Agenda for Supply Chain Strategy and Enablers, 2012

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1 G Agenda for Supply Chain Strategy and Enablers, 2012 Published: 23 February 2012 Analyst(s): Michael Dominy, Dana Stiffler When supply chain executives establish the right strategies and enabling capabilities, they can support growth, agility and sustainability, while containing or cutting costs. This agenda will provide advice about key strategies and best practices for building enabling capabilities. Analysis Figure 1. Supply Chain Strategy and Enablers Agenda Overview Source: Gartner (February 2012)

2 Every supply chain organization faces the unyielding pressure to reduce costs, improve service and support new growth initiatives. If supply chain executives want different results, they usually need to significantly upgrade the capabilities that underpin and cut across all supply chain processes and functions. This means more than just operating better; it requires an investment in developing people, processes and technology. Change requires a set of function-spanning capabilities that must be part of an enterprise's overall strategy. The supply chain strategy and enablers agenda focuses on the key strategies and enabling capabilities an enterprise must tackle to successfully support corporate objectives. The agenda aims to identify what capabilities and strategies a supply chain organization should invest in, but also how enterprises should go about implementing the initiatives to achieve a higher level of supply chain performance. All supply chain executives know that improving supply chain performance is an ongoing journey that becomes an integral part of the job. As enterprises struggle to transform, supply chain leaders must ensure that they align critical strategies and enabling capabilities to support the organization's overall strategy. This alignment produces supply chain initiatives that deliver tangible business benefits, now, and in the future. The key supply chain strategies and enablers are: Organization, talent, change management and governance Outsourcing and external services Sustainability in the supply chain Supply chain segmentation, network design and cost-to-serve Supply chain risk, metrics and performance management Supply chain business and technology architecture Key Issues How can companies create and manage an effective supply chain risk management function? How can sustainability be integrated into products, services, enterprises and supply chains? How do we plan, implement and manage transformational initiatives? What architecture do we need to support supply chain transformation? What are the best practices when selecting or working with consultants, supply chain outsourcing or supply chain management (SCM) business process outsourcing (BPO) providers? What skill sets are required to transform and govern the supply chain organization? Page 2 of 7 Gartner, Inc. G

3 How can companies create and manage an effective supply chain risk management function? Risk is indelibly linked to SCM; supply chain executives must deal with risk all the time because the supply chain is responsible for acquiring, transforming, holding and transporting inventory. Global uncertainty and the threat of disruptions require executives to be able to identify, assess and plan for risks. The earthquake in Japan, flooding in Thailand and political upheaval in the Middle East represent recent examples of why supply chain risk management is important. This process involves identifying risks across the extended supply chain and the likelihood and impact of these, as well as developing and implementing a plan to address these risks. This research will build on Gartner's existing research about supply chain risk management. In 2012, we plan to conduct research concerning the current state of supply chain risk management. The research will identify practices, tools and techniques used to plan for, mitigate and manage supply chain risks. We also plan to deliver research illustrating the alignment between risk management and supply chain performance management. How can sustainability be integrated into products, services, enterprises and supply chains? Sustainability continues to grow in importance. For business, it has expanded from compliance and reporting exercises, to the development of critical new platforms for IT and organizational transformation and growth. The evolution of sustainable practices has also had an increasingly important focus and impact on the macrosupply chain and microproduct scales. As a result, it has attracted marketing attention, investment and innovation, and fueled advances in technology. Mitigating the risks and exploiting the opportunities it presents are critical new competencies in the supply chain. This involves defining, quantifying and codifying sustainability as a competency, and exposing the business value it creates. Enabling sustainability that spans the enterprise and supply chain requires: Robust frameworks and metrics that the organization can interpret and measure in operational and financial dimensions. A new view and model of supply chain performance and optimization that's focused on holistic resource usage. IT integration to promote efficiency and performance through necessary levels of visibility. In 2012, we plan to research the drivers of sustainability in the supply chain. Our research will examine sustainable practices across multiple supply chain processes, such as sourcing and procurement. We also plan to deliver quantitative models and tools to help enterprises assess the maturity of their sustainability. We will publish those models and tools alongside research about Gartner, Inc. G Page 3 of 7

