Process stumble

Supply Chain Management Stumbles Down Under

posted in: Careers

An article in a supply chain magazine highlighted the results of a worldwide KPMG survey of companies examining key risk areas within their supply chain operations. The crux of the article was the fact that the Australian component of the KPMG survey did not score well in comparison to its overseas counterparts — despite the fact that these companies were actually considered ‘Leaders’ and ‘Key Players’ within Australian industry.

Those at the coalface of implementing supply chain concepts and philosophies within Australia are unsurprised by these findings. So why isn’t this survey surprising? As one commentator has noted, “The problem is most organisations don’t have the guts to really embrace supply chain management.”

Failure to Embrace Agents of Change

The philosophy of supply chain management is the biggest issue that has to be faced by companies when it comes to improving their operational and profit performance. Well run and managed supply chain activities provide a clear and significant advantage to those who embrace them, including difficult cultural changes issues, over those who do not.

The big issue that Australian companies need to eliminate is the “Not in my backyard” syndrome. Many executives pay lip service to wanting to improve their operation’s performance but when the acid test of actually changing the way they conduct their day-today work, or the way they need to think or relate to suppliers arrives, the attitude changes. Experience demonstrates they resist change and alternatives; particularly if left to their own devices and not guided by an independent supply chain improvement mentor.

However, the other side of this double-edged sword means that as an independent consultant it can be extremely difficult to manage this reluctance. In some cases this can actually manifest in deliberate actions to derail or sabotage the project, or even more unfortunate for all involved – discredit the agent of change.

So why do Australian executives stumble when it is evident and documented that well-managed SCM activities can provide such a critically needed and strategically valuable competitive advantage?

Generally, there is a failure amongst senior management to fully embrace change. This becomes even more difficult when it means they personally need to change the way that they think and act.

Remuneration Barriers to Doing Difficult Things

A classic example of this is highlighted when there is a direct relationship between a company’s reward/remuneration system and the difficulties being experienced in their operations. Their method of generating and rewarding sales can causes significant difficulties in their procurement department and with the reliability of supply from suppliers.

This can create significant pressure on capital requirements (cash flow) of the business. Despite observing a major improvement in cash flow requirements that can result from other changes that are made in their business process – critical issue of remuneration usually remains sacrosanct and unchanged. Hence, the levels of improvement possibilities are hamstrung and the difficulties remain.

A Need to Stand Up and Be Held Accountable

A lack of commitment to change appears to be one reason why so many of Australia’s companies do not openly embrace supply chain management concepts. Maybe the reluctance to change has its genesis in people not wanting to be held accountable for their actions? There is also a clear correlation between management’s willingness to be held accountable and the level of success possible during supply chain improvement programs.

Maybe the hesitance stems from a lack of clarity or understanding for the true benefits and advantages for implementing an improvement program?

Either way, the critical skills required for successful improvement programs are an ability to accept accountability for one’s actions and an ability to be clear and forth right in why and how company operations will change. If the boss doesn’t embrace the change and demonstrate this acceptance through their own actions, then how can the staff embrace the new program?

This clearly demonstrates the importance of ‘Leadership’ – leadership through actions and not simply saying the right things or using the latest buzzwords.