The Supply Chain Masters
By William C. Copacino -- Logistics Management, 9/1/2003
At the end of this month, I will report at the Council of Logistics Management's annual conference about a study by Accenture, Stanford University, and INSEAD (Institut Européen d'Administration des Affaires) on how companies are using supply chain management to drive competitive advantage. The three organizations wanted to understand why some companies have seen astonishingly successful results from leveraging supply chain innovation—and why their competitors have not.
As part of that effort, we analyzed financial and operating data from more than 600 companies; interviewed scores of industry analysts, academic experts, and business executives; and conducted in-depth follow-up interviews with more than 60 companies and 100 executives. The results offer some powerful lessons about the companies we call the Supply Chain Masters.
First, our findings show that there are explicit correlations between companies' supply chain performance and their financial success. Specifically, we found that:
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Strong supply chain performance is rewarded with a premium of 7 to 26 percent in the growth rate of market capitalization;
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Companies that improve their supply chains also grow their market caps by 8 percent or more; and
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Poor supply chain performance leads to below-average market cap growth.
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Second, supply chain management is a priority for leading companies' top management teams. They understand supply chain management and explicitly build it into their business strategies. Most importantly, they devote a significant amount of attention to designing an integrated operating model. Most other companies, by contrast, do not spend sufficient time on thinking through the design of their operating models and how they can use those models to achieve differentiation.
Third, leading companies develop innovation and capabilities in four areas:
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Integrated supply and demand planning—in effect, cross-functional collaboration and cross-channel collaboration. This has a major influence on cost, customer service, and asset productivity;
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Functional excellence in sourcing and procurement, logistics, manufacturing, and design;
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Selective implementation of technology strategies. Leading companies take on fewer, more focused projects and are extraordinarily effective in redesigning their processes and incorporating change management practices into their implementation plans; and
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Selective outsourcing of activities to leverage best-in-class capabilities.
Finally, leading companies are rigorous in the execution of their strategies. They tend to be great operators who manage day-to-day activities extremely well. They develop strong leaders and managers, align organizations and metrics to their strategic goals, and adapt to changes in their competitive environments.
We also concluded that it's possible for companies to transform themselves and become Supply Chain Masters. To do so, they need to build the capabilities noted above. They must also change their internal cultures to place supply chain management at the heart of their business strategies.
William C. Copacino is group chief executive of the Business Consulting Group at Accenture. A frequent speaker before business and professional groups, Mr. Copacino has a number of publications to his credit, including the book Supply Chain Management: The Basics and Beyond (The St. Lucie Press, 1997). He is based in Accenture's Boston office, 100 William St., Wellesley, MA 02181. Phone (617) 454-4480.
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