The future-winning supply chain requires forward-thinking Supply Chain Executives to build future-ready capabilities composed by new strengths and competencies, such as supply chain risk management, resilience, sustainability and agility. We continue to face turbulent times and the VUCA world has even become more challenging. Managing disruptions is both an old and new challenge. Additionally, the modern Supply Chain is undergoing a transformation like never before. The development from today’s linear supply chain to a dynamic, networked supply chain ecosystem requires to embrace industry 4.0 and digital supply chain technologies. How is the role of Supply Chain Leadership playing out here? The answer to that question is crystal-clear: “Supply Chain Leadership is the differentiator that separates the winners from the rest of the crowd,” explains Supply Chain & Industry 4.0 expert Dirk Stolte, through this article…
What is the most successful Supply Chain Leadership approach for staying at the forefront of supply chain management? Effective supply chain leadership encompasses the orchestration of people, processes and technologies to enhance competitiveness by optimizing the flow of goods from suppliers to customers. That includes setting the strategic direction, fostering supply chain collaboration, employing efficient supply chain risk management and for sure leveraging innovation to drive digital transformation. The functional areas covered here include all elements of the end-to-end (E2E) supply chain: planning, purchasing, procurement, manufacturing, logistics and distribution.
Dirk Stolte
By looking at classical leadership theories, leadership styles and supply chain leadership concepts, we can see that transformational leadership seems to be the best way to lead supply chain organizations. However, this alone doesn't fully answer the question. It's important to remember that this doesn't fully address the complexity of the matter, as it doesn't take into account the challenges that the industry landscape, digital transformation and the supply chain face today.
To adequately answer what constitutes the most successful supply chain leadership approach, a more comprehensive statement and broader viewpoint are needed. This requires a deeper analysis and focus on the current challenges facing supply chains and the strategic and organizational frameworks that should be developed to address them. In other words, the focus should be more on the challenges that all supply chains currently face and the future strategies and organizational structures needed to stay at the forefront of supply chain management.
What are the challenges that Supply Chain Leaders facing in today's business environment?
The challenges supply chain leaders face today are multifaceted and complex. These challenges can be categorized into four main elements:
Globalization, regionalization, insourcing, outsourcing, offshoring or nearshoring? The search for the right strategy for today’s and future supply chain management is like the quest for the holy grail in many corporations these days. Supply chain disruptions triggered by crises, wars, pandemics, inflation, stagflation, trade wars, shortages of raw materials, high freight prices and shortages of skilled workers are the topics that are currently omnipresent in all companies, often termed as the New Normal to be managed when the stormy times are gone.
But what is the new normal in supply chain management? The answer is quite simple with a certain level of complexity. There is no "new normal" in the meaning of a newly established status quo. Rather, companies and their supply chains must be prepared for the fact that supply chain disruptions caused by economic, political, and technological change will continue to be on the agenda in the future. Supply chain disruption is constant and impactful. Supply chain disruption is both omnipresent and unpredictable at the same time. The question to be addressed: Are we able to mitigate the next global supply chain disruption? Being able to deal with such shifts in the global economy including the associated risks and challenges has rather become a core competence for competitive supply chain management. Undoubtedly, this is a major challenge for all Supply Chain Leaders. Especially if they manage supply chain operations globally. In consequence, existing supply chain designs, organizational structures and strategies need to be assessed and redefined.
But is that good enough to be future-ready? For sure it is not. Being able to deal with the next global disruption that comes our way by employing resiliency and agility can be considered as the gold standard of today. The future supply chain leader is requested to go beyond the concept of resiliency. Being resilient means just to mitigate risks and minimize the impacts from disruptions in order to protect the supply chain and business. What is needed here is to lever it onto the next level - to create value from the uncertainty. Through the development of an antifragile supply chain - one that responds effectively to disruptions, adapts to changing conditions, learns, improves, and emerges stronger from adversity.
CHALLENGES #2 - DEVELOP THE END-TO-END SUPPLY CHAIN
Traditionally, the functional teams in supply chain have operated in silos or functional segments such as sourcing, manufacturing, distribution and logistics, retail and aftersales service. The visibility across the functional areas was limited, data and information has been not shared and the interconnection between suppliers and customers could not be named as a network. That was resulting in unnecessary network disruptions and operational inefficiencies. But those days are gone. In today’s supply chain, it is crucial to understand how does each process step contribute to an end-to-end supply chain that maximize customer satisfaction, minimize operational costs and generate the competitive advantage. It requires effective coordination and collaboration among all stakeholders involved in the supply chain, from suppliers and manufacturers to logistics providers and retailers.
Does that sound simple? Not at all as it requires to manage complexity and to drive transformation leading to the new standard of an end-to-end supply chain to be established. The development from today's linear supply chain to a dynamic, networked supply chain ecosystem requires Supply Chain leaders of the future with a holistic mindset, understanding their roles as an embedded business function aligned with sales and marketing, research and development and suppliers and customers.
