Supply Chain Transformation: Building and Executing an Integrated Supply Chain Strategy - Book Report/Review Example

 Supply Chain Transformation Introduction Dittman’s book is a helpful guide for those company’s managers whose supply chain strategy is not generating the results the company needs or expects or perhaps for those who need to transform their company’s supply chain. Some companies’ supply chains may fail to deliver supplies in a timely manner or fail to manage costs and inventories at the right levels. Additionally, a company management may realize that the firm is lacking proper supply chain strategy, a problem affecting most companies today. This book is helpful for the companies, which need to transform their supply chain strategies. Chapter 1: transforming your supply chain Chapter 1 of this book defines supply chain strategy as a “… multiyear road map that starts the needs of your customers (1).” In order for a company to meet its needs and expectations, it should implement an effective supply chain strategy. This is because the excellence of a company’s supply chain creates economic profits that are attached directly to the value of shareholders in public firms and to the equity of owners in private firms. Economic profit refers to the profit that is less the capital that a company needs to generate the profit (Burch & Lawrence, 2007). Dittmann argues that, the excellence of a supply chain, which is dependent on a compelling and clear supply chain strategy lead to the creation of economic profits, therefore the need for companies to implement good supply chain strategy. Although supply chain strategy is among the effective strategies that ensures the success of a company, most studies assert that a great percentage of today’s companies do not have a supply chain strategy. According to Dittman, most companies lack a supply chain strategy, mainly because they lack enough resources to implement one. Out of the supply chain strategies that exist, 78% last for only three to six years and the rest 22% last for a very short duration. Perhaps most companies’ executives do not understand the meaning of supply chain. However, understanding the exact meaning of this term is obviously essential for development of a supply strategy (Burrows, 2012). According to CSCMP (Council of Supply Chain Management Professionals), supply chain is the management and planning of all firm’s activities that involves procurement and sourcing in a company. Other definitions of supply chain depend on target such as, ensuring that the customers get the products the time they need them. Despite the benefits of supply chain strategy, most companies have not implemented one. The main reason why we have a few companies with supply chain strategy is that most companies lack enough time as well as resources. Additionally, some of the companies’ senior executives do not understand the exact meaning of supply chain. Supply strategy implementation also requires expensive consultants and the development runs counter with the culture of a company, hence hindering many companies from implementing a supply strategy (Burch & Lawrence, 2007). An effective supply chain strategy encompasses customers, internal assessment, external Megatrends, competitors, risk, technology, new chain capabilities, organizational metrics, and business case. Chapter 2: starting with your customers Chapter 2 of this book argues that an effective supply chain must absolutely start with the current and future demands of the company’s customers. Dittmann states that where a company starts its supply chain serves as a driving force for everything involved in the process of the supply chain development (Dittmann, 2013). There are two basic approaches that companies should follow when developing a supply chain strategy. The first approach, Supplier forward approach, entails that the company starts with the capability of its suppliers and move forward to customer needs. The second approach, customers focus approach, the company starts with the needs of its customers working backwards to suppliers’ capability. Most companies make use of the supplier forward approach. However, starting with the needs of the customers is the best approach comparing with supplier forward approach. In this chapter, Dittmann argues that the customer ’ needs approach is the best since “… it gives a company a clear sense of the needs it is serving… (15).” This approach also gives a company an insight of how these needs may change in the future and what it should do to ensure that it continues serving the customers for a long time. Most successful companies look for a way that will enable them to balance these factors as well as meeting their objectives. Although the main of companies is to meet the needs of the customers, they should generally meet the operating costs as well as inventory goals. This means that in order for a company to make its supply chain effectiveness, it should use an enhanced customer approach. Most people believe that supply chain development must start with the needs of the customers. For a company to address the needs of customers at reduced costs and low operating capital, it should follow the enhanced customer-first development approach. The steps in this approach mirrors the strategy process described in this book. However, one of the examples given in this chapter, CPG Co. identified some customer requirements that company should ensure in future. Such requirements include decreased replenishment lead-time, offer deliveries