Strategy execution?

“There’s very little science in supply chain management.” This bold statement came from a Vice-president Supply Chain Europe of a pharmaceutical multinational when I was interviewing him recently. I didn’t understand what he meant at first, although I have been graduated as a business engineer in operations research. The supply chain director helpfully explained that he is surrounded by trained scientists – pharmacists – in his everyday work. When looking for new, entrepreneurial project managers for the pharmaceutical industry’s rapidly changing supply chains, he selects them from this pool of young academic talent. In his view, students of supply chain management are ill prepared for the complex reality.

His comments made me think back to the interactive workshop we organised for the SCM Professionals Club with consultants PwC in December 2012. In the first theory-based part of the session, PwC highlighted the findings of renowned scientists Michael Treacy and Fred Wiersema, who have said that only three business strategies really exist: Product Leadership (best product, such as Apple), Operational Excellence (best total costs, such as Walmart) and Customer Intimacy (best total solution, such as hotel chain Office Depot). During the session, it struck me that many of the supply chain directors present were not familiar with these three strategies. Each strategy entails a specific supply chain set-up. In the case of Product Leadership, low logistics costs are less important than quality levels. Claims that mix flexibility, product flexibility and volume flexibility are important for Operational Excellence, Customer Intimacy and Product Leadership respectively prompted questions during the workshop.

A recent global study, also conducted by PwC, revealed that companies who structurally focus on improving supply chain performance structurally outperform their competitors financially. And yet executive boards still fail to recognise the true importance of supply chains. Leading companies manage to deliver On Time In Full more often while also optimising their working capital. Strangely enough, this study does not make the connection to the three different business strategies. Until studies like this start to make those sorts of connections, the amount of science within supply chain management will indeed remain small. It’s the task of the scientists and students of today to apply more science, i.e. strategy, in supply chain management.

Martijn Lofvers, Publishing Director & Editor-in-Chief of Supply Chain Movement