Bob Trebilcock: Welcome to The Rebound, where we'll explore the issues facing supply chain managers as our industry gets back up and running in a post-COVID world. This podcast is hosted by Abe Eshkenazi, CEO of the Association for Supply Chain Management, and Bob Trebilcock, editorial director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now to today's episode.
Welcome to today's episode of The Rebound: What It Takes to Be a Supply Chain Leader. I'm Bob Trebilcock.
Abe Eshkenazi: I'm Abe Eshkenazi.
Bob: Joining us today is Mike Griswold. Mike is a research VP in Gartner's Consumer Value Chain team focusing on the retail supply chain. Mike, welcome.
Mike Griswold: Hi. Thanks for having me, guys. Looking forward to today's discussion.
Bob: We are too. I'd like to start, Abe, think fast, name three or four identifying traits of the leading supply chains and supply chain leaders?
Abe: I think most of us would recognize these traits of financial stability, a focus on environmental, as well as ethical standards, and social responsibility. When we take a look at collaboration, we take a look up visibility, transparency, I think there's a lot of different traits that we can identify for organizations and their supply chain leaders. It's interesting to note how Gartner has codified and really provided a great framework to recognize those organizations and the individuals.
Bob: Well, that was about 27, [chuckles] but that's a great segue. Every year, for the past 16 years, Gartner, and now Mike, leading that team, has put together its list of the top 25 supply chains, and now a second list of five supply chain masters. Those are based on a number of weighted factors along with input from their peers. It's a fascinating list, both from a contest aspect.
Like sports season, you want to know who's up and who's down. It's also a glimpse, not just into leading supply chains, but supply chain leaders. After all, supply chains don't just happen. That's what we'll talk about with Mike today. Let's get started. Mike, I think this is the second year that you've led the research project. When you compiled the list, what stood out the most?
Mike: Yes. This was the second year. A couple of things stood out to me, first is, if I talk about the list itself, the 25 companies and the five masters that you highlighted, several things jump out. We have a mix of industries, we have Cisco at number one, certainly from the high-tech area. We have we've had the most life sciences companies in our list this past year, Johnson & Johnson at number three.
A good collection of consumer products companies, between the top 25 and the five masters the consumer products companies has the most representation, strong representation from retail. Also, with some of the new entrants, BMW or newer entrants from an automotive perspective, just a well-rounded portfolio of organizations, which to me, demonstrates that there really isn't only one way to deliver an effective supply chain. Different industries have found different ways to do that.
Then when I look at some of the data that we got back from organizations as part of the process, there were four things that I noticed that are in their DNA. The first is about 70% of the companies have established centers of excellence, not only in areas like planning and IT but also centers of excellence that drive those best practices into the organization. Secondly, about 90% of them have implemented or upgraded supply chain planning capabilities as well as visibility.
If we think about the disruption that we've all experienced during COVID-19, the ability to enhance planning and the ability to improve visibility have been become key capabilities, and certainly are prevalent in those top 25 and masters.
The third thing is, which will not be a surprise to people I'm sure who follow your podcast, would be the implementation of advanced analytics and big data. Lots of activity in machine learning and AI, not only from a planning perspective but also customer service areas, product testing. Investing in those areas is another thing that jumped out at me. Then lastly, and the one that was probably the most surprising, was the area around change management.
About 85% of people in the research have created or established a change management discipline within the supply chain. That doesn't mean that they are divorced from their HR partners, but what it does mean is we're bringing a change management skill internally to the supply chain because we recognize the amount of change the supply chain has gone through. We also recognize the amount of change that's on the horizon for supply chains in the future.
Abe: Mike, those are really interesting trends, you also identified three that really stood out to me. First, was the purpose-driven organization, the second, was business model transformers, and lastly, digital orchestrators. When you take a look at those, give us a sense of why they're notable, and is this a change from the past or is this more an amplification of a trend that has been within the industry?
Mike: I think it's an amplification of trends that we've seen growing over the last couple of years. For example, one of our trends last year was this idea of leveraging your ecosystem, and what has evolved from that trend, in particular, is this idea of a purpose-driven organization. Let me share briefly some high-level statistics around those three trends that we see, and then I'll just dig a little bit deeper into each one.
