SMC3 Connections 2018

We’ve all heard of the concept of continuous improvement, right? So, let me start by asking for your input with this question:

What is your top priority for achieving improvements in your business this year?

Equipment standardization and/or upgrades?
Process standardization?
Hiring practice improvements?
Technology upgrades?
Cost reductions or performance improvements from suppliers/labor?

For me, during my 30-year supply chain career with Fortune 500 companies, I learned that one of these choices always rose to the top. I think you’ll figure out which one as we chat here for a few more minutes.

My husband always liked to simplify my job as a supply chain leader to “…just getting stuff from point A to point B.” To him, inventory is “1 item, 2 items, 3 items, lots of stuff.” Clearly an oversimplification by someone who’s not a supply chain professional, right? I’m afraid, however, that many of us think of our roles and our staff’s roles too tactically, too simply, and not strategically enough.

Continuous improvement is vital to business performance. Either you make progress, get better all the time, or, in this fast-paced environment, your business will perish. How are all of you ensuring a constant upgrade of performance and competitiveness? Are you thinking strategically enough? Are you creating a culture and teams of strategic problem-solvers? Is there a relentless drive to make your supply chains better every day, week, month?

Lots of managers are great at pushing daily transactions through the supply chain and beating carriers for better rates (or beating customers for price increases). The daily fundamental stuff has to be done, but today’s supply chains require people with the experience, abilities, vision, and desire to address amorphous global problems, create breakthroughs in service and costs, and lead cross-functional, cross-continent teams.

I had the privilege of working for global manufacturing company Danaher Corporation for many years. If you’ve never heard of Danaher, ask your investment advisor because it has been one of the top-performing stocks of the past 25 years across all categories. They are an extremely high-performing organization because we had a keen focus on the links between people, strategy, and operations. But, despite our outward, public success, we knew where all the flaws were…our supply chains were still pretty lousy in our view. I often said to my team after our quarterly results were announced to Wall Street, “Wow…great numbers! Imagine how good they could be if we really got our act together!” We were always looking for continuous improvement. We called it having a “healthy paranoia.”

How many of your supply chains are operating at six sigma level—meaning out of every 250,000 of your orders, one—only one out of 250,000—has any sort of error. That’s the definition of a great supply chain. Most of our supply chains fall way short of six sigma performance. One critical reason is that our supply chain professionals aren’t involved in strategic decision-making. Most of our finance and marketing colleagues probably don’t even invite us to participate in strategic planning, and that results in strategic targets that are out of whack with the way our supply chains work. It’s starting to change, but I think a key reason is supply chain managers often don’t demonstrate the skills, the vision, and the desire for strategic planning.

As supply chain leaders, we need to step up, demonstrate strategic problem-solving skills, and ask to participate in the company’s top-level planning. Are you making sure you’re involved in strategic planning of your organization?

Let’s assess your situation:

Here are six questions to ask yourself. The more “no” answers you have, the more work you have to do to get linked to your organization’s top-level strategies.

1. Execution without effective strategy is chaos. Have you eliminated the chaos from your department so that you can execute every day without getting pushed and pulled in different directions by other functional areas?
2. Are you personally involved in cross-functional strategic planning activities?
3. Are your annual objectives directly linked to your organization’s top-level business strategy?
4. Are you coaching new supply chain professionals about how to link their daily activities to the overall business strategy and objectives?
5. Can you and each of your staff members name your organization’s top-level objectives for this year, and for the coming three years?
6. Have you earned the respect of the other functional areas in your organization so that they understand the value you create?

Here’s what to do if you answered “no” to any of the six questions.

• Request that you be involved in your organization’s annual and long-term strategic planning process. Be relentless…keep asking until they let you in.
• Develop an internal marketing campaign for your department that communicates to other functional areas the value you create. Tell them over and over about the good things you’re doing to enhance the achievement of top-level objectives.
• Discuss with your marketing department the delivery and service options you can provide to enhance the product’s competitiveness.
• Benchmark your competitors’ delivery and service options to learn where you’re under-serving and perhaps over-serving your customers. Share your findings and recommendations with your marketing/sales organization.
• Develop total cost-to-serve analyses for products and customers. Discuss the total profitability of your product lines and customer categories with your marketing colleagues. Build strategies with them for improving profitability based on this information.
• Build your group’s objectives around the top-level objectives set by your CEO, even if you don’t report directly to the CEO.
• Develop metrics for measuring logistics and supply chain contributions that impact your company’s top-level objectives, such as cash flow, revenue growth, and net income.
• Encourage your staff to ask themselves every day…how do my activities directly and positively impact our company’s goals? Am I doing anything that makes it harder for our company to meet its goals?
• Constantly question the tactical and transactional activities of your team. Do they enhance your company’s value with customers and shareholders? What actions can you take to eliminate the wasteful activities? Can these activities be done more efficiently by another organization? By an automated system? You’ll be amazed at the year-over-year improvements you can make in eliminating wasteful activities by staying focused on if and how those activities support top-level objectives.

…and here’s where we get back to that initial poll about the top priority for achieving improvements: Hire, train, and develop employees who have a broad set of business skills, including analytical skills, communication and interpersonal skills, and leadership abilities. I’ve learned that the key to continuous improvement is the hiring practices that result in team of critical thinkers and problem-solvers.

The TV journalist Bill Moyers once said, “School is where I got my questions answered and life is where I got my answers questioned.” Hiring practices that seek supply chain managers who are willing to question the way things work, find new ways of performing better, and then empowering them to make the changes is truly the foundation of continuous improvement.

Those are the people who will find new solutions to your asset utilization problems, your cost over-runs, your technology constraints, and process problems. If you don’t have the hiring practices to create the team of critical thinkers and strategic problem-solvers, you won’t have the progress your business needs to survive.

And here’s the really big kicker to improving your team’s performance – diversity. Hard research shows that better decisions are made 73% of the time from gender diverse teams. Better decisions are made 87% of the time from broadly diverse teams. So again, it’s about hiring practices and building your teams. You want to amplify the effects of your problem-solving and continuous improvement efforts? Take action now to hire and create your team of diverse supply chain professionals based on gender, race, age, and personality.

So, my message is that continuous improvement comes from the talent you attract, retain, and develop as strategic problem-solvers, and that diversity in your teams accelerate the performance. Your involvement in strategic planning, hiring strong talented problem-solvers, and creating diverse teams will yield better operating and financial results and, ultimately, a more satisfying job for you personally.

And now, as your honorary conference chair, I am pleased to officially open the 2018 Connections Conference.