Supply Chain Excellence by the Numbers

By Lora Cecere on Mar 13, 2015

One in three companies have a supply chain center of excellence, but only one in two is successful. These are grim statistics. This is especially true when the word “excellence” drips off of the lips of the supply chain leaders that I meet.

At Supply Chain Insights, we are busy working on a report on Centers of Excellence to understand the drivers and barriers. While I will know more when I finish the research than I do now, I want to encourage all readers in manufacturing and retail to participate. The survey will be open for four more days. It will close on March 15th. Everyone participating in the research, and completing the study, will have the opportunity to share the results with their peers. As follow-up, we are having two virtual roundtable sessions: one focused on companies that have centers of excellence, and the second is focused on helping those that do not have a center of excellence to understand the potential value proposition. (So far, we have 40 sign-ups.) The complimentary virtual roundtable is part of our philosophy of “You give to us, and we give to you.” Our goal is to help companies fail forward. How so? By sharing the research and networking with peers, we can help.

So, while I have not heard the responses from the voices on the phone responding to the results from the survey about centers of excellence (I love connecting with supply chain leaders on these types of trends), nor having finished the quantitative research, here are some trends that I am expecting.

• Confusion of Center of Expertise with Center of Excellence.These are two very different concepts. A center of expertise is a collection of supply chain experts. They are often disciples of  best practices. The goal of a center of expertise is to drive best-practice adoption. A Center of Excellence is different. The Center of Excellence is driving supply chain evolution against an operating strategy. They question “best-practice concepts” and actively test-and-learn, while evolving  supply chain practices.  The Center of Expertise has a higher probability of failure.
• Pull Versus Push. I once interviewed a successful Center of Excellence manager who had a percentage tacked up on his bulletin board. The day I was at his office, it was 92%. When I asked what the number meant; he responded that it was the percentage of projects that were pull versus push which he was currently involved in. He stated that when there was more “pull,” his organization was more successful. I agree. When a Supply Chain Center of Excellence becomes push–dictating practices–there is a higher probability of failure.
• Clarity of the Operating Strategy. Supply chains are fit for purpose. They deliver on the operating strategy. I expect to see that where there is clarity in the operating strategy, the Supply Chain Center of Excellence is aligned to deliver on success.
• Active Work on Design and Modify. The use of network design technologies, in combination with inventory optimization technologies, drives a higher level of satisfaction for the Center of Excellence. While traditional supply chain practices used network design technologies to define brick-and-mortar strategies on an ad hoc basis, the new focus is to use these technologies to actively design and modify flows, buffers, and processes. Network design technologies are growing up and becoming part of enterprise architectures. Those that have successful Centers of Excellence are leading the parade.
• Alignment on Corporate Objectives. Metrics Matter. Let’s face facts. Most organizations are far more comfortable with functional than corporate metrics. Functions within the organization struggle for alignment and functional metrics are more clearly understood. It’s what’s taught in most supply chain classes and it is reinforced by the SCOR model. For example, a manufacturing leader feels more comfortable with a Return on Asset (ROA) measurement than Return on Invested Capital (ROIC). Why? It is more controllable. Successful Centers of Excellence bridge this gap. They connect functional and corporate metrics in defining what is possible.