when needed, ensure a real-time order tracking among others. For a supply chain to be effective, a company should understand the changing needs of customers, understand customer trends, and come up with appropriate model that will aid in serving the needs of the customers (Goetschalckx, 2010). Chapter 3: assess the internal capabilities relative to best in class Chapter 3 of this book provides real examples that show how some companies do comprehensive SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) as the initial step in their internal assessment. Dittmann in this chapter asserts that, the best approach to ensure a comprehensive SWOT analysis of the supply chain is to start by conducting a supply chain assessment. Dittmann argues that, the only way that can result to existence of strengths and weaknesses is when a company compares them “to best in class”. On the other hand, opportunities and threats subject when a firm understands it stands, which are relative to the model of its supply chain excellence. The term “best in class” refers to the best practices that companies should follow to produce outstanding as well as working successfully to achieve the best results like the other competing firms (Handfield, 2002). In this chapter, Dittmann tries to discuss the proven approach of supply chain assessment that can lead to a company’s success. In order for a company to ensure an effective supply chain assessment, it should use an unbiased, outside organization whose database has best practices developed from interaction with many successful companies. In this chapter, Dittmann recommends for three best practices to ensure an effective supply chain assessment, which include establishing assessment scope, gathering data, and conducting interviews. After accomplishing these three steps, it is necessary to compare the results with best practices database, identify issues, and come up with some recommendations. Dittmann also points out some common problems that firms face when carrying out their supply chain assessments. According to their conducted supply chain assessment, there are problems that nearly all firms face when conducting supply chain assessment. These problems are independent of the size of a company, its industry, and a company’s position in the chain of supply. Most of these challenges are not easy to address, but the successful firms have unique opportunities to address them hence building a competitive advantage. Some of these challenges are too much complexity of products, obsolete and slow-moving inventory, physical network problems among many others. In order to address these issues, companies should interact with other companies to see how they address similar situations. This enables a company to, “… have a good portion of the foundation needed to assess its current supply chain capabilities relative to the best in class (27)”. Chapter 4: Evaluate the supply chain game changers This chapter acts a bridge connecting the internal and external environments through consideration of game changers of the supply chain that a company should address in its supply chain strategy. In this chapter, Dittmann tries to highlight the important trends that a firm should embrace as it faces the future. Dittmann argues that the seven games-change trends, which he discusses in the entire chapter from a range of choices (Dittmann, 2013). According to their data and statements of most firms’ executives, the seven trends show a great impact towards supply chain strategy and is the most challenging options that ensures fully implementation. Chapter 2 and chapter 3 emphasize the need of starting the company’s supply chain by focusing on the needs of customers followed by internal assessment of the company’s supply chain. This chapter bridges the internal and external environments of a company. Dittmann in this chapter recommends that, supply chain implementation teams should critically discuss all these seven trends to determine the way each helps the company to serve its customers strategically as well as meeting the company’s strategic objectives for working capital and cost (Handfield, 2002). The seven trends discussed in this chapter that supply chain strategy teams should into consideration in order to ensure a company has an effective supply chain strategy are: (1) collaboration, (2) LSSASC (Lean and Six Sigma Applied to the Supply Chain). (3) Complexity aggressive management, (4) network optimization, (5) global supply chain, (6) sustainable supply chain, and (7) focus of working capital and cost (Dittmann, 2013). These game changers of the supply chain have and will still have a great impact on companies’ supply chain strategies. In general, they have an impact on a company’s capability to compete with other companies. In for a company to implement effective supply chain, the supply chain strategy team should evaluate whether the supply chain strategy used by the company can address the above game changer trends since these trends can affect the performance of the company in future. Dittmann states, “these game changers will continue to have a huge impact on any supply chain strategy and, in general, on your company’s ability to compete (44).” The next steps of supply chain development are analyzed company’s competitors and used technology. The seven trends outlined in this chapter move the effort of strategy development from an internal perspective to an external focus. The two external forces that can affect the supply chain strategy of a company are; changing