A behind-the-scenes look at the supply chain industry's reaction to change

"We're going to see more focus on build fast and locally, both in Europe and America."  November 05, 2009, http://logipi.com/public/item/244794

Meet Joseph Francis

Joseph Francis is Executive Director for the Supply Chain Council (SCC). He is an acknowledged expert on Supply Chain, and business management with a particular focus on SCOR and related frameworks with groups including the Supply Chain Council, Brainstorm, DCI, IQPC, Delphi, and Open Group. He has advised companies as diverse as Air Products, IBM, PRTM, Cendant, Hewlett-Packard, SASOL, Home Depot and Ericsson on methodologies for SCOR and framework-based process management within their company’s enterprises.

The Recession's Impact on Supply Chain

Logipi's Dustin Mattison had the recent privilege of speaking with Joseph Francis about the recession's impact on supply chain management and innovation. In Joseph's experience, most companies reacted to the recession with a quick and heavy reduction of inventory as a means of decreasing working capital requirements. To accomplish that objective, companies focused on improving inventory management practices for better alignment with sales requirements.

Consequences of Recession

The most obvious consequence of the recession, at least publicly, was the number of plant closures, layoffs and reorganizations. With companies cutting all discretionary expenditures, including memberships to supply chain management associations like the Supply Chain Council, it seems every corner of the industry has been touched by the recession.

What Joseph Francis found interesting, in the midst of major staffing reductions, was watching companies become intensely interested in the qualifications of the supply chain professionals that survived the cuts. In the last six to nine months, Joseph says he's seen a very big up-kick in broad, cross-company training in supply chain management and best industry practices.

Emerging from Recession

Joseph Francis says Douglas Kent, the Supply Chain Council's European Training Director, and others, are beginning to have discussions with companies about how to scale up. Instead of rushing into a hiring frenzy, they're really focused on what steps should be taken as the effects of the recession begin to ease.

In addition to training and scaling, Joseph says businesses are more focused on aligning supply chain planning with sales cycles and inventory. The lesson we have learned, he said, is that proper alignment would have enabled companies to react quickly to changes in demand. Interestingly enough, American companies proved to be more agile in realigning staffing requirements with sales and inventory, followed by Asia. Europe, Joseph Francis said, was slowest to make the necessary cuts in staffing and inventory.

Learning to Do More with Less

Working capital is going to be expensive well into the future, and Joseph Francis sees that translating into less semi-finished and finished goods on the road. According to Joseph, we will also see a shift in thinking. "We're going to see more focus on build fast and locally, both in Europe and America," he added.

Of course, lean is the watchword across the industry, and Joseph Francis doesn't see the industry staffing up to pre-recession levels. It will take years, he believes, to staff back up the levels we once enjoyed. One of the dirty secrets of reorganization, he said, is that you go through a period of heavy cuts, a cycle of years -- five, maybe longer -- of trying to be smarter about managing supply chain processes rather than staffing up and filling gaps in bad processes.

Avoiding Consequences in the Future

To avoid dire consequences in the future, Joseph Francis says we'll need to improve our reaction cycle times, and look at more standardization in our supply chains. For example, from the collapse of Lehman Brothers back in October, it literally took companies 30 to 60 days to realize they weren't able to access the capital they needed. Now, Joseph believes, companies understand that cycle times for reacting to business change that were acceptable prior to 1998 are no longer valid.

In terms of advice, Joseph Francis says we need to be faster and more agile, and that kind of speed requires standardization of supply chain processes. We no longer have the luxury of sorting through very elaborate, customized metrics or processes. We need to know what our inventory levels are in real time, we need to have planning processes in real time, we need to have decision-making systems in real time, and we need to be able to turn our supply chain cost structure on and off more closely aligned to the world's business and credit cycles.

Closing Thought on the State of Supply Chain

The thoughts Joseph Francis shared with Dustin Mattison are anything but conjecture. They are actions and reactions he and his Supply Chain Council colleagues witness every day. Large companies, he says, are staring to make significant investments in training staff for improved business process management in supply chain. Energy companies and infrastructure providers, he adds, are making significant investments in supply chain -- they are really beginning to focus on supply chain management and processes in line with pricing models.

About Supply Chain Council

Supply Chain Council (SCC) is a global non-profit organization whose methodology, diagnostic and benchmarking tools help member organizations make dramatic and rapid improvements in supply chain processes. SCC has established the supply chain world's most widely accepted framework for evaluating and comparing supply chain activities and their performance. The framework -- the Supply Chain Operations Reference-model (SCOR®) -- lets companies quickly determine and compare the performance of supply chain and related operations within their company or against other organizations. SCC and its member volunteers continually advance these tools and provide education on how to leverage them for supply chain excellence. SCOR® is a registered trademark in the United States and Europe.

SCC’s membership consists of companies representing a broad cross-section of industries including manufacturers, distributors, retailers and services as well as technology solution providers, business consultants, academic institutions and government organizations. SCC has chapters in Australia/New Zealand, Greater China, Europe, Japan, Latin America, North America, South Africa and South East Asia. Founded in 1996 by AMR Research and PRTM and 69 member companies, the organization now serves over 1,000 organizations worldwide.