PART 12. SUPPLY CHAIN LOGISTICS – THE PURSUIT OF EXCELLENCE

This series presents A LEADERSHIP STRATEGY, as the subtitle indicates. They use Supply Chain and Logistics as the focal point for discussing contextual leadership in the face complexity, randomness, risk, flexibility, agility and non-rational decision making. In them I discuss the multi-dimensional approach to leadership: what is leadership? How do we lead? What is our capacity to lead? And specifically, they look at leadership from the perspectives of risk, ambiguity, uncertainty, beyond command and control process management.

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If you change the way you look at things, the things you look at change. Wayne Dyer

In the 21st Century, we need

·        to recognize global supply chain logistics as a complex system,

·        to develop a deeper understanding of that complexity as a business eco-system and

·        to position supply chain logistics leadership at the strategic level of organizational, economic, social, national, international, and environmental development.

Strategically, the Global SCL complex system benefits in three primary ways:

·        Access to a broad range of capabilities, especially external capabilities that may be too expensive or time-consuming to build internally.

·        Ability to scale quickly, because the modular or component structure, with clearly defined interfaces, makes it easy to add participants.

·        Agility, because the modular setup, with a core direction but highly variable components, enable a degree of flexibility, a capacity to evolve, and a capability to be responsive.

In practical terms, what does it mean to call Global SCL a complex system? While the concept may hold merit, what proof is there to support the “complexity claim”?

Complexity is not synonymous with “difficult” and “challenging”. Anyone engaged in supply chain logistics manages challenging and often difficult processes in an effort to balance the “6-Vs”:

·        Value for customers by controlling total landed cost while delivering quality and post-sales support

·        Velocity reducing product storage times, increasing inventory turns, reducing transit time delays

·        Variability eliminating unexpected changes in process flows and reducing buffer inventories

·        Visibility regarding where products are, when they will arrive, and levels of inventory in transit

·        Vulnerability of channel and product exposure to risk – natural and manmade, visible and invisible

·        Verdancy /“Green Planning” focusing on environmental impact, carbon footprint, waste reduction

However, recognizing Global Supply Chain Logistics as a complex system requires a more strategic perspective. We need to change the way we look at things. We need to pursue excellence.

This Supply Chain Logistics Excellence Model incorporates research conducted by Singh and Cottrill, and published as Supply Chain 2020 Project Working Paper [MIT- Center for Transportation Logistics, 2004], and framed by the external forces [Porter] and internal capabilities [Burney] of competitive advantage.

In the pursuit of excellence on any level – corporate, economic, social and so on – Supply Chain Logistics must do more than balance the 6-Vs. As a complex system Global SCL involves:

By definition, a business ecosystem consists of independent economic players that agree to collaborate. Collaboration is a critical success factor. In the pursuit of SCL excellence, I identify two internal capabilities to illustrate the need to collaborate as a critical success factor.

ILLUSTRATION 1. DISTRIBUTED MANUFACTURING

Distributed manufacturing is a form of decentralized manufacturing practiced by enterprises using a network of geographically dispersed manufacturing facilities that are coordinated through information technology. Distributed manufacturing leverages large numbers of ‘partner’ factories and the talent of others to create agile supply chains.

This model dismisses location to find the best talent. The network allows for a specialist factory to fill excess capacity, while keeping manufacturing local to the product’s final destination, reducing emissions and logistics cost, and maintaining product quality. It is agile and scalable.

Whether implemented locally or internationally, distributed manufacturing requires leadership in negotiating and managing relationships with collaborating organizations.

ILLUSTRATION 2. FEDERATED SUPPLY CHAINS

The “federated business model” was first introduced by Peter Drucker in The Practice of Management [1956], where he positioned organizations based on expertise, like orchestras or hospitals, in contrast to organizations structured in command-control hierarchies, like most companies.

Federation is based on the simple thesis that leaders cannot standardize or control the entire world, and must depend on others locally to lead as well as make contributions. The organizational model used by Drucker to illustrate this point is the orchestra conductor depending on the talent and expertise of the violinist or timpanist or any other member of the orchestra in the performance of a symphony.

On the one hand, collaboration requires a clearly defined organization [the orchestra], with clear roles and responsibilities [the conductor conducts; the violinist plays the violin], so that people speak to the same processes [the composer’s score], with the same toolboxes [instruments, concert hall, acoustics]. This ensures that all parties are “speaking the same language” and are using comparable plans.

On the other hand, differences should be highlighted [the violinist is not the conductor and the conductor is not the violinist]. Leaders should be aware of the challenges and successes of regions, what they struggle with, and what they are proud of. Leaders should also be prepared to accept a different point of view on what is working locally and what is not, and be prepared to adapt the process to fit the right local requirement [the violinist is not the timpanist and is not expected to play the drums].

This kind of collaborative leadership requires interactive communication to ensure that when decisions are made, everyone is aware of it and is kept informed [the interpretation of the conductor leads the collective performance of the orchestra]. It is the interaction that creates intelligence [it is not just about how the conductor conducts, but also about the talent and expertise of the violinist], in a cyclical view of new ideas, feedback, and response that drives new knowledge [rehearsals]. Technology is the game changer that allows this to happen more quickly – but trust is the essential ingredient that allows data to cross boundaries, and forms the glue for federation.

The pursuit of excellence is highly interpersonal. Global SCL business eco-systems entail limited control of the overall system by each participant. Even an ecosystem orchestrator has limited means to enforce or control the behavior of partners, compared with a hierarchical supply chain model or an integrated business model.

The leadership challenge, therefore, is to engage and orchestrate external partners without full hierarchical power or control. However, a certain constraint on control is the price to pay for open innovation, flexibility, and resilience. Business ecosystem governance must be finely balanced, leaving room for serendipitous discoveries and self-organized evolution. Ultimately, it involves managing relationships between and among independent economic players.

The dynamism and flexibility of Global SCL ecosystems are opportunities and challenges: the complex system is evolvable and scalable, but it requires continuous adjustment, and therefore is not controllable. Sustainable success calls for permanent engagement with all stakeholders, improvement and expansion of the offering, and innovation and renewal of the ecosystem.

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SPONSOR: The Logistics Institute is a Canadian-based professional organization delivering programs that enable practitioners to become certified professionals by earning P.Log, LS, and SC designations. Institute programs are competency based; they validate capability, not just knowledge. By earning these designations one is recognized as a professional and a strategic leader in Global Supply Chain Logistics. For further information go to www.loginstitute.ca