4 how to incorporate sustainable strategies, technologies, services and best practices into the ongoing operation of the supply chain, and how software applications can support those activities. How do we plan, implement and manage transformational initiatives? When the enterprise's overall strategy changes dramatically or calls for a significant change to the way the supply chain is managed, supply chain executives and their staff need tools, frameworks and advice about how to transform the structure and operation of the supply chain. For example, manufacturers in some industries are changing how they compete. They are moving from a product-centric approach to becoming a total solution provider. This requires a shift from a focus on product features and cost to orchestrating multiple value chain partners and competing to deliver the total customer experience. Transformation means significantly enhancing the supply chain organization and its enabling capabilities that enterprises need when attempting to make the leap from SCM to demand-driven value chain orchestration. In 2012, we plan to deliver research on best practices for planning and managing large-scale supply chain initiatives that typically span multiple supply chain functions. We will also develop tools and frameworks to aid supply chain executives and their staff in key aspects of supply chain strategy and transformation, such as supply chain segmentation and cost-to-serve. Our research will also cover the supply chain implications of transformational business models, such as the evolution from a product-centric manufacturer to a solution-centric provider of products and services to an original solution orchestrator (OSO). We will again publish the global and regional Supply Chain Top 25 research in What architecture do we need to support supply chain transformation? As is the case in IT, the right architecture to support current and future supply chain requirements is critical for enterprises in every industry and across the globe. Before supply chain and IT executives can establish this architecture, they need to understand how the physical, digital and data supply chains work together to enable the enterprise's overall corporate strategy and goals. This insight can enable them to support, or even lead, initiatives designed to transform a manufacturer or retailer from a product-focused company into a total solution provider. Supply chain architecture includes not only the physical make-up of the supply chain, but also the enabling IT systems on which supply chain applications run. As enterprises revamp their business models or implement more-advanced supply chain capabilities, technology enables them to scale prototype or pilot initiatives across a supply chain network and better collaborate with extended business partners. This network can be composed of multiple plants, distribution centers, suppliers, customers and other value chain partners. Supply chain applications will primarily act as systems of differentiation and systems of innovation, supporting the journey of transformation. The majority of the supply chain architecture research in 2012 will focus on enabling systems. Specifically, we plan to deliver research that explores how technology enables the movement from Page 4 of 7 Gartner, Inc. G

5 one stage of demand-driven maturity to another. We also intend to publish a framework showing the relationship between the complexity of supply chain software and total cost of ownership (TCO). Lastly, we plan to publish additional OSO research that defines what players organizations need to enable the OSO business model. What are the best practices when selecting or working with consultants, supply chain outsourcing or SCM BPO providers? Throughout their quest to become demand-driven, sustainable and agile, supply chain leaders must constantly evaluate what value chain processes to retain and enhance, and which ones to outsource. As companies advance along the demand-driven value network (DDVN) maturity curve, they need help from external service providers, including consultants and supply chain outsourcers. Supply chains that succeed in the 21st century are effective at forming, fostering, and dissolving relationships with supply chain services providers. In 2012, we plan to deliver research about supply chain consultants and outsourcing providers. We also plan to provide supply chain executives with advice and guidance about emerging options for acquiring supply chain capabilities that take advantage of cloud computing, software as a service (SaaS) or BPO. What skill sets are required to transform and govern the supply chain organization? Once synonymous with logistics, today's supply chains increasingly embed multiple functions to better coordinate responses to the changing global market. With an expanding charter and broader span of control come higher expectations that supply chain will deliver positive business outcomes across the organization, in addition to efficiency and cost savings. This has major implications for the supply chain organization's talent development and capability building strategies. Traditional supply chain skills in plan, source, make and deliver functions are no longer enough. This requires a major overhaul of competency models to achieve functional excellence in core supply chain skills, augmented by broader business and orchestration skill sets. These include advanced analytics, governance and change management. How leaders are addressing cross-functional governance and change management challenges is one of the most in-demand topics for We plan to deliver best practices research notes and tools that help supply chain executives understand how governance, roles and responsibilities change as companies mature their supply chain capabilities and performance. This year, clients can expect research with additional best practices and Toolkits detailing the building blocks of supply chain talent programs, including competency models, career path architecture, training and development, and recruitment and onboarding. We also plan to expand our coverage of supply chain university programs in Europe as a follow-on to our research on U.S. supply chain programs (see "North American University Supply Chain Programs, Part 3: Ranking the Top Programs"). Gartner, Inc. G Page 5 of 7

6 Related Priorities Key Initiatives address significant business opportunities and threats, and typically have defined objectives, substantial financial implications and high organizational visibility. They are typically implemented by a designated team with clear roles, responsibilities and defined performance objectives. Table 1. Related Priorities Demand-Driven Value Network Orchestration Supply Chain Functional Excellence Orchestration of demand-driven value networks (DDVNs) delivers better business results than isolated mastery of individual supply chain functions. This overview describes the key capabilities required for orchestration, and the implications for supply chain leaders in manufacturing, healthcare and retail. The performance of key supply chain functions is essential to establishing a sound foundation to orchestrate a DDVN. Functional supply chain leaders can use this initiative to help improve performance in these functional areas, leveraging appropriate technology and best practices. Source: Gartner (February 2012) Recommended Reading Some documents may not be available as part of your current Gartner subscription. "Toolkit: Supply Chain Outsourcing Strategy, Phase 1: Strategic Alignment" "Demand-Driven Value Networks: Supply Chain Capabilities Road Map for Growth, Agility and Competitive Advantage" "Building a Resilient Supply Chain" "Four Talent Development Milestones Build Better Supply Chains" "Building Sustainable Supply Chains" Page 6 of 7 Gartner, Inc. G

7 Regional Headquarters Corporate Headquarters 56 Top Gallant Road Stamford, CT USA European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM Japan Headquarters Gartner Japan Ltd. Atago Green Hills MORI Tower 5F Atago, Minato-ku Tokyo JAPAN Latin America Headquarters Gartner do Brazil Av. das Nações Unidas, andar World Trade Center São Paulo SP BRAZIL Asia/Pacific Headquarters Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner s prior written permission. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner s research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner s Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see Guiding Principles on Independence and Objectivity on its website, ombudsman/omb_guide2.jsp. Gartner, Inc. G Page 7 of 7

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