The purpose-driven organization, 70% in the supply chain, plan to invest in the circular economy. Part of a purpose-driven organization is recognizing, "How do I partner within my ecosystem to solve problems that are larger than I can solve myself?" Circular economy is certainly one of those focus areas where organizations are taking into account how do I design the end of life of a product in the very beginning of the design cycle? We see companies like Dell, as an example, Lenovo, other high-tech companies really jumping in with both feet into that circular economy capability, but it's also around the organization itself.
We're seeing a lot of organizations feel pressure on two fronts around having an environmental or social purpose for their organization. Associates are rallying around causes and making their view known to their employer around how important it is but we're also seeing the consumer and the end customer voting with their wallet, with his or her wallet. Going with organizations that have publicly put forth goals and targets may be around ESG, maybe it's around other social activities that are important to customers. That purpose led really to your question is really an amplification of some of the things that we saw last year.
The second trend around a business model transformers, that I think is a newer one for us in its current format, about 86% of CEOs expect their business model to change. I think COVID was a great example of how a disruption or a turn, as we refer to them at times at Gartner, how they can force organizations to think about their business model. We saw an incredible growth in direct-to-consumer from pretty much everybody, whether that was a retailer who had stores closed and needed to ship directly to the consumer, or even consumer products' companies who were looking to get the closer connection, enhance that customer experience, and really be able to connect on a personal level.
Personalization is becoming huge in the research node, and in some of the other webinars we've done, we've talked about the work that L'Oreal has done around personalized makeup. Not only from the standpoint of creating a makeup that's unique to an individual customer, but the whole supply chain apparatus behind that, that allows them to deliver that personalized makeup for that personalized customer deliver that and make it in a way that is scalable and affordable.
Then the third trend is this idea of how do I become a digital orchestrator? That definitely is an amplification of things that we've been talking about and the role that technology is playing in enhancing the supply chain. 79% of supply chains agree that they are investing to be digital by 2025. I think the key here for organizations, and what we've seen for sure in the top 25 companies, is a clear answering the question, what does digital mean to me? There really isn't a wrong answer to that as long as you have the ability to say, "I'm company XYZ, and this is what digital means to me."
From a supply chain perspective, a business strategy perspective, it's imperative that those are all aligned, but it's really- more important that we're actually able to define that because that then starts to shape what are the capabilities? What's the supply chain operating model need to look like to support digital? Do I need to now invest more, let's say, in data scientists? Do I need engineers that understand robotics and automation?
The other element to digital orchestration that does pick up on what we've talked about for a couple of years now is this idea of becoming bimodal, or having a bimodal skill set. Where I have mode one skills, which are very targeted and focused on the blocking and tackling of the supply chain, plan, source, make, deliver, customer service, the things that we're all familiar with from the SCOR model.
Mode two though, however, brings a contrasting skill, which is around entrepreneurship, bringing a startup mentality, how do I figure out how to trial things quickly? Probably most importantly, "How do I take those bright ideas that come out of mode two, how do I operationalize them?" The idea of being bimodal, understanding the skill sets that I have, and maybe more importantly, the skill sets I don't have, those are keys to that digital orchestration journey. Those are the three trends in a little bit more detail around what we see within them as they're portrayed by our top 25 and our masters.
Bob: Mike, thanks for that. When you were talking about the business model transformer, I was reminded Abe and I, had Craig Jones, who is the supply chain leader for Under Armour on two weeks ago. Craig talked about two things, one about, as a result of COVID, how the mix of his business from wholesale or to the store, really changed and how they feel they really have to become a direct-to-consumer company, where that mix is going to change.
The second business model transformation he was talking about is how he works with his suppliers. Looking at more of an as-a-service model than, "I'm going to license Manhattan," or, "I'm going to buy this or that," because of the challenge they have in investing in technology right now. Your description of business model transformation really aligned with some of the things that Craig was talking about.
Let's talk about The Masters, you launched the five masters, I can't remember if it was last year or the year before that, as five companies that really set themselves apart, even from the Top 25. What I wondered, is it consistency? Or when you look even within that specialized group, is there something else about them that even the Top 25 can learn?
