Leading like a strategist

Even if companies have a clear corporate strategy, they rarely translate it into a clear supply chain strategy. The standard strategy and supply chain models fall short in this respect. New models are emerging based on real-life experience. Important factors for a successful strategy include: focus not only on the revenue and profit generated but also on the capital needed to do so, and keep a close eye on the extent to which each project actually contributes to implementation of the strategy.

By Marcel te Lindert

Napoleon was an excellent strategist who surprised his opponents with his troops’ marching speed and operating range, made possible by a sophisticated supply chain strategy that fully supported his military strategy. The replenishment set-up was so flexible that the soldiers themselves were required to carry considerably less with them than was commonplace at that time. That made the army fast and agile, two characteristics that enabled Napoleon to continually wrong-foot his enemies. His units performed complex manoeuvres and seemed to pop up everywhere, but the attack was ultimately coordinated tightly and extremely effectively.

Yet even now, over two hundred years later, many companies have still not completely understood the lessons to be learned from Napoleon. Within many organisations there is a mismatch between the general corporate strategy and the supply chain strategy, which should be focused on achieving the business objectives – as Jotun, a Norwegian paint manufacturer, discovered for itself.

The company has four different divisions, each of which used to work with the same type of supply chain. That started to cause friction at Jotun’s Spanish facility a couple of years ago. “We supply paint to the maritime sector, for example, where speed of delivery is very important. After all, ships only dock for a short time, sometimes as little as four or five hours, and they need to receive the paint they’ve ordered before leaving again. That’s why we have 33 factories and offices in 40 countries. We want to be close to our customers, to be agile and to offer high product availability,” says Angel Caja, Jotun’s Supply Chain Manager for Western Europe.

Although Jotun’s customers in the maritime sector require a responsive supply chain, the Spanish factory was not set up for that. The process equipment was only able to make very large batches of paint, which automatically resulted in high stock levels. “Remember, the economic crisis has had a major impact in Spain, so there is immense pressure to reduce costs. Therefore, we want to start producing smaller batches to enable us to react to market demands more quickly while also reducing the amount of working capital tied up in inventory,” comments the Spanish supply chain manager.

Jotun is not alone. A survey by McKinsey of two thousand decision-makers reveals that just 35 percent of companies have a strategy that equips them to beat the competition. And even fewer, 20 percent, have translated their strategy into clear choices about supply chain management.

Another thing they often lack is a feedback loop, according to Martijn Lofvers, trendwatcher and publisher of Supply Chain Movement. He has noticed that while many companies define strategic projects that are based on their corporate strategy, they then fail to check whether those projects actually contribute to achieving their business objectives. Project execution becomes an end in itself. When the market conditions subsequently change, the supply chain soon becomes out of sync with the corporate strategy. Lofvers advocates a different approach, which he has already helped to put into practice in workshops on Strategy Mindmapping for companies such as PepsiCo, Johnson & Johnson and Office Depot.

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Read the full article in Supply Chain Movement 23 | Q4 – 2016

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