Masters of the Supply Chain

By William C Copacino -- Logistics Management, 12/1/1998

An analysis of data from a study I conducted of eight industry segments indicated that there was a growing gap in logistics performance (including cost, customer service, and asset productivity) between the average performers and the leading performers in each segment studied. My hypothesis about the source of this growing performance gap is that effective logistics and supply chain management requires greater sophistication, enhanced skills, leveraged use of information technology (IT) tools and capabilities, and more harmonious and collaborative cross-functional teaming than generally is practiced today.

To test this hypothesis, I worked with Yossi Sheffi and Jonathan Byrnes of the Massachusetts Institute of Technology to conduct a Delphi Study with leading practitioners, academics, and consultants. This study, which consisted of several rounds of group discussions with these experts, was designed to ascertain which companies were viewed as the leaders in supply chain management for those eight industry segments (appliances, automotive, chemicals, computers, packaged goods, pharmaceuticals, semiconductors, and telecommunications). We now are in the process of determining the characteristics that distinguish these supply chain leaders from their competitors.

Although the results are preliminary, it appears that the leaders share five common characteristics or capabilities:

* "Deep" functional excellence. The leaders have developed depth of skills in key functional areas such as procurement, manufacturing, transportation and distribution, and customer care. They also have managed these functions in an integrated way.

* Management of surge and uncertainty. Not only are the leaders able to integrate the key functions mentioned above, but they also are skilled at managing complexity. They understand the operational implications of poorly planned promotions, quarter-end loading, excessive seasonal spikes, product proliferation, product-line complexity, and poorly coordinated new-product introductions. We speculated that this capability may separate a Nabisco (which has great logistics capabilities) from a Procter & Gamble (which has excellent logistics capabilities as well as a focus on managing surge and uncertainty).

* World-class information technology. This includes applications, data management, analytical and decision-support tools, and communications capabilities.

* "Virtual logistics." The term "virtual logistics" describes the leaders' ability to leverage the distinctive capabilities of third party and "fourth party" logistics providers selectively.

* Extended supply chain. The leaders are able to create an extended supply chain, which integrates channel partners--suppliers, distributors, customers, end users, and service providers--into an enterprise with visibility and collaboration across the channel.

Our preliminary research indicates that this performance gap will continue to grow, and that the true "Masters of the Supply Chain" will provide a distinctive and enduring competitive advantage for their companies.

William C. Copacino is managing partner of Andersen Consulting's Strategic Services Practice for the Americas. 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 Andersen Consulting's Boston office, 100 William St., Wellesley, MA 02181. Phone (617) 454-4480.