Mike: There certainly is. We've had The Masters for 10 years now actually. Part of getting to be a master speaks to your question around consistency. Because to be a master you need to have a top-five composite score of 7 in the last 10 years. That's how these five companies, Apple, Amazon, McDonald's, P&G, and Unilever, that's how they've landed and remained in the masters.
Because oftentimes people think that The Masters is a Lifetime Achievement Award from the Academy Awards, or it's hanging someone's jersey from the rafters in a sports facility, it's not. Every year, these companies are evaluated, and if their composite score falls outside of the top five, then that's one year out of, or one year that counts against them, in terms of The Masters. The Masters was really established to recognize, as you pointed out, this high level of consistent supply chain performance.
When I look at the organizations, though, to get to the heart of your question, there are several traits that I see in those organizations. The first is a sustained commitment in investment over time, rather than just focusing on specific projects and specific tactics. What I mean by that is The Masters don't tend to succumb to things like initiative of the month, project of the month, those types of things. As I mentioned, in those previous traits, they have aligned business supply chain, digital strategy, and they set a course and they stay with it. It doesn't mean they're inflexible and rigid, they have their eyes set on a target and they're laser-focused in delivering that.
If I think about the second trait, they also have a broader definition of the supply chain. I would suggest, over time, I would say many organizations, if not most, in the Top 25 and these 5 masters, have broadened their supply chain to be just more than distribution center and transportation. It now includes those elements of the SCOR model plan, source, make, deliver, customer service is now becoming more and more prominent in supply chains.
This broader definition of the supply chain enables organizations to look and make more end-to-end decisions that are the best for the entire organization. We all know, and I've talked to companies that have a more narrow definition of the supply chain, it's very easy to make the decision that's fantastic for distribution or logistics, but may introduce costs in some other part of the business or may hinder from a service perspective, some other part of the business. This broader definition of the supply chain facilitates some of these more end-to-end decisions that enable high performance.
The third trait, and this is one that no one probably in the audience will consider sexy, but it's definitely a trait of these organizations and that's around maturity with the connective processes. What I mean by that is if I were to look at our five-stage maturity models in things like sales and operations planning, supply chain metrics, supply chain segmentation, and cost optimization, these masters companies are at least stage three, if not higher, in our five-stage maturity model.
They are well versed in internal collaboration, they're well versed with things like S&OP, they're well versed around their cost structure with things like cost optimization, and they recognize that they have more than one supply chain. When we talk to organizations around supply chain segmentation, we asked them how many supply chains do you have? The only wrong answer really is one. Most any organization, if they look hard enough will understand that, they have more than one supply chain. These masters have figured that out and have architected their supply chains to really do that effectively.
Then lastly, speaks to our second trait that we've just talked about, this business model innovation. Think about Amazon and the transformation over their lifetime that Amazon has gone through, from a cute little online bookseller to now a major factor across almost all aspects of commerce. The ability to innovate, the ability to get into new markets, new products, those are some of the things that differentiate The Masters from the rest of the Top 25. Although I would argue, all the Top 25 companies have elements of this, I think the masters are the ones that have pulled all these together for a sustained period of time.
Abe: Mike, really great description of those leaders and their quality and their characteristics. If you're taking a look at maybe not the Top 25, the companies that are being considered that didn't make the cut, what do the leaders tell us about where supply chains are going? Where do the other organizations need to focus? You identified the four characteristics, it's really hard to focus on all of them at the same time, where do you suggest the company start as they're evaluating, how do I become one of these top recognized, top tier organizations? Give us a sense of where companies should focus on talent, technology, digital transformation? Where do you recommend that they take a look at first?
Mike: Well, one of the things that I didn't touch on, and I'm sure my Gartner talent analysts would hold me to that, I didn't touch enough on the talent component when we talked about digital orchestration. When I look at what do I think is one of the enablers of success? Or the converse of that, what's one of the things that will hold people back, it's going to be talent.
We've done a lot of research, we have a Top 25 supply chain colleges and universities that we publish every other year. Talent to me is going to be the make or break for organizations, not only if their aspiration is to get into the Top 25, but I think in general, around growing the proficiency of your supply chain, talent is one of those fundamental things that we need to look at. We need to identify where we have talent gaps, we need to identify how we're going to fill them, and we really, really need to focus on how are we going to keep the talent that we have?