the face of the company’s competitors and the emerging supply technologies. Chapter 5: Analyze your competition The content of this chapter describes a process that supply chain strategy teams should use to analyze the supply chains of their competitors. In this chapter, Dittmann tries to emphasize that, “the essence of strategy often lies in choosing what not to do (45).” There is need of most companies to be careful when placing their bets. Dittmann states that successful companies such as Wal-Mart can accidentally make mistakes and recover, but this is challenging for some companies. Apart from analyzing the needs of customers, companies can also come up with effective supply strategy choices through analyzing and having an insight of the activities of its competitors. First, the supply chain team must know who the competitors of the company are. Dittmann states that “… understanding the process, technology, and network capabilities used by your competitors… (47)” is useful for these places the implementation team in a better position that enables it to interpret data such as costs and inventory turns as sales percentages. For instance, “if your competitors use Lean and Six Sigma techniques extensively in its warehouse operations and you don’t, you may face a competitive disadvantage (48).” Therefore, it is good to use techniques that are similar or better from those used by your competitors in order to stay ahead of your competitors, an idea most companies refer to as “cross docking versus competition”, which requires expertise areas like supplier support, process improvement capability, committed organization, computerized systems, facility layout and design, and right products. In this chapter, Dittman asserts that, companies should hire consultants to enable the supply chain team gather competitive information from competitors. However, it is not necessary that a company should hire a consultant to gather competitive information, but a company also gathers this information from database and internet searches. The main message contained in this chapter is that, a company cannot complete a good supply chain strategy without having knowledge of the techniques used by its competitors. Once a company employs a disciplined approach, it stands a chance to gather the type of intelligence it needs (Ketikidis, 2006). The basics to use are quite easy: review all available public information from electronic databases as well as internet such as the 10-K report, conduct an interview for all those workers who have once worked for your competitors before, and finally engage your suppliers and customers in the process of developing the supply chain strategy. The action steps discussed in this chapter are: (i) choose the strategic competitors to follow, (ii) make use of the available public information and assess the major competitors. (iv) Survey the employees who worked for your competitors and suppliers, (v) brainstorm strategic scenarios, and (vi) compare the capabilities of your strategy with that of your competitors and set goals for improvement (Dittmann, 2013). Chapter 6: Survey technology Chapter six of this book highlights the role of technology towards development of a competitive supply chain strategy. In this chapter, Dittmann argues “…technology should be considered after the new supply chain capabilities have been identified, not before (56).” In order for supply chain strategy to be advantageous, the supply chain team should incorporate support of new technologies. These new tools act as essential components of the entire strategy plan to enable it move to another process as well as institutionalizing it. The supply chain team should view technology as one of the enablers of new process that are necessary for the strategy. This chapter emphasizes that, assessment and survey of technology is one of the vital parts of the development of supply chain strategy. However, implementation of new technologies can be challenging due to the cross-company and cross-functional nature of most supply chains. Therefore, the supply chain team should be careful when selecting the appropriate technology to support the company’s supply chain strategy. The three caveats that a supply chain team should focus is making sure that it uses the leading technologies appropriately and carefully, realizing that customer issues are challenging than technical issues, and make sure that the implemented technologies will ensure strong investment returns. The supply chain strategy probably requires a company to implement current information technologies that will support the essential processes to the company’s strategy. Failure to implement the appropriate information technologies in the company’s supply chain strategy and weighing it appropriately can cause negative impacts to the transformation process. However, most people claim that, implementing new information technologies makes the complex job. This entails that management requires detailed documentations as well as cross training to ensure that the implemented technologies meet the set goals and objectives rather than the job more complex for employees to handle. Chapter 7: Deal with supply chain risk Chapter 7 outlines the importance of risk assessment during the transformation of a supply chain strategy. Dealing with supply chain risk is essential since it enables a company to sustain a successful supply chain strategy. However, most companies have challenges when it comes to sustainability of the supply chain strategy. The greatest