Major organisational and cultural changes lie ahead for SCM

Recent european and international supply chain management conferences have been primarily characterised by their focus on strongly emerging trends and their impact on companies’ supply chains. apparently, supply chain professionals have not yet reached the end of their journey towards adding value for customers – there is still much to be done in terms of organisational and cultural change. The real challenge lies not in tools or technology, but rather in human behaviour.

By Martijn Lofvers and Marieke Lenstra

The trends of increasing urbanisation and digitisation were covered extensively several times during the Logy Conference in Helsinki, Finland. Professor Theodore Stank from the Global Supply Chain Institute at the University of Tennessee provided an update on the status of supply chain management within companies, saying that supply chain professionals have not yet reached the end of their journey. He recently repeated a broad study of the status of supply chain management that he previously conducted in 1999. “In 2000 companies were taking incremental steps to become agile. Nowadays, companies are still reactive in terms of ‘sense and response’, but they need to become ‘prognostic’ by anticipating changes and being proactive.” Companies also still need to evolve from vertical integration in 2000 to flexible network integration in 2025.

Finnish view of disruption

In a lively panel discussion, four Finnish supply chain professionals explored the impact of digitisation. Their advice was that, in view of the growing disruption in the market, it is essential to test a large number of ideas. Develop a culture of innovation by forming partnerships with start-ups and learn to appreciate the value of mistakes. Innovation demands new operational approaches. Logistics is in the digitisation hotspot, such as in the case of 3D printing which is creating a new and different type of need for raw materials.

Reima, a rapidly growing Finnish manufacturer of children’s clothing, has been around for 70 years yet still has the genes of a start-up in its DNA, explained Chief Supply Chain Officer Nina Anttila. “Because we’re growing so fast around the world, our ‘engine’ sometimes becomes overheated. If we’re too late in starting on the new fashion season we have to try to make up for lost time elsewhere. That’s why we plan four seasons ahead in our sales & operations planning process, which we still do in Excel. S&OP and omnichannel supply chains are demanding new analytical skills. And the complexity will only increase further as we will be adding electronics and games to our outdoor clothing items.”

Finnish companies are not the only ones to recognise supply chain challenges. During the first pharmaceutical supply chain conference organised by the German Association Materials Management, Purchasing and Logistics (BME) in Frankfurt, Susanne Hundsbæk, Senior Vice President Supply Chain at Novo Nordisk, posed a question to her audience: “Do you manage under the given circumstances or do you manage the circumstances you have created yourself? You have to knock on the doors of other departments to gain insight into what is causing demand volatility and long lead times.

Ultimately, it revolves around the simultaneous design of the supply chain and the product. By making a joint value stream map together with our suppliers, we identified many redundancies and causes of waste and shared the savings equally.” Thanks to very ambitious targets, Novo Nordisk has saved over 60 percent on material costs for some products.

“We rarely design a client-driven supply chain in the pharma industry,” stated Alessandro De Luca, Senior Vice President of the Merck Group. Because it is still very early days in terms of the necessary segmentation in this industry, De Luca presented a highly practical step-by-step guide to the approach. “First, start with the customer and their specific needs. Then map the demand patterns on a customer segmentation matrix and decide how you should do the forecasting – whether automated or not. Finally, design the supply chains per segment from the customer’s perspective.”

A third home

Culture was one of the main themes during the European Supply Chain Directors Forum in Prague. Courtenay McHugh, Director Supply Chain Development & Commercialization at Starbucks, talked about Starbucks’ company core values. According to Starbucks’ CEO, Howard Schultz, it is possible for a company to grow big without losing the passion and personality it is built on, but only if it is driven by values and people rather than profit. Therefore, the company culture is characterised by a strong focus on attention at both individual and team level.

That personal approach to employees and customers alike is deeply rooted in the coffee company’s DNA. For example, employees are consistently referred to as ‘partners’ and they look out for one another. “The balance must be right. There’s no point in letting people burn themselves out; you shouldn’t take advantage of impassioned people who make personal sacrifices. You sometimes have to protect them from themselves and send them home if they’re still sitting there at 6 p.m.,” said McHugh.

The aim is to turn every Starbucks store into a ‘third home’ for people, in addition to home and work. And it was just that for McHugh, who showed the audience a photo of ‘her’ Starbucks in Amsterdam. When she was looking for work, she went there every day – with her laptop – just to get out of the house for a while. “The baristas all knew me and kept asking me how I was.”

Furthermore, your order is served in a cup with your name written on it. “No one is ever a number,” said McHugh. “However, we don’t guarantee that your name will be spelt correctly. My own name is always a nightmare. No one knows how to spell Courtenay properly so I sometimes just say that my name’s Anna instead!” she joked.

Kingpin as tour guide

Line Sandberg, VP Supply Operations at Novozymes, emphasised the importance of social proof in her company’s Lean adventure. To illustrate the concept of social proof, the Danish professional explained how she and a colleague had taken the train while abroad. The train suddenly came to a halt and they didn’t know what was going on because they could not understand the announcement that had been made in German. “We looked around us – what was everyone else doing? And we simply followed someone who we thought looked as if they knew what to do,” recalled Sandberg. “It’s just like ten-pin bowling. If you knock down the kingpin – the pin at the front of the triangle of ten – the rest will follow. But how do you know who the kingpin is within your organisation? You have to observe things carefully. Once we knew who it was, we invited that person to join us on the adventure and said that we wanted him on board.” According to Sandberg, you should give those people lots of attention and training, and compliment them on their qualities. Social proof was just one of the many elements covered that are important in executing a strategy. Sandberg referred to the wellknown quote by Peter Drucker: “Culture eats strategy for breakfast”. The two cannot be viewed separately. “No matter how well thought-out your plan is, if your organisation doesn’t have the right culture your strategy won’t come to fruition.”