Three paths to a redesigned supply chain

Caterpillar sees it. Estee Lauder recognizes it. Cargill has set its sights on it. These global organizations understand the potential of the truly strategic supply chain and they’re pushing hard to make it real.

In the next few articles, I’ll discuss what each of those companies is doing to redesign its supply chain. For now, let me set the scene by describing the three organizational archetypes that are essential preparation for that redesign. This is important because too many companies jump from appetite for change to action without fully evaluating the many “whys” in between.

Fully redesigning the supply chain starts with envisioning what it needs to become. The disruptive change that’s typically involved affects all kinds of people and involves complex connections and processes across the organization. To embark on this change without a clear destination or “north star” risks confusion, inefficiency, and resistance—resulting in higher costs and worse, not better, outcomes.

The usual starting point is to develop a performance-led vision, the first of the archetypes PA Consulting describes in detail in its Smart Supply Chain report. The performance-led archetype focuses on driving cost reductions and quality improvements and increasing capacity for growth. It’s an inward-looking view, meant to optimize the organization’s current operations to realize performance goals. Individual supply chain functions apply targeted solutions that resolve particular problems to overcome inefficiencies. Cross-functional initiatives and capabilities aren’t yet aligned. With discrete, focused solutions, it’s relatively easy to demonstrate value, build momentum, and start familiarizing people with what change really involves. Global food giant Cargill exemplifies this archetype.

The next archetype is connectivity-led. Here, the organization’s focus starts to turn outward, to better understand how connecting digital capabilities across supply chain partners can do more for customers and even develop new revenue streams from products and services that are digitally aligned. Demand-sensing capabilities improve forecast accuracy and cut inventory. Operations are synchronized to ensure the products customers want are available on demand. Concurrently, integrating systems and data with those of suppliers helps visualize the supply chain, which improves governance and decision-making, enhances delivery performance, and helps mitigate risk. Caterpillar fits this archetype.

The third archetype is agility-led. The organization flexes easily in response to customers’ evolving demands. This model works well for start-ups that are unconstrained by legacy systems or big established operations. But a growing number of large organizations – cosmetics leader Estee Lauder, for example – believe this is where their future lies. To succeed, they must aim to become “super disruptors” and commit to weaving AI and other digital technologies deep into their fabric.

All three archetypes have their merits and will generate value. Organizations often relate to more than one archetype, with some functions more performance-led while others transition to a connectivity or agility-led approach. PA Consulting’s Smart Supply Chain report shows that 51% of supply chain leaders say they’re either looking to work through these three archetypes or are picking and choosing elements from each to apply to distinct parts of their organizations.

Shanton Wilcox is the US manufacturing lead at PA Consulting