There is a lot of great work being done in supply chains across Europe, but even the ‘best in class’ honoured here acknowledge that there is still huge room for improvement. By Gordon Colborn
As first time principal sponsors, it isn’t particularly easy for PRTM to spot historic trends in the European Supply Chain Excellence Awards – we’ve utilised different methodologies and techniques this year. But equally, as a newcomer to these awards, it may be that our ‘snapshot’ impressions of the state of European supply chain management practices as revealed by the entrants are of interest. As our first year in the role it’s probably worth noting a few observations regarding our discoveries and how this compared to what we were expecting.
Firstly, it was interesting to note the proportion of finalists drawn from service and aftersales supply chains, as opposed to manufacturing/outbound supply chains. This is
undoubtedly a reflection of the increasing importance of services in the European economy, as manufacturing continues to migrate to lower cost countries. This isn’t all bad news – Europe has a real opportunity to excel in developing capabilities in aftermarket services which are more difficult to provide from locations that are physically remote from the customer.
A second highlight is the increasing importance of managing the outsourced supply chain. Cisco is this year’s best example of how this can be done well, and encouragingly, here is a globally outsourced supply chain being essentially managed from Europe. There is no doubt that managing an outsourced supply chain introduces a number of challenges that do not exist in a vertically integrated supply chain. The capability or ‘maturity’ (using PRTM terminology), to manage this type of collaborative supply chain is still rare but will become critically important in the future. Differences of vision
One surprise finding is the fundamental differences in the interpretation of commonly used terminology within our profession. Words themselves don’t matter that much but the way they are used reveals underlying differences of vision. What does ‘supply chain’ mean to some of our contestants? Is it really ‘from my supplier’s supplier to my customer’s customer’ or do we associate ‘supply chain’ with our suppliers? Or does supply chain mean simply logistics and distribution operations? What this tells me is that there is still a significant need to educate and communicate at a management level to ensure a consistent understanding and approach within supply chain practices.
I was pleasantly surprised at the level of supply chain improvement activity being undertaken. Almost all of our finalists could point to active supply chain improvement programmes – some quite narrow in scope, others extremely wide-reaching – in the case of British American Tobacco for example, addressing every node and interface between the tobacco grower and the customer. Leading supply chains will, in my view, continue to improve. The implications for those who aren’t doing real performance improvement is significant – the gap can only get bigger and may eventually become unbridgeable. Many of our observations and comments are borne out by PRTM’s wider practice experience, providing an important pool of information from which to compare entries. Each year the sponsors and organisers strive to ensure our judging structures and operations are attracting the best possible entries from across Europe so we can continue to reveal supply chain excellence across all industries and companies regardless of size or location.
Environment on the agenda Surprisingly we had very few entries in the ‘Environmental Improvement’ category award. I am sure that most, or all of our finalists have environmental and wider corporate social responsibility issues close to the heart of their corporate agendas, but very few entries went out of their way to express this. I had expected to see a much greater focus on the question ‘What can I do to gain some level of competitive advantage by taking a strong position on the supply chain and the environment?’ I believe that this will become a critical issue for all supply chains in the very near future. If this is not on your agenda today then you may need to revisit the issue shortly. We were rather disappointed with the number of SMEs (small and medium sized businesses) who entered the competition this year. For next year, we’d certainly like to encourage more SME’s to take part. There is absolutely no reason to believe that supply chain excellence is the premise of large organisations, therefore I hope that this year’s absence is because we failed to convince these companies to participate, rather than a reflection of the fact that SMEs have taken their eye off this particular ball.
One important observation was the number of organisations that do not appear to conduct any external benchmarking of their supply chains, beyond perhaps entering the awards. High-performing supply chains invariably focus on metrics, designed to give an insight into how the organisation measures up against direct competitors and within the wider world. If you don’t have an external view, how are you going to focus on what needs to be done to stay competitive?
Strategic weapon Many organisations are now starting to realise the potential of the supply chain when it comes to business performance. However, less than half of all entries considered their supply chain a key strategic weapon for the business. This leaves significant scope to communicate and elevate the importance of the supply chain to board level – on a par with new product development, sales and marketing. We scored a select number of organisations highly on their understanding and use of the supply chain as a strategic weapon. Too few firms are asking ‘How can I use my supply chain to do something differently; how can the supply chain change the way I compete in the marketplace?’
However, I don’t want this to sound too negative. There is a lot of great work being done in supply chains across Europe, more than we can possibly describe in the summaries that follow. But even the ‘best in class’ honoured here (especially the best in class) acknowledge that there is still huge room for improvement, while many European organisations are still taking their first, faltering steps. But with focus, drive and high levels of commitment, as demonstrated by these awards, supply chain ducklings can become swans and I expect to see at least some of those at future ceremonies.
Gordon Colborn is a director at PRTM and was responsible for the facilitation of the judging process for The European Supply Chain Excellence Awards 2006