This requires a deep understanding of the business model, market dynamics, and business acumen, as competition has shifted from individual corporations to entire supply chains, making it a critical factor in gaining a competitive advantage or disadvantage. Orchestrating the end-to-end supply chain, which includes all stakeholders and partners, necessitates a leadership style that aligns supply chain partner activities to achieve targeted and common goals for all stakeholders involved.
CHALLENGE #3 - DIGITAL TRANDFORMATION & INDUSTRY 4.0 - DIGITAL SUPPLY CHAIN
Supply chain management is undergoing a transformation like never before. The advances in technology, specifically in the context of digital transformation and industry 4.0 will change the landscape in Industry and Logistics. Digital supply chain networks and smart factories will define new standards. The development from today's linear supply chain to a dynamic, networked supply chain ecosystem warrants embracing industry 4.0 and digital supply chain technologies as the fundament for the digital supply chain of the future. Global Supply Chains, including all players like vendors, manufacturers, retailers, and customers, are part of this digital transformation. That will result in new breathtaking breakthroughs in terms of productivity, delivery performance and the way supply chain ecosystems are managed. The use of these new digital technologies - autonomous robots, artificial intelligence, machine learning, blockchain, digital twins, VR/AR and the Internet of Things (IoT) - will transform how supply chains operate.
The technology with most relevance for the entire supply chain is for the time being Artificial Intelligence (AI). Artificial intelligence (AI)-enabled supply chain management has the potential to supercharge demand forecasting, revolutionize end-to-end transparency and boost integrated business planning. 48% of companies rate Artificial Intelligence (AI) as the game changer technology with significance for the digital supply chain of the future. Another technology with high level of relevance is the Digital Twin. Digital twins are used to simulate and optimize the performance of real-world objects and systems. They can be used to optimize production processes, predicting machine failures before they occur and identifying areas for improvement. They can also be used to simulate supply chain scenarios, helping companies to identify potential bottlenecks and optimize inventory levels. Combining digital twins with artificial intelligence (AI) will be the ultimate door opener for the future of supply chain planning processes.
Digital control towers are expected to play a significant role as well. They can provide a centralized, real-time view of the supply chain and enable companies to make more informed and agile decisions. The power of a networked supply chain ecosystems supported by digital control powers comes from the fact that all improvement initiatives will focus on the entire supply chain network and deliver results for all stakeholders and processes involved. This can be called as well as digital supply chain network where a digital core creates connectivity among traditionally unconnected links in the supply chain.
All of those aspects are part of the game and leading to a paradigm shift in industry and supply chain management. It’s clear that it’s time to engage digital supply chain management. In a first step, Supply Chain Leaders need to get an insight on what these mega trends and technologies are about. Which technologies should be prioritized while upgrading supply chain operations?
Therefore, supply chain leaders play the key role in leveraging digital supply chain technologies to drive improvements in their supply chain performance. The successful supply chain leaders need to acquire industry 4.0 expertise to understand the potential of these technologies and to set the right priorities.
CHALLENGE #4 - THE WORKSFORCE OF THE FUTURE
Starting from the times of pandemic hybrid working models have become more common and supply chain leaders were requested to manage employee expectations. The learnings from that experience often resulted in a new way of thinking and flexible working policies. That has been just the starting point as in the meantime a move toward nontraditional work models such as gig work (short-term, temporary or independent contractors) and digital nomadism (work anywhere, workation) evolved. Especially the younger generation is striving here for greater flexibility how, when and where to work and that can be a game changer by dealing with the supply chain talent shortage. Following that it appears the need to redesign work experience by leveraging technology to enrich hybrid and virtual work experiences.
Furthermore, the labor shortage on the shopfloor roles warrants incorporating more technology, advanced robotics and automation, especially for repetitive tasks and processes in factories, distribution centers and warehouses. That will contribute to improving the work environments by making them safer and reducing hard work.
Emerging technologies such as virtual (VR) and augmented reality (AR), digital twins, artificial intelligence (AI) and autonomous robots will open the door to a new world of working, resulting in better operational performance, customer service and higher profitability. That facilitates a new way of working where humans and robots interact in newly defined processes, striving for a new level of operational excellence. These human-robot interactions need to be designed to create or even reinvent the future work environments representing new industry standards.
Consequently, the human and digital coexistence comes up with the challenge to be build this new blended workforce aimed at becoming the excellence team of the future. That human and digital coexistence requires redefining and reinventing new roles and skills for supply chain professionals and leaders across all functionalities.
The challenge here comes with the fact that the workforce in place today at any time is not what will be needed in the future. That comes with a balancing act as both needs to be managed at the same time: the workforce and organization as of today and simultaneously develop the workforce and organization of the future with new roles and skills needed for the coming years.
