The Importance of People in the Supply Chain

Stephen DeAngelis

June 19, 2012

Pedro Rodríguez, an educator at the University of Wisconsin who specializes in the supply chain, believes “companies need to invest more in talent in the supply chain.” [“Supply Chain Talent is Every Company’s Most Important Asset,” Dustin Mattison’s Blog, 21 May 2012] Steve Hall agrees completely with Rodríguez and further believes that if companies don’t invest more in their people they could be “stuck with mediocre talent.” [“Attracting the next generation – is procurement doomed to be stuck with mediocre talent?Procurement Leaders, 14 May 2012] In his interview with Dustin Mattison, Rodríguez noted that the current economic downturn has “increased focus on supply chain as a key strategic value for companies.” That means that business executives are more keenly aware of the processes, technologies, and people that provide that value. Mattison continues:

“In the future, Rodriguez believes increased visibility of supply chain management will be a key strategic component of business models. ‘We know of two people that have been promoted to senior vice presidents from vice presidents where there was a job that didn’t exist prior to the recession because the CEO wanted to have a senior vice president of supply chain in their teams, at the highest level. So, I guess that’s the good news,’ added Rodriguez.”

Rodríguez doesn’t believe that cheap capital will be a permanent fixture on the business landscape. As a result, significant decisions will have to be made as companies move forward about how they can provide the same level of service to their customers “with a lot less inventory.” Rodríguez believes that a lot more (and a lot better) tactical planning is going to be required. He’s pretty certain that companies will continue to invest in processes and technologies; but, he isn’t as sure that they will invest in their people. “I think if anything has been learned from this period,” Rodríguez told Mattison, “[it] is that companies need to invest more in talent in the supply chain. And as an educator myself, I cannot tell you how good it is to have good, educated people in supply chains. So my parting comment is: invest in people, in supply chain, of course, and then processes and tools, but first, people. Educated people are the key to success.”

 

A key part of the supply chain is procurement. Steve Hall focuses his comments about personnel in that sector. He believes that too many functional heads (and supporting HR departments) are using narrow thinking in their hiring practices. Narrow thinking, he insists, results in hiring narrow individuals (i.e., people with limited skills and, therefore, limited potential to move a company forward). He writes:

“The more sophisticated procurement organizations are coming up with some clever answers … to snare the talent they need. … For Johnson & Johnson Consumer’s VP of global supply chain procurement Ralf Garczorz, success has come by taking a personal approach in order to sell the story of procurement. ‘I engage with talent on a one-on-one basis, and so educate them on what procurement can be in the future,’ he advises. ‘It’s a place where there’s a lot of opportunity. And people are sometimes surprised by that.’ On a trip to a conference in Switzerland to talk to a class of students about sustainability, rather than procurement, he learned a valuable lesson. ‘I presented two sustainability case studies and people were extremely surprised that this is what procurement could be. Because of this interaction we hired two people and their reaction was “this is so cool”.'”

Helping the rising generation of students understand that supply chain jobs can be “cool” is an important task. I have noted in several previous posts that, as some manufacturing returns to developing countries, there are likely to be more jobs created in supporting supply chains than there are going to be created on the factory floor. For a generation of graduates wondering what lies in their future, now is a good time to convince them that the opportunities associated with jobs in the supply chain makes it a good place to look for answers. Hall continues:

“Cynthia Dautrich, CPO of consumer goods group Kimberly-Clark, is equally positive about the opportunities for organizations that can sell a good story to candidates. ‘We show them a three to five-year plan and we’re very clear about how they fit into 
that plan. The market for talent is quite robust – we can put out a strong message and there are definitely candidates who are eager to get involved,’ she says.”

Hall’s anecdotal examples offer some hope that talent can be attracted to the supply chain field; but not everyone is so sanguine. “Supply-chain professionals have been sounding the warning bell about the coming talent shortfall for several years now,” writes Robert J. Bowman, managing editor of SupplyChainBrain. “But who’s listening?” [“The Hunt for Talent: A Supply Chain of Its Own,” 29 May 2012] He continues:

“At a time when the economy at large is coping with high unemployment and sluggish job growth, the notion of a sector that can’t attract enough qualified bodies is tough to grasp. Still, that’s the reality in the supply-chain world today, and it’s only going to get worse. For those who are paying attention, the message is coming through loud and clear. Finding and nurturing the right talent was among the five most critical issues cited by the 42 corporate members of the advisory board to the University of Tennessee’s Global Supply Chain Institute. Spanning a dozen industries, those companies come together twice a year to share their observations about supply-chain management.”

