain in a global economy – a larger focus on supply chain management is becoming a necessity. That’s why I believe organizations need to take Apple’s lead and include supply chain-minded executives at the leadership table: to help organize, implement and manage strategies to improve the business’ value chain.”

With technology driving so many supply chain innovations, Koploy is right that it’s about time that the tech sector reward supply chain excellence with a CEO position. More than that, it’s fitting that Apple, the recognized supply chain leader, is the company to do it. Koploy does give credit to Michael Dell, who “was one of the first successful proponents” the personalized supply chain. He notes that “Dell’s model was revolutionary for computer manufacturing – reinforcing lean and just-in-time (JIT) principles that helped Japan rise to manufacturing prominence years before.” Koploy continues:

“Since Dell’s emergence in the 1990s, we’ve seen Apple and other tech companies also rise. Many have done so thanks to the foresight of leadership that understands the role of the supply chain in a give-it-to-me quick world. Today, consumers expect more from their technology and from the companies that produce it, and an agile and effective supply chain has become even more important. However, businesses that aren’t addressing their supply chain inadequacies are flailing in quicksand, from both a logistics network and a talent perspective. Our modern expectations of multi-channel commerce hinge on a logistics network that can display inventory levels in real time and a leadership team that can anticipate fluctuations.”

The solution for getting out of this morass Koploy claims is promoting more talented supply chain executives into C-level positions. He writes:

“A supply chain expert on the board of executives can push for the complete integration of business initiatives and supply chain strategy. Additionally, because these decisions often directly tie into marketing, sales and general operational strategies, the argument can be made that a supply chain executive deserves to be the top dog – as in the case of Cook at Apple.”

Koploy notes that he is not alone in his position. He writes, for example, “Prior to Cook’s promotion, Scott Belsky, CEO of Behance Network, was quoted that Cook was just as important – or more so – than Jobs, and would be fine if he was required to take over. Likewise, Bob Ferrari of Supply Chain Matters commented after the news broke that Apple would be fine with Cook at the helm, adding that the supply chain is a great place for future executives to ‘cut their teeth.” Koploy continues:

“While more supply chain-minded executives are certainly needed to articulate integrated strategies – it is also critical that these leaders understand the intricacies of how to optimize the supply chain using technology. In fact, [Prashant Bhatia, RedPrairie’s VP of Strategy], notes that modern supply chain software allows managers to analyze interdependent variables that one individual could never have done in the past. ‘Software has opened up opportunities for new levels of optimization and effectiveness,’ adds Bhatia.”

As CEO of a company that provides supply chain optimization solutions, I certainly agree with Koploy and Bhatia on that point. Koploy goes on to describe what he believes are important characteristics of software solutions. These solutions help address some of the communication and alignment issues discussed by Tyndall and Burnson. With so many supply chain analysts praising the importance of logistics, Koploy rhetorically asks, “What’s stopping a stampede of supply chain managers to the C-level?” His answer seems to be that he doesn’t believe the supply chain talent pool is deep enough to produce a sufficient number of superstars. He explains:

“Ken Cottrill, MIT Global Communications Consultant, discusses this in his whitepaper Are You Prepared for the Supply Chain Talent Crisis? In the whitepaper, Cottrill notes that the decreasing baby-boom workforce and shift in workforce talent are leaving the talent pool dry. Additionally, the talent isn’t ready for what the economy is demanding – supply chain experts that can not only connect multiple corporate divisions, but can also transition from a traditionally execution-based role to a strategic one. He summarizes:

‘Supply chain faces a severe shortage of talent at a time when the demands of a profession have never been greater. Globalization, market uncertainty, shifting demographic patterns, and the emergence of supply chain as a strategic function are some of the factors that are driving the skills shortfall.’ – Ken Cottrill

“What Cottrill describes as necessary for supply chain talent success also describes talent capable of C-level ascension.”

Koploy goes on to describe how he would build “the ideal candidate” if given to chance to begin “from the ground up.” Unfortunately, creating supply chain-oriented CEO’s takes time. Koploy estimates around 20 years. He concludes, “We don’t really have time for the talent to work up the ranks.” As I’ve written before, there are some great supply chain education programs in some of our best universities. (See my post entitled Interesting Students in a Career in Supply Chain Management.) Graduates from these programs may provide depth to what Koploy sees as a shallow talent pool. If they’re quick learners, perhaps we will see some great, young CEOs in much less than 20 years. After all, in his 2005 commencement speech at Stanford, Steve Jobs reminded graduates that he had founded and been fired from a company by the age of 30.