August 2, 2014

Article Review: Supply Chain at the C-level

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Chameleon Board meeting

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Michael Koplov over at contacted me last week to write a review of his article, Consumer-Driven Technology Creates the Need for a C-Level Supply Chain Focus.

The article focuses on the ascension of Tim Cook to the CEO position at Apple, following Steve Jobs’ decision to step down from the position due to health-related issues.  More accurately, Michael discusses Cook’s background in manufacturing and, even more accurately, in supply chain.  He writes:

What’s most surprising about Cook’s move up the ladder at places like IBM, Compaq and then Apple, however, isn’t his track record or reputation, it’s his origins in manufacturing and the supply chain. Widely viewed as the father of Apple’s best-in-class supply chain, Cook’s success as a supply chain-minded executive is a rare sight – not because supply chain experts lack knowledge or skills. Rather, it’s that the industry is lacking supply chain talent in the first place.

Cook’s promotion is a move that other technology corporations should take note of. Why? Because Cook assuming the top spot is indicative of a growing need for supply chain expertise at the C-level.

The rest of the Michael’s discussion stays on point – that the C-level, and possible even the CEO’s position, needs to have someone with a rich supply chain experience.  He states:

A supply chain expert on the board of executives can push for the complete integration of business initiatives and supply chain strategy.

He concludes by observing that the reason more companies aren’t adding Supply Chain experts to the C-level is, by and large, due to a lack of talent and that the supply chain profession is headed for a crisis.

While I am grateful for the opportunity to comment on Michael’s thoughts, I can’t say that I agree entirely with his conclusions.  Here’s why:

  • The CEO’s position is one that is focused on the overall strategy of the business and increasing revenues and shareholder value.  While supply chain is critical to a business, and may provide a strategic advantage, it is only necessary if the company’s products are in demand.  Efficiently building that which no one wants is worse than inefficiently building what everyone wants.  Why?  Because to do so would be overproduction – which we know to be the worst of all wastes.
  • Apple may have the best-in-class supply chain, however, they are legendary for innovation and a constant ability to leverage that innovation in order to succeed with a first-mover strategy.  That strategy has created the demand that the supply chain has delivered.  Stock analysts and industry observers didn’t shudder, and the stock price didn’t plummet, when rumors of Jobs health surfaced because everyone was concerned about how Apple would now source its components.
  • Every functional group believes it needs more and greater representation at the C-level.  HR pros talk frequently of earning a seat at the executive table, indicating that without talent and an engaged workforce, no other function in the organization can succeed.  So, too, with Supply Chain, or Facilities Management, or Business Analysis.   Consider the Shingo model – all functions have an equal share, and all are important, and should be equal, but equality need not come from elevating every function to the top of the food chain.  To do so is indicative of command-and-control environments where those with authority jockey for position at the top based on personal merits, not operational need.  This passage from the Shingo Model & Application Guidelines is particularly salient:

“The genius behind ‘The Toyota Way’ has been their ability to knit together a complete set of tools and concepts that fit with their guiding principles and a propensity for continuous improvement that consistently improves the fit. The tendency to disassemble these tools and concepts into Six Sigma, TQM, TPM, JIT, etc., has resulted in a haphazard tools-driven attempt to copy, and delayed understanding of what is really required to become operationally excellent.”

While no one disagrees (I hope), that functions like HR and supply chain are vital, they still struggles to earn their place.  Why?  Because those functions are cost centers and, for good or ill, businesses focus on increasing revenue first.  As such, product development, engineering, marketing and financial functions will continue to take precedence with manufacturing and operations trailing behind.

While the manufacturing and supply chain practices of places like Toyota, Dell, Southwest Airlines and Wal-Mart will continue to be studied in business schools and aspired to in board rooms, even those companies are only successful due to the demand for their products.  The supply chain methods practiced there are integrated with and enable the overall strategy, however, I’m reluctant say that perfecting the supply chain is the key to business success in those companies.

Simply put, I’m not certain a C-level supply chain expert is necessary for success, and there’s little evidence that such a position is sufficient to guarantee excellence in business operations any way.

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  • Lora Cecere

    A sad, but true commentary. The traditional supply chain is pigeonholed into the efficiency and cost saving value proposition while the more advanced and emerging supply chain organizations are focused on actualizing the corporate strategy which includes channel management and growth strategies through value chain design.

    • David M. Kasprzak

      Thanks, Lora,

      I’d love to know more about “Value Chain” design as opposed to “supply chain.” Would you suppose that the CEO is not already focusing on the value chain, and if not, is the solution to the problem to create another C-level position? Consider me very interested in knowing your persepctive.

  • Trevor Miles

    Hi David

    I think the discussion needs to be elevated to Operations instead of Supply Chain, where Operations covers the activities and functions whose primary function is to acquire customers and satisfy their demand. When worded this way itis easier to understand Lora’s postion on Value Chain rather than Supply Chain.

    Depending on the indusry different functions will have a greater or lesser influence. For example, at Apple Product Design – both Engineering and Design – will have a lot on influence, whereas at Proctor & Gamble Engineering’s influence will likely be insignificant (when compared with Apple) whereas Marketing will have a much bigger influence, as will Distribution.

    Tim Cook’s experience covers all of these functions, not just the coordination of inbound materials required to assemble products. That is a very narrow view of supply chain management.

    • David M. Kasprzak

      Trevor, thanks for deepening the conversation. Always love it when readers take the discussion and run with it. I agree, “operations” might be a more intuitive description of the organization that oversees the “value chain” – as opposed to the limited view of “supply chain” as you’ve described.

      Value Chain is, indeed, the CEO’s responsibility and, as such, I’d have to say that bringing people into the office with an appreciation for, and experience with, all aspects of the value chain is a good move, indeed.