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Strategic Supply Chain Management
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brought in several experienced supply chain managers from other leading companies in a range of industries. Avon plans to repeat the program every year with new groups of people to ensure that everyone in the organization understands what a world-class supply chain looks like. The leaders of Avon s transformation agree that communication is perhaps the single most critical success factor and the one they most underestimated. Everyone in the organization must understand the change, why it s happening, and his or her role in the new world. Even with the best-laid plans, though, changing a culture and long-held behaviors doesn t happen overnight. You always read in books about how tough change management is, but the reality is that it s even harder, notes Watson. Avon was very clear on the fact that its supply chain transformation would be process-driven, not systems-driven. Instead of overhauling its computer systems, the company focused on getting the processes right first. The leadership team felt that doing both at once would be unmanageable. Therefore, aside from creating the central data repository and the Web-based system for suppliers, systems upgrades were put on hold even though Avon s country-based, entrepreneurial model had resulted in a jumble of systems and no integration. This lack of integration is starting to cause problems now. Given the growing complexity of the business and the need for greater speed and responsiveness, not having the system and information in place is frustrating. Mindful of these problems, Avon has begun designing a new, global platform to replace the existing system and support the new processes. In the meantime, the company is savoring the results of its transformation effort. By rethinking the supply chain, increasing efficiency, and taking out costs, Avon will save about $50 million annually or two gross margin points. Almost half these benefits are a direct result of the company s new approach to working with suppliers: the smaller supplier base, local sourcing strategy, supplier partnerships, and collaboration. Just as important, Avon Europe is far easier to manage now that it has a streamlined organization, upgraded skills, simplified processes, and the right metrics. I don t say this lightly, but this has been the most challenging, the most rewarding, and the most fun thing that I ve ever done, says Kitchener, a 30-year veteran of the company. The journey isn t over, though. It s never over.
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Core Discipline 3: Design Your Organization for Performance
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Many companies still think of their supply chain organization as a set of
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functions that complements manufacturing or as a set of operations departments such as receiving, production, and logistics. To provide effective end-to-end supply chain management, however, the organization should include all the core supply chain processes plan, source, make, deliver, and return as well as the supporting infrastructure. That means grouping these processes under one senior manager and, more important, giving that manager a set of cross-functional performance objectives and the resources needed to meet those objectives. This is the key characteristic of the integrated model of supply chain organization to be described in more detail later in this chapter. An integrated organization requires new skills and a new way of thinking about organizational structure. The complexity of today s supply chains and the advent of highly sophisticated technologies have fundamentally changed the skills needed within the supply chain organization. As a result, companies face three primary challenges:
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Determining how to structure the organization Defining roles and responsibilities Finding the right people with the right skills
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Strategic Supply Chain Management
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Moving to an integrated model doesn t necessarily mean overhauling your existing operations, creating a new department, or inventing a new vice president. It does mean ensuring that your supply chain organization is a collection of departments and people clearly responsible for executing and continuously improving each of the core processes. Thus, even if you don t plan to group these departments and people together through a large-scale reorganization, you most likely will need to consider some level of change to your existing organization to ensure that it is able to support integrated, cross-functional process management. This may mean consolidating two departments to eliminate a functional boundary or process handoff, rescoping the responsibilities within a particular group, or realigning existing groups to focus on specific channels or customers. You also may need to revaluate the skills within your current organization. Certainly, a high degree of fluency with state-of-the-art information systems is a must for virtually any key supply chain position. Technical skills aren t enough, though. Only focused management skills will set your organization apart from the competition. Today s supply chain requires people who can assimilate and interpret vast quantities of data and then make effective decisions. It requires people who have breadth of operational experience and depth of process knowledge, people who have a passion for satisfying customers. It requires people who can embrace new measures as tools to help improve overall performance. And, as if this were not enough, the cross-functional nature of the end-to-end supply chain also demands conflict-resolution skills.
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