Each year Gartner releases a list of the Top 25 corporations noted for their supply chain excellence. In an article announcing the release, SupplyChainBrain wrote, “Long gone is the day when materials management and production planning were a reactive function admired primarily for the ability to expedite. We’ve entered a new era where supply chain professionals are knowledgeable about business strategy and profitably serve managed demand. This, of course, is a journey where each company must assess its position along a path, with the greatest obstacle often organizational inertia.” [“Apple Tops Gartner’s Latest Supply Chain Top 25 Ranking,” 7 June 2011] Overcoming organizational inertia and becoming flexible enough to deal with volatility are hallmarks that make the recognized companies stand out from their peers. Gartner analysts report “four key themes emerged this year among the leaders, including how they deal with volatility.” The other three themes were: “Their approaches to value chain network integration, their focus on sustainable execution and their abilities to orchestrate.” For a more in-depth discussion of what is meant by supply chain orchestration, see my post entitled On the Bandwagon: Supply Chain Orchestration.
After attending the Gartner Supply Conference in early June, supply chain analyst Trevor Miles wrote that volatility was a theme that he heard a lot. In fact, he wrote, “The first keynote Jane Barrett introduced the acronym VUCA, which is used by the military and means Volatility, Uncertainty, Complexity, and Ambiguity.” [“VUCA, a useful acronym for today’s supply chain,” The 21st Century Supply Chain, 9 June 2011] Miles concluded, “There is nothing better than agility to address VUCA.” He continued:
“Jane … used VUCA to describe the current business environment and its impact to the supply/value chain. Jane said that companies are thinking about how they cope with this volatility and uncertainty in the supply chain so that they can respond profitably. Doing so means not only product innovation, but supply chain innovation too; focusing on how new products are brought to market. I could not have scripted the message better to match with my perspective. I almost feel that we should be shouting ‘Vuka’ which in Xhosa (one of the South Africa languages) means ‘wake up.’ Wake up to the new reality that VUCA is a new norm. … In my opinion volatility is the active ingredient and uncertainty, complexity, and ambiguity are largely effects, though complexity can add to the volatility, uncertainty, and ambiguity. Globalization is the driving force of demand volatility … which is in turn driving product complexity … which, coupled with outsourcing, is driving supply chain complexity.” … This all leads to a great deal of demand uncertainty. On the supply side, multi-sourcing and outsourcing has led to longer and more variable lead times, and associated costs. Ambiguity arises from not having the appropriate processes and systems in place to respond profitably to actual demand.”
We can assume that companies who received a “Top 25” selection from Gartner have made great strides towards mastering VUCA. Here’s the prioritized list of Gartner’s Top 25:
- Procter & Gamble
- Research In Motion (RIM)
- Cisco Systems
- Wal-Mart Stores
- The Coca-Cola Company
- Johnson & Johnson
- Kraft Foods
Nestle, Starbucks, 3M and Kraft Foods are new additions to the list. Having reviewed and assessed the companies on the list Gartner analysts, Debra Hofman, Kevin O’Marah, and Carla Elvy, came up with the following recommendations for companies that want to emulate the Top 25:
- Develop supply chain processes and methodologies throughout your trading partner network that will provide the resiliency to deliver predictable results in the face of ongoing volatility.
- Supplement a clearly articulated, long-term value chain vision with strong, agile, and sustainable execution capabilities. Push your team to think differently and go beyond conventional wisdom to push the boundaries on performance levels.
- Measure your supply chain as your customers experience it. Develop the capability to internalize customer needs, and proactively build customer feedback into your supply chain design.
- Step back and consider the basic supply chain capabilities you need, as well as the innovations that will differentiate your performance. Ensure the sustainability of your efforts and initiatives through a constant focus on governance, change management and culture.” [“The Gartner Supply Chain Top 25 for 2011,” 1 June 2011]
The first thing I thought about when I perused the Top 25 list was an article in The Economist celebrating IBM’s centenary. [“The test of time,” 9 June 2011] As the authors of article write, it’s “good to be elegant, better to be old.” Some of the companies on Gartner’s Top 25 list are mentioned in the article (e.g., Apple, Amazon, Dell, Microsoft, and Cisco Systems). Since it was an article about technology companies, non-technology corporations like P&G, Walmart, and Kraft were not mentioned. Nevertheless, I believe IBM’s flexibility is shared by most, if not all, of the companies on the list. Commenting on IBM’s longevity, the article states:
“IBM’s secret is that it is built around an idea that transcends any particular product or technology. Its strategy is to package technology for use by businesses. At first this meant making punch-card tabulators, but IBM moved on to magnetic-tape systems, mainframes, PCs, and most recently services and consulting. Building a company around an idea, rather than a specific technology, makes it easier to adapt when industry ‘platform shifts’ occur.”
What I found particularly intriguing about the article in The Economist was that it prognosticated about which technology companies would be around 100 years from now. The conclusion: “Apple, Amazon and Facebook look like good long-term bets. Dell, Cisco and Microsoft do not.” The article explains the forecast this way:
“Apple (founded in 1976) … is dangerously dependent on its founder, Steve Jobs. But it has a powerful organising idea: take the latest technology, package it in a simple, elegant form and sell it at a premium price. Apple has done this with personal computers, music players, smartphones and tablet computers, and is now moving into cloud-based services. Each time it has grabbed an existing technology and produced an easier-to-use and prettier version than anyone else. This approach can be applied to whatever technology is flavour of the month: Apple has already shifted from PCs to mobile devices. The animating idea of Amazon (founded in 1994) is to make it easy for people to buy stuff. It began by doing this for books, but has since applied the same idea to other products: music, groceries, mobile apps, even computing power and storage, which it sells on tap. The Kindle may resemble an e-reader, but it is just as much a portable bookstore. As new things come along, Amazon will make it easy for you to buy them. Similarly, the aim of Facebook (2004) is to help people share stuff with friends easily. This idea can be extended to almost anything on almost any platform. Consider, by contrast, three product-based firms. Dell (founded in 1984) made its name building PCs more efficiently than anyone else and selling them direct to consumers. That model does not neatly transfer to other products. Cisco Systems (also 1984) makes internet routers. It has diversified into other areas, such as videoconferencing, but chiefly because it thought this would increase demand for routers. Microsoft (1975) is hugely dependent on Windows, which is its answer to everything. But software for a PC may not be the best choice to run inside a phone or a car. All these firms are wedded to specific products, not deeper philosophies, and are having trouble navigating technological shifts.”
I’m not sure whether Dell, Cisco and Microsoft will be on Gartner’s list 50 or 100 years down the road (or any other of their Top 25 for that matter). But Gartner is correct in assuming that companies that can master volatility, uncertainty, complexity, and ambiguity have a better chance of surviving and thriving than those that can’t