impediment to sustain implementation of a successful supply chain is the lack of a strategy to prioritize, identify, mitigate, and manage supply chain risks (Lee & Lee, 2007). In this chapter, Dittmann argues that it is hard to find a company with such a process. Honestly, most companies ignore the risks with terrible costs. However, firm’s managements should acknowledge, “supply chain arguably faces more risk than any other areas of a company… (66).” This is mainly because of the supply chain global nature as well as the systematic effects on the financial performance of a company. Since risks are life facts, implementing a risk management plan in an organization can even serve as a competitive benefit since most firms do not have a risk management plan. Global supply chain disruption can manifest in several devastating ways. Some of the risks can be financial risks, but others occur because of natural disasters such as earthquakes (Lee & Katzorke, 2010). However, sourcing offshore brings a wide array of risks because long supply chains places a company at a risk due to unforeseen events. Additionally, local phenomenon also causes supply chain risks. Therefore, supply chain strategy teams should allocate their time to evaluate the potential risks that face the supply chain strategy. In addition, a strategy team can highly benefit from a deep understanding of the methods of risk management in today’s industry. The common type of risks that might affect the results of a supply chain is supply risks, demand risks, and operational risks. According to this chapter, the common ways that most companies use to address this issue include speculation, hedging, control share transfer, avoidance, security, and postponement. The action steps outlined in this chapter are (1) brainstorming the strategy team the risks faced by the supply chain, (2)prioritize the risks, (3) develop a mitigation plan, and (4)include an risk evaluation plan. Chapter 8: Determining the new supply chain capabilities and develop a project plan This chapter shows how s strategy team takes all the information discussed in the previous chapters to enable it determine the new capabilities of the supply chain that a certain company need to develop. This chapter also shows a section that focuses development of a project plan to be used in the implementation of the supply chain strategy. At this transformation stage, the strategy team should have fully analyzed the customers’ needs and done an accurate internal SWOT analysis as well as consideration of the megatrends of the supply chain. The strategy team should have evaluated the landscape of new technologies and best practices for the supply chain strategy. In addition, the strategy team would have completed analysis of the company, competitors as best it cans (oil & Coyle, 2009). How can a strategy team combine all this gathered information together? How does the strategy team determine the new capabilities of the supply chain that its company needs? Lastly, how does the strategy team prioritize the available capabilities so that it ensures that the right things are given the first priority? This chapter covers all these topics. In this chapter, Dittmann asserts that a supply chain transformation should last for three years. This is final stage of developing the supply chain strategy, which involve the use of all gathered information from the previous stages discussed in the previous chapters. During this level, the strategy leader should assign each team member a specific role to ensure accumulation of all inputs collected so far. The team members should be assigned specific roles to review and assembles essential information such as customer needs, internal chain assessment, competitive evaluation, external Megatrend analysis, technology appraisal, and risk assessment. In this stage, the strategy team should set priorities to determine which things they should do first. Based on some examples given in this chapter, the author recommends the following approach to select priorities. (1) Identify all capabilities in the supply chain. (2) Reduce the initiatives to a number that is easily manageable. (3) Lay your goals. (4) Quantify all the supply chain initiatives. (5) Use the information to establish a multiyear approach that achieves all set goals. After developing this multiyear plan, it is now time to develop the project plan. Choosing the supply chain capabilities and allocating priority for each capability to deliver the set goals is the result of the supply chain transformation. Chapter 9: Evaluate the organization, people, and metrics After the implementation of the new strategy, it is very probable to imply the requirements for the current organization of the supply chain. Along with this, there will be undoubtedly required of new metrics. Eli Goldratt once said that, if you measure somebody in a logical manner, then you should not complain about his or her logical behaviors. Similarly, in order for the strategy team to ensure successful implementation, they should make evaluations of the organization, people, and the metrics. Dittmann covers this subject in chapter 9. In the organization, design, “… the strategy team should adopt a general standard that it is good to separate demand creation practices from demand fulfillment practices… (98).” It is also essential to list all likely activities to be incorporated in the supply chain as well as involving the stakeholders. When assessing the people it is good to evaluate whether each person will cope with the