Bowman notes that the UT gathering wasn’t the first alarm that had been issued. “Others identified the trend earlier,” he writes. He continues:

“In the fall of 2010, MIT’s Center for Transportation & Logistics issued a white paper with the provocative title ‘Are You Prepared for the Supply Chain Talent Crisis?’ In it, global communications consultant Ken Cottrill speculated that the recession, ironically, was at least partly to blame. Eager to cut costs in a down economy, companies went too far in shedding themselves of valuable (albeit expensive) supply-chain expertise. They took for granted their ability to pick up suitable talent from a supposedly deep pool of applicants, when things got better. Meanwhile, baby boomers, who make up the lion’s share of supply-chain professionals, are beginning to retire, and younger replacements are in short supply. Add to that a discipline that’s ever-changing and more challenging than ever before, and you have a situation that’s bordering on the critical.”

If people truly are a company’s greatest assets, these alarms need to be taken seriously. Like Hall, Bowman wonders, “Why aren’t more young people drawn to a career in supply chain?” He continues:

“For the most part, the jobs pay well, and provide interesting and challenging work. But they also demand a set of skills that are rare in any one individual. ‘For supply-chain people, you need depth everywhere,’ said Daniel Stanton, supply chain professional and development manager with Caterpillar Logistics Inc. … An effective executive in that area today must be free-thinking, good at managing people and dealing with multiple cultures, willing to travel, conversant with information technology and able to crunch numbers.”

Bowman goes on to detail how Caterpillar realized it was facing a major personnel challenge and what it did to meet it. He starts with how Caterpillar discovered the extent of the challenge. He writes:

“Cat Logistics was hit by its own ‘lightning bolt’ after reading a December 2010 article about the problem in the Wall St. Journal. Soon after, it got a lesson even closer to home. The third-party logistics provider was unable to find an internal replacement for a retiring chief procurement officer. It ended up filling the position from outside the company. ‘That was a wakeup call for us,’ said Stanton. Stanton began assessing Cat’s needs for supply-chain talent over the next five years. (And none too soon. The company was anticipating a boost in full-time employment from 104,000 to 120,000 between 2010 and 2011.) Accounting for natural attrition, it was looking at 15-percent growth in its workforce – a level of demand that wouldn’t come close to being satisfied by job-market entrants. Polling its account base, Cat uncovered the need for twice as many experienced professionals as recent college grads. ‘We were focusing on career fairs,’ Stanton recalled. ‘Customers were telling us that’s not what [they] wanted.’ Next, Stanton broke down the cost of failing to filling that gap. It turned out to be substantial.”

Stanton indicated that there “were five discrete areas of consideration: the initial cost of recruiting; compensation and benefits; relocation and travel; education, training and development, and opportunity cost.” Bowman writes that the opportunity cost “was the ‘eye-opener.'” He explains:

“It detailed the price of work that would get done badly or not at all, and employees burnt out by overtime. Solving the dilemma meant striking a careful balance between paying for fresh talent and meeting business needs. Bottom line: when it comes to assessing a workforce, you don’t give short shrift to the supply chain.”

Bowman notes that the supply chain historically “accounts for between 60 and 70 percent of a company’s cost structure.” David Ecklund, program director of the University of Tennessee’s Global Supply Chain Executive MBA program, told Bowman that supply chain’s cost structure represents “most of the inventory and a pretty significant majority of the assets. It’s the single organization in the company with the most impact on the customer.” Bowman continues:

“Understanding the full value of supply-chain talent will often lead a global company to depart from the standard model of depending on expatriates to run an overseas operation, Ecklund says. Kraft Foods, for example, increased its reliance on nationals – the right move, no doubt, but one that creates yet another challenge in finding the right individuals. Ecklund counsels a ‘dual development path’ – one that hones in on core supply-chain skills while simultaneously embracing cross-functional capabilities. The transformation of talent requires a focus on standard competency models, career and succession planning, continuing education and global networking. The last one, he said, ‘is absolutely critical. You’ve got to get outside your own industry.’ Don’t just delegate the job to Human Resources, Ecklund adds. ‘I would encourage you not to take that approach. You need to become directly involved in the recruiting and development process.'”

It appears that Ecklund agrees with Hall that narrow thinking about who to hire into supply chain positions is not a strategy for success. Bowman concludes:

“We often speak of the need for dramatic improvements in systems, processes and collaborative links within the supply chain. It begins, though, with the right individuals to make it all run. All companies should be undertaking an honest appraisal of their workforce requirements, and taking steps to meet them. As Ecklund put it: ‘You should start looking at talent as a supply chain.'”

Too often processes and technology receive priority over people. If, as it appears, there is a coming shortage of supply chain talent to be found, people should probably head to the top of the priority list.