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Your supply chain organization should be evolving constantly, but several conditions may drive more major change. Any significant supply chain improvement effort, for instance, may make it necessary to redefine roles and responsibilities to focus on the right objectives, modify organizational structures to reduce process complexity, or develop new competencies and skills. Similarly, updates to your company s overall strategy may render existing competencies obsolete or give rise to the need for new capabilities. Changes in the business environment, too, may make it necessary to improve specific supply chain capabilities. Or you simply may have to clean house or redeploy resources that are underperforming. Changes in how you evaluate supply chain performance also can drive organizational changes. In a traditional functional organization, metrics often are designed to optimize performance within a specific depart-
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CHAPTER 3 Core Discipline 3: Design Your Organization for Performance
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ment or function. But as your supply chain strategy and processes evolve, you ll need to embrace a new set of metrics designed to optimize performance for the company as a whole, as we ll discuss in Core Discipline 5. If you don t restructure and develop your organization in a way that supports these new performance objectives, you ll likely fall short of your targets and sabotage your supply chain strategy. We rarely see a shift in strategy so major that it drives a fundamental rethinking of needed skills and an organizational overhaul. Because your supply chain organization is responsible for executing your supply chain strategy, you ll need to consider them both in parallel. Stratex Networks, a leading provider of digital microwave radios, provides a case in point, illustrating how capabilities within the supply chain organization can be developed and improved as the supply chain strategy becomes more focused and corresponding process changes are made. In early 2002, Stratex made a strategic decision to focus on improving its return on assets and customer service levels by elevating orderdelivery performance and reducing order-fulfillment cycle time. Among other changes, this meant a fundamental overhaul of the company s operations strategy and a move to outsourced manufacturing. The company embarked on an aggressive schedule for the transfer of production from San Jose, California, to a manufacturing partner in Taiwan. In parallel with the transfer of manufacturing, Robert Schlaefli, Stratex vice president of global operations, launched an initiative to fundamentally redesign the company s core supply chain processes to support the new manufacturing model.1 The company needed to maintain strong relationships with several key suppliers while transferring responsibility for most materials purchasing to its new manufacturing partner. Stratex also was concerned about the communication challenges inherent in an outsourcing relationship and wanted to ensure that customer requirements could be collected, integrated, and acted on as quickly as possible. Many of the new processes were designed to optimize the flow of an order as it progressed through the configuration and manufacturing process for example, the criteria for accepting a customer order were updated, and checklists were put in place to ensure that all critical information was available prior to order entry, eliminating the delays that occurred when required data had to be researched after the order was already in process. But Stratex still had information gaps between functional groups and confusion about which function ultimately was responsible for order-delivery performance. While regional sales administration, finance, order management, planning, procurement, and traffic were each
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Strategic Supply Chain Management
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responsible for a subset of the data included within each sales order, none had ultimate accountability for ensuring that commitments to the customer were made on a timely basis or kept once they were made. Stratex quickly concluded that the many handoffs inherent in its current organizational structure would not support the new strategy. The need to improve delivery performance and the decision to outsource production really elevated the importance of the order-fulfillment process. Stratex needed to start thinking about the management and scheduling of orders, the configuration of the product, and the shipment to the customer as one process, not three or more. Prior to the move to outsourcing, Stratex had a very traditional operations organization, with distinct functional groups responsible for order entry, order management, production, planning, sourcing, and logistics (see Figure 3-1). While the groups interacted frequently, Schlaefli felt that his people were passing information back and forth, as opposed to sharing common information. Communication about delivery schedules between functional groups and when interacting with customers was inconsistent, and both salespeople and customers expressed frustration at being unable to get an accurate order status. Stratex s solution was to recraft the organization, with a new group focused on managing the entire order-execution process from the time an order is entered to the time the product is shipped to the customer. Stratex created an order-fulfillment team and moved the traffic functions within
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