THE SUPPLY CHAIN LEADERSHIP CHALLENGE
To summarize the outlined four challenges: Supply Chain leaders of the future require a holistic mindset with an excellent knowledge and expertise about the end-to-end Supply Chain (E2E Supply Chain) as the fundament to challenge the status quo. At the same time, they need to have more than just an insight of industry 4.0 & digital supply chain technology developments. Understanding when to invest in which technology requires a combination of Industry 4.0 expertise and strategic foresight.
The successful supply chain leader has the competence to deal with the fact that supply chain disruptions are omnipresent and unpredictable at the same time. Being able to deal with these shifts in the global economy has become a core competency for competitive supply chains. But the future supply chain leader is required to go beyond the concept of resiliency. What is needed here is to lever it onto the next level - to create value from the uncertainty. Through the development of an antifragile supply chain - one that responds effectively to disruptions, adapts to changing conditions, learns, improves, and emerges stronger from adversity.
To build a capable workforce of the future requires to take into account new working models composed by the employee expectations, hybrid working models, digital technologies and fact that labor shortages will continue being part of the game. As more and more technology such as advanced robotics, automation, digital twins and AI will play here, the human and digital coexistence will create a new working experience and environment by setting new industry standards.
Overall, the challenge for the Supply Chain Leader will be to simultaneously manage the current workforce, organizational structure and processes while also developing the function and structure for the future based on new technologies and processes by incorporating new roles and skills required in the coming years.
BUILDING A NEW ERA OF SUPPLY CHAIN LEADERS & PROFESSIONALS
As a result, supply chain leaders managing a successful transition into the future supply chain will need to assume the role of a Transformation Manager. They will be responsible for both optimizing current supply chain operations and transforming functions, organizational structures, and processes to build an end-to-end supply chain by incorporating digital supply chain and Industry 4.0 technologies. As a result, modern supply chain leadership entails assuming the role of a ‘Digital E2E Supply Chain Transformation Leader’.
Does this sound challenging? Undoubtedly. In addition to the functional expertise and technical skills required to become a world-class supply chain leader as highlighted, there are also soft skills needed to perform the role. These include communication, collaboration, problem-solving, conflict resolution, influencing skills, customer focus, business acumen, negotiation skills, presentations and storytelling abilities, diplomacy and assertiveness, and the ability to influence internal and external stakeholders. And for sure, intercultural competencies are especially important for managing global supply chain operations. Indeed, that represents a comprehensive list of skills and competences required.
In consequence, effective leadership in supply chain management requires a high level of expertise, business acumen and the right skill. Many corporations have started to recognize that supply chain management is becoming an increasingly important board priority. Latest research shows that the best-in-class operations have supply chain expertise at the boardroom. The recommendation is clear: incorporating supply chain talent into the future board is one of the key success factors.
How to build the supply chain organization of the future?
Developing a Vision and Roadmap: Everything begins with developing a vision and roadmap for a digital end-to-end supply chain organization aligned with business objectives. This process includes defining the required levels of supply chain and digital technology competencies. It also involves determining the skills needed for functional supply chain expertise areas such as strategy, demand planning and forecasting, inventory management, procurement, production planning, order management, and logistics and distribution. Most important here is to add to the requirements of traditional supply chain expertise the “new disciplines” such as advanced analytics, artificial intelligence, data management and scenario modeling. Evaluating leadership skills and soft skills is also a critical part of this process.
Conducting a Maturity Assessment: A maturity assessment is essential for understanding the current and future capabilities of the workforce, organizational structure and culture. This assessment serves as the foundation for identifying gaps, mismatches and areas that require improvement and change. Deciding on the optimal organizational design (centralized operating supply chain, decentralized supply chain, centralized strategic supply chain model, or platform) depends on various criteria such as business model and strategy, market trends and industry developments. Gaining a clear understanding of the operational design is a prerequisite to define roles and functions properly.
Developing Future-Ready Capabilities: The most challenging aspect of the roadmap is developing a future-ready supply chain capability development initiative. This transformation initiative should encompass organizational development and a comprehensive supply chain development program composed by talent management, career paths, career progression plans, succession plans, mentoring and coaching programs, supply chain mastery level programs, center of excellence (CoE) concepts, and even an in-house supply chain academy.
To develop this supply chain capability transformation and the supply chain development program, it is recommended that a benchmarking exercise be conducted. While it is common for corporations to benchmark within their industry, it is advisable to extend benchmarking efforts beyond industry boundaries. By doing so, best practices and excellence standards from other industries can be adopted, especially if they appear with world-class supply chain performance.
Regardless of the roadmap or strategic concept employed, whether only the first steps have been taken or more extensive efforts have been made, it is now time to address the supply chain leadership challenge and develop future-ready capabilities for Industry 4.0 and the digital supply chain.
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