Supply Chain Organization Design and Talent

Reorganizing without a clear business reason for doing so can lead to high supply chain costs and increased supply chain risk. Too often supply chain organization redesigns simply mask areas of friction, if not compound persistent challenges, around resource allocation, building and delivering expertise, and decision making.

Supply chain leaders must first map the challenges driving the need for reorganization. Commonly these are a failure to optimize people, partners and assets; gaps in knowledge and capabilities; and problems in the clarity, speed and quality of decision making.

Once the challenges are made clear, you can define specific objectives for the new organization. For example, if the pace and cost of adding new staff (FTEs) is exceeding that of revenue and profit growth, you can set out to improve scalability of FTEs in the supply chain. Or, if the supply chain organization is too siloed, you can establish the need to align decision making with the commercial business.

And finally, you can develop and apply targeted strategies. These strategies may range from “light-touch” solutions (e.g., adding cross-functional teams, upskilling employees, redesigning the cadence and composition of team meetings) to major restructuring (e.g., installing a shared service organization, adding new roles, adding an intermediate management layer).

The talent shortage is an ongoing struggle in supply chain organizations — especially as nontraditional work models develop — and younger generations demand more flexibility in all aspects of work. What’s more, supply chain disruptions like the COVID-19 pandemic intensify the pressure on supply chain leaders to reinvent work.

But how do global chief supply chain officers redesign the frontline roles that appear to be less flexible by nature, like those based in warehouses and factories? There are many more frontline workers in the supply chain workforce than desk workers, and developing great talent is mission critical for high performance in the future supply chain.

Fortunately, there are many ways to improve the frontline worker experience when you focus on activities instead of treating an entire role as “on-site only.” For example, many machines can now be operated and monitored remotely. Using technology, shift schedule design can be delegated to the workforce to a certain degree, so workers are in a better position to align their work and personal schedules. Providing autonomy will lead to happier workers and better business outcomes.

Coordinating end-to-end processes is consistently a top challenge for supply chain leaders. Individual positions, teams and functions evolve over time, leading to a complex web of roles and responsibilities and a lack of clarity in decision-making authority.

At the same time, increasing demands for speed and efficiency cause resources to be prioritized for short-term results at the expense of building foundational supply chain management and digital supply chain capabilities — both key for adapting to constant change.

What supply chain organization design is best to avoid the bureaucracies that stagnate decision making and to break down the silos that cause fragmentation and duplication?

Gartner recommends distributing decision-making authority in the following four ways to not only accelerate operations but also to successfully deliver end-to-end process outcomes.

1. Designate the chief supply chain officer as the governance lead, setting directives on strategy and policy, aligning metrics, budgeting and defining roadmaps.

2. Use a center of excellence (COE) to design infrastructure and adapt capabilities for the supply chain.

3. Entrust functional teams (e.g., S&OP, OTC, P2P) with process stewardship, execution plans and trade-off decisions.

4. Empower buyers, manufacturing schedulers, customer service reps, warehouse staff, etc. to make tactical decisions related to product and service delivery given their proximity to operational realities.

A supply chain center of excellence (COE) is a physical or virtual center of knowledge, concentrating on developing expertise and resources in a supply chain function, capability or process to attain and sustain performance across the supply chain. Supply chain COEs can be cornerstones of innovation and adaptation of the supply chain strategy, but without a proper business context, they can fall short of enacting organizational change.

The first step in organizing an effective supply chain COE is choosing the best-fitting COE organization structure based on your current capabilities and future needs. There are three basic COE designs:

1. Decentralized COEs, or expert teams within the business units that share best practices

2. Center-led COEs, in which a small, central coordinating team seeks to identify and adapt critical, few enterprisewide efficiencies

3. Centralized COEs, in which one team of full-time professionals prioritizes and deploys their expertise toward enterprise initiatives

To enable COE success, Gartner recommends following these three steps:

1. Focus the mission of your COE by framing the scope and scale of the COE across functions, processes and/or capabilities.

2. Maximize resource utilization by taking a portfolio approach to multiple COEs across the global organization.

3. Assemble a network of partners to support COE governance and project management.