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Supply Chain

Supply Chain Centers of Excellence

The idea behind a supply chain 'center of excellence' (CoE) is to inject innovation into an organization’s culture through cross-functional engagement of key stakeholders who actually know how the business works and where the real opportunities are hidden. By Rich Becks

A CoE initiative is usually commissioned by the executive team as a way to shake things up and begin to address problems holding the company back or causing it to lag behind its competitors.

In short, forming a CoE is usually an acknowledgement that a company’s operational performance needs improvement.

All too often, we see CoE initiatives launched with high hopes only to fail to deliver tangible business results – and eventually, lose momentum. Here are some common challenges we see having an impact on whether a CoE succeeds or fails:

  • Governance: Most companies tend to select the right people, but don’t really empower them to change their organizations. They are expected to advocate or influence others to change behaviors and business practices, which are usually deeply rooted.

  • Change management: Seeding a CoE with respected subject-matter experts is the best way to gain credibility within an organization. However, this sometimes places members “outside” the common interests of their respective functions. Without continuous executive-level support and constant communication of needed reforms, stakeholders face the difficult task of persuading coworkers to expose their problems, leave their comfort zones, and risk new ways of working.

  • Metrics that actually move the needle: The hallmark of a CoE is focus on fact-based, data-driven measurements of business performance. The old adage “How do you manage something if you can’t measure it?” has never been truer. But COEs often scramble to measure things for which they have data, sometimes misunderstanding if that data represents the symptom or cause of poor performance. In the end, many organizations find themselves merely documenting bad processes and not really getting to root causes.

  • Collaboration or communication? Many companies confuse collaboration with information sharing. Posting problems for all to see without really getting their organizations to reflect and understand how their process ultimately affects customers causes them to tune-out COE recommendations. They usually suspect something is wrong upstream. And without all parties helping to identify the source of the problem, this eventually dilutes stakeholder buy-in.

  • Misalignment of rewards and incentives: Let’s face it, functional goals and objectives may be aligned but measurement systems are not. Production wants long manufacturing runs, procurement wants cheaper parts, and sales wants plenty of inventory. What could go wrong with that? Enterprise processes are now strung across the globe with each entity seeking to optimize their own performance metrics that often conflict with each other.

  • Overlooking technology as a stimulus of COE change: The IT axiom that “the problem is the process, not the technology” is only partly true. Sometimes technology is wrapped around bad processes, and sometimes the wrong technology is chosen to “improve” good processes. Knowing how one affects the other is important to COE success.

They struggle to get the data they need to understand the challenges they face and nearly perish before finding an issue they can affect. CoE initiatives sometimes play out like an old movie: familiar, stiff, a bit boring and sometimes too predictable. Our CoE “heroes” begin with a promise of a new beginning but soon face adversity, resistance, and then, denial.

If you want your CoE initiative to resemble a modern action movie, consider some of these best practices we have developed with our clients.

  1. Commit to serve your customers above all else. Be humble and helpful and listen to your stakeholders first. Before you develop a hypothesis about what is wrong, find out what is right about how your company competes (and then, promise not to mess that up). Get a C-level sponsor, if at all possible.

  2. Recruit your skeptics as advisers. Get their fingerprints all over your work. Communicate your challenges in terms of your customers’ expectations. Let the customer be the bad cop, and you be the good cop. Be accountable for results not activities.

  3. Don’t chase key performance indicators (KPIs) just for show. KPIs cost money to collect. Only collect data that tells you something about your core performance to your customers. Things like stockouts, line downs, inventory turns by product, returns, perfect order fill rates, and so on. Measure transaction-level data to identify root causes to process exceptions. Don’t over-summarize, generalize or overly speculate without the facts.

  4. Collaboration is a conversation not a command. If your supplier or coworker can’t do something ask why. How much can they do? When? How could they respond faster next time? How can you help them help you?

  5. Think globally about processes but execute locally. Realize that data degrades every time you touch it. Six process touches, all 90 percent good, equal 53 percent overall process accuracy. Respect the math. Stop “touching” (judging) the data, let the problems surface, and fix the root cause. Encourage performance metrics to be more holistic and focused on customer success – not just your department.

  6. Don’t underestimate the power of using Collaborative Planning and Execution to rewire your global processes. Tapping into business networks with existing data connections and best practice-driven processes, such as E2open’s, can save your CoE initiatives a lot of time and greatly reduce risk.

The movie is yours to script. Make it bold, interesting and full of action and your audience will stick with you to the end and be satisfied their time was well spent.

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