What Does it Take to Build a “Fit” Supply Chain?
Published on 19 May 2021
Is your supply chain strong and fit, or fragile and weak? A new report from Gartner helps you determine the answer and work toward a stronger, more resilient future.
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Is your supply chain fit, fragile, or somewhere in the middle of the spectrum? This is a question that more organizations are asking themselves right now as they balance high levels of demand with constraints like supply chain shortages, port congestion, a dearth of ocean containers, and a short supply of qualified truck drivers.
Much like an amateur or professional athlete focuses on maintaining a certain level of fitness to be able to compete effectively, a company’s supply chain deserves the same level of attention (if not more). In a new report, Gartner explores the correlation between a fit supply chain and a resilient one, knowing that both elements are critical in today’s uncertain business environment.
Fit For Purpose
According to Gartner, the term “fit for purpose” describes an approach where planning leaders focus on what they should be doing, instead of benchmarking what others are doing—but that may not necessarily work for their own organizations.
Supply chain planning leaders that define their function’s fit for purpose and choose a corresponding organization design will improve their results and be better aligned to the overall business, Gartner says.
“Many supply chain planning leaders ask themselves if they should organize their function in a more centralized or decentralized way,” said Gartner’s Ken Chadwick, in a press release. “To answer that question, they must first understand what their individual fit for purpose organization looks like.”
To design a fit for purpose planning organization, Gartner says supply chain leaders must consider their companies’ business and operating model as well as the operational mindset.
They must also understand the business and operating model of the overall company – customer base, products, serviced markets – and determine to what extent those factors are changing.
“Some companies are now moving from global to more regionalized supply networks because global networks are less resilient when it comes to disruptions, such as trade wars or the COVID-19 pandemic,” Chadwick said. “On the other hand, there are companies that want to try a more centralized approach to better serve their key customers.”
Gaining Competitive Advantages During Disruption
Fit supply chains can move ahead of the competition after dealing with the high-impact events, while fragile supply chains fall behind. According to Material Handling & Logistics, the most fragile supply chain operators focus on short-term survival, while the fittest supply chain organizations see disruptions as inflection points to improve the value that the supply chain provides to the business.
“Disruption is not a short-term situation, but a long-term trend that will most likely accelerate as we face climate change impacts, global power balance shifts, and more,” Gartner’s Simon Bailey told MH&L.
“In the future, disruptions will occur more frequently and supply chains must be able to deal with whatever is coming next,” he continued. “Some supply chain leaders have understood that already and prepared their organization accordingly.”
Step by Step Approach
Creating a stronger, more resilient supply chain requires a focus on what’s important to the company, both in terms of operations and decision making. Some companies’ mindsets focus on business unit accountability, for instance, so they align planning to a commercial leader who owns those outcomes.
Other companies are driving an end-to end mindset, leading to one integrated planning organization serving enterprise outcomes, with mindsets related to cost-focus, customer experience, innovation, agility, resilience, and risk also significantly impacting how planning leaders organize.
“When planning, leaders know about their organization’s present and future operating model and mindset,” Chadwick added, “they can in turn think about what their own function should look like to best fit in and serve its purpose.”
When creating fit supply chains, companies can choose among decentralized, center-led, or centralized models. Using the organization’s overall operating model and mindset as a guide, Gartner says supply chain planning leaders can evaluate if a decentralized, center-led, or centralized model is the best design for their function. Here’s what each of these looks like and how it operates:
- In a decentralized model, all planning roles report into the separate business unit leaders. This approach makes sense for large portfolio companies with mostly independent business units.
- The center-led model leaves planning operations within the business units but creates roles at a global level that focus on planning processes and long-term planning.
- Finally, in the centralized model, all elements of supply chain planning report into an integrated planning leader who is running all aspects of planning across the different regions.
Remember that different companies will take different paths to “fitness,” and that these variations are expected and perfectly normal. “There really is no one-size-fits-all solution for a planning organization, nor is a decentralized model necessarily a sign of lesser maturity,” Chadwick concluded. “Planning leaders must evaluate their individual situation and future plans and design their function accordingly.”
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