I think everyone knows it's much harder to find a new talent than it is to retain the talent that you have. We're seeing a lot of organizations inside the Top 25, and out, really bolstering their talent strategy, competency models, recognizing the different generational type of aspirations that people have and what are they looking for in a job and a career. Talent is certainly one.
The other one I want to touch on, because you mentioned it and I think in some ways it's counterintuitive given the pandemic and what people are going through, but it's about investing, and it's about investing in technology. It's finding the pragmatic deployment of technology that will solve what is your most pressing problem. For a lot of people, it's demand.
It's figuring out what's demand going to look like, how do I demand sense and demand shape, and having a technology platform and a technology partner becomes really important in that journey. If I was to narrow it down to two, I would say it's a relentless focus on talent, and it's going to be a pragmatic approach to technology investment because we cannot cost-cut our way out of this.
We talk in our keynotes, both of our keynotes are going to touch on this for our two symposiums, the goal of getting through this disruption and the goal of getting through any disruption is not survival, it needs to be, "How do I thrive on the other side?" If we are solely focused on survival, we will probably struggle on the other side. It's talent and this pragmatic investment in technology that I think is going to get us through that, and through that help organizations move into the Top 25 and beyond.
Bob: Thanks, Mike. This is the last question, and we've been talking about supply chains. As I noted in the beginning, supply chains are led by supply chain leaders. Gartner talks to a lot of key supply chain officers, you see the best, what distinguishes those leaders who are leading your Top 25? Then what are you recommending to the other supply chain officers to either take themselves or their organizations to the next level?
Mike: There's three things that I'll summarize as the big takeaways from our symposiums. I touched on the first one, organizations, chief supply chains officers, and global chief supply chain officers, they need to strengthen their capabilities to get through disruption, to get through the turns, and look to come out stronger on the other side. You are winning in the turns, navigating through the turns research.
We started with our finance practice that looked at 1,200 companies during the great recession 2008, 2009. Of those 1,200 companies, only 60 came through from a financial performance perspective stronger at the end of the recession than they went into it. Chief supply chain officers and their teams need to figure out how does the supply chain become that enabler of thriving on the other side of a disruption?
The second is, in order to do that, we have to be more adaptive around how we think about strategy, investments, and leadership. One example is, one of our surveys cited that about 80% of organizations, their entire planning process is built around a calendar, it's not built around events. Funding is built around a very rigid calendar. Think about the pandemic, it doesn't know a calendar, it just knows that it's going to start, and at some point, it's going to stop.
Leading organizations need to figure out, "How do we become more flexible and adaptive? Not only to embracing some of those three trends that we talked about, like a business model transformer, but also how do we think about how we're going to fund these initiatives? How can we be creative but probably more flexible in how we do that? Then lastly, which to some of your earlier comments piggybacks on what we've been talking about for the last three years at our events, is that there is no such thing as the next normal. The future is going to be defined by ongoing turbulences.
We are in a disruption, we're in a turn now, there will be another one hopefully, not this duration or this magnitude. Leading supply chains have to figure out how do I create flexibility, resiliency, and agility in my supply chain so that I can weather the next storm whatever it might be? What can I learn from how I've weathered this storm? What are those transferable skills that come out of weathering this storm that I can apply going forward?
Because as we look across the supply chain landscape, we expect organizations will be continuingly dealing with disruptions. They may be local, they may be global, they may be long, they may be short. Supply chains are forever going to be tasked with that resiliency and agility question, and how are we going how are you going to get us through the next disruption?
Bob: Mike, thanks so much. That's all the time we have today. Thanks for joining. Again, I want to thank Mike Griswold from Gartner. I hope you read his Top 25, and we hope you'll be back for our next episode. We look forward to seeing you then. I'm Bob Trebilcock.
Abe: And I'm Abe Eshkenazi.
Bob: The Rebound is a joint production of the Association for Supply Chain Management and Supply Chain Management Review. For more information, be sure to visit ascm.org and scmr.com. We hope you'll join us again.