new skills associated with the implemented supply chain strategy. In metrics assessment, the strategy team should ensure that it follows the logical framework as well as supporting the new strategy (Parlier, 2011). Chapter 10: Develop a business case and get buy-in Chapter 10 of this book focuses on the most critical part in the process of supply chain transformation and development. This chapter covers the appropriate measures the strategy team should use to ensure that the extended organization accepts the newly implemented supply chain strategy. If there is no cross-functional buy-in, then the new implemented supply strategy results to another challenging and frustrating duty in an organization hence delivering no significant achievements (Rangarai, Raghuram & Srinivasan, 2009). A company’s supply chain strategy is the key to its cross-functional entity. Most initiatives of supply chains of any outcome cross the functional boundaries. According to many executives, “getting buy-in is tough. Someone’s ox is being gored with everything we try to do (100).” Although this chapter is at the end of this book, the buy-in process should be at the beginning of the implementation process with the involvement of the main decision makers, and concludes at the business case study. The content of this chapter tries to assert that, a rigid business case is insufficient condition for a company’s buy-in, although it is very necessary in ensuring an effective supply chain strategy. This chapter describes how the strategy team should make use of a business case as well as other tools towards achievement of buy-in for a supply chain strategy. All people in the company should show support for the new implemented supply chain strategy. The senior executives, middle managers, and the front lines all needs to have an understanding of the new supply chain strategy. A company’s supply chain is the key to ultimate functional entity and therefore it is necessary for everyone in the company to understand its operations. Chapter 11: Case study: Development of the supply chain strategy In chapter 11 Dittmann outlines in details the process used to develop a supply chain strategy he worked closely with. The content of this chapter combines all the information covered in the previous chapter. The chapter shows how the firm used this information to develop a new supply chain strategy. The case in this chapter gives us a clear example that strategy teams should follow to develop a new supply chain strategy. This chapter gives strategy teams an insight on how to develop an effective supply chain strategy that will ensure that a company meets its goals. According to the content of this chapter, “…it is necessary for a strategy team to take into account all the steps outlined in the previous chapters… (127).” As said earlier, the excellence of a supply chain, which is dependent on a compelling and clear supply chain strategy, leads to the creation of economic profits, therefore the need for companies to implement good supply chain strategy (Gansler, 2004). Therefore, incorporating all gathered information is the key to effective supply chain strategy. In conclusion, the main challenge affecting most companies today is lack of supply chain strategy or insufficient supply chain strategies. This book is helpful for the companies, which need to transform their supply chain strategies. The book outlines all the necessary steps that a company’s supply strategy team should follow to ensure implementation of an effective supply chain strategy (Sherman, 2013). For the companies whose supply chains may fail to deliver supplies in timely manner or fail to manage costs and inventories at the right levels it is necessary for them to transform entire supply chain. References Burch, D., & Lawrence, G. (2007). Supermarkets and agri-food supply chains: Transformations in the production and consumption of foods. Cheltenham, UK: Edward Elgar. Burrows, R. P. (2012). The market-driven supply chain: A revolutionary model for sales and operations planning in the new on-demand economy. New York: American Management Association. Dittmann, J. P. (2013). Supply chain transformation: Building and executing an integrated supply chain strategy. New York: McGraw-Hill. Gansler, J. S. (2004). Transforming government supply chain management. Lanham, Md. [u.a.: Rowman & Littlefield. Goetschalckx, M. (2010). Logistics Enterprise Design. Berlin: Springer US. Handfield, R. (2002). Redesigning your supply chain: Strategies for success. Prentice Hall. Ketikidis, D. P. H. (2006). E-technology and manufacturing enterprise competitiveness. Bradford, England: Emerald Group Pub. Lee, H. L., & Lee, C.-Y. (2007). Building supply chain excellence in emerging economies. New York: Springer. Lee, W. B., & Katzorke, M. (2010). Leading effective supply chain transformations: A guide to sustainable world-class capability and results. Ft. Lauderdale, FL: J. Ross Pub. oyle, J. J., & Coyle, J. J. (2009). Supply chain management: A logistics perspective. Mason, OH: South-Western Cengage Learning. Parlier, G. H. (2011). Transforming U.S. Army supply chains: Strategies for management innovation. New York, N.Y.] (222 East 46th Street, New York, NY 10017: Business Expert Press. Rangarai, N., Raghuram, G., & Srinivasan, M. M. (2009). Supply chain management for competitive advantage: Concepts & cases. New Delhi: Tata McGraw-Hill. Sherman, R. J. (2013). Supply chain transformation: Practical roadmap to best practice results. Hoboken, N.J: John Wiley & Sons. Read More