Expectations for supply chain network performance are entering a new phase; where business leaders, and stakeholders expect perfection.
For the last 20 years practitioners of Lean have been seeking perfection in order to optimize their quality, costs, delivery, and service. Companies with robust processes, and integrated supply chains have consistently delivered superior returns in the marketplace. Enterprises that have not optimized their supply chain networks have lost billions of dollars in shareholder equity, and market capitalization. They have wasted millions on new product introductions, and investments in systems applications. Ill-advised programs that never created value or earned a dime. Some companies failed to exit marginal regional markets. Companies loitered in under performing countries where there was no detectable path to ever being profitable, or generating favorable free cash flow. These poorly managed companies did not keep pace with best in-class design, management, and manufacturing processes. Their cost of poor quality is unsustainably high. Their customers are pissed off. Their balance sheets are bloated with debt.
Those days are over. These companies are dying.
We are witnessing supply chain optimization entering a new phase. Decisions are data driven, often automated, hard-nosed business choices. Investments deliver quick returns. Shareholder money is invested in ways that provide double-digit returns, including the cost of capital. Integrated supply chains where hardware and software come together are delivering extraordinary outcomes. Supply networks are efficient, hyper-fast, and brutally competitive. Operations leaders are prepared to disrupt and recreate their business frequently. Survival is dependent on the ability to destroy existing products and processes, and rebuild them with thoughtfulness. Forward-thinking supply chain practitioners know their teams better be in outright fighting shape in order to survive. These leaders embrace the challenge. We’re entering an era that is going to disrupt or destroy supply chain networks that cannot deliver perfection. Laggards, still caught in the vicious layoff, cost cutting, downward spiral that continuously cuts people, and capability across the organization are dying as you read this.
Across all platforms and markets companies are dumping products, exiting markets, and taking drastic actions. Witness that winners in the technology space have already done this, and are reaping the rewards from customers and the market. In many markets and sectors, we are witnessing massive product rationalization. Note the automobile industry, where entire market and product segments are being abandoned. Organization structures are being challenged and flattened. Companies can no longer carry money losing products or operations. Opportunity to revenue cycles are being continuously improved to deliver dynamic cash flow. Services are being developed to be sticky, and deliver consistent, recurring revenue. Execution must be flawless. Balance sheets must be pristine. Revenue and operating income metrics must have double-digit growth, with consistent sequential improvement. Conversation counts for nothing in this new reality. Existing rules no longer apply. Results matter.
Make no mistake, where we are in the evolution of supply chain performance is logical. The ability to integrate advanced planning tools, software, and hardware has made real time optimization, and automation of supply chain networks and processes a reality. ERP’s based on mobile information technology platforms have placed the ability to manage complex SC networks in the palm of your hand. Traditional metrics such as delivery have been optimized and stabilized. 85% of all manufacturing companies routinely deliver zero defects, year after year, after year. Network stability, artificial intelligence, and autonomous network cyber-security are where the battles for competitiveness and dominance are being fought.
For those waiting for the old days to return, forget about it! New technology and new leaders are enabling companies to make rapid change, at revolutionary speed. How? By investing in and embracing the best and latest technology, and combining it with the time tested methodology of Kaizen. Investing in the people to shepherd in this new era is a top priority. Supply chain practitioners will out of necessity invest substantially into developing new products, technology, and processes. In order to invest and create a competitive advantage, you must have a high performing business delivering results. You must have the financial capacity to invest at a level that is consistent with the rate of innovation in your market. Your people must lead this pursuit of innovation. This people driven pursuit of innovation must be the foundation of everything you do. Respect, intellectual curiosity, passion, and inspiration must be at the cornerstones of your business. These critical characteristics must be on top of a foundation of authentic communication, and the ruthless, maniacal execution of standard operation procedures.
You will have to make these investments in order to develop the next generation of market changing product and services. You will have to develop the capacity to go through repetitive cycles of innovation in order to win. New technology companies and startups are coming for your business. Traditional companies are developing new values propositions around existing products/services. New competitors are consolidating businesses to achieve scale and create markets where none previously existed. These new players are unencumbered by the past, and poised to destroy your business.
Analyze your business. No matter how good you think you are, recognize that there is an existential threat to your business. The good news is that leaders with the courage and conviction to change will win. You need to get prepared to disrupt your business and improve it today. The only path to survival is double-digit profitable operations, best in-class cash flow, opportunity to revenue cycle-times, and balance sheets. Anything that hinders this has got to go. Nothing is sacred. Begin with your customers. Question everything that you do. Change or go out of business. If you are in the supply chain management business, you must be assiduously anal, and partially paranoid. There is no longer a place for marginal supply chain performance.