Span of Control Key to Talent Development
By David Aquino -- Supply Chain Management Review, 9/1/2008
A number of leading organizations have witnessed with alarm the increasing gap in both the quality and availability of supply chain talent. They felt a sense of frustration with non-scalable and independent efforts by various organizations to attempt to define and solve the problem.
To address this issue, the Supply Chain Professional Development Committee, a subgroup of the Supply Chain Council, was charted as an industry and academic consortium. The group's goal was to “explore, research, and address concerns about professional development comprising skills, competencies, capabilities and supply of current and future global requirements for supply chain professionals.”
AMR Research was commissioned as part of this effort to work with the committee in building, fielding, and analyzing a survey around the state of the discipline regarding talent. Our completed survey as well as supporting interviews of top supply chain organizations has provided both insight into the current talent and operating challenges within a modern supply chain and a view into the structure of best-performing organizations.
Span of Control is Key
One of the central questions in our research was this: How can an organization improve service, speed to market, and inventory investment while balancing manufacturing costs in the face of exploding product portfolios and international growth?
First, ensure that the supply chain has an adequate span of control. Early in our development process, it became clear that in order to assess requisite skills and competencies required for the new supply chain professional, we needed to better define the discipline. A review of prior academic research on skills and on organizational design highlighted what has been referred to as “context independent skills” (for instance, creativity, problem solving). In some cases, the review also highlighted the growing importance of technology. But the underlying finding of the analysis was that an updated model clearly articulating the discipline requirements was lacking.
In response to that void, AMR Research created a Supply Chain Talent Competency Model built on the SCOR (Supply Chain Operations Reference) foundation. Our model contains seven functional stations (plan, source, make, deliver, customer management, post sales support, new product design, and launch) and four enabling stations (strategy and change management, technology enablement, performance measurement and analytics, and governance). We believe this construct more clearly reflects the extended nature of supply chain management, and has allowed us to test attributes within each of these stations. In addition, it provides a foundation to be used going forward in building an integrated, comprehensive curriculum.
We felt it was important to evaluate the current level of responsibility that existed in our respondent base against the broader view of supply chain management incorporated in our model. We theorized that a key challenge in establishing a clear curriculum requirement was surmounting the heritage of legacy supply chain organizations steeped in “deliver” or logistics activities. Companies would now be required to move from such narrow functional pillars to a horizontally extended, multi-organizational interdependent relationship between our identified stations.
The results of our evaluation were telling. In particular, we were struck by both the enormous diversity of supply chain structure--clear evidence of the difficulty in defining the appropriate skills sets and career paths. On a positive note, though, we found evidence pointing to the benefits associated with a broader span of control and supply chain operating performance. In spite of naysayers who contend that supply chain management's definition will continue to be muddy and boundaryless, our initial comparison of AMR Research's Supply Chain Top 25 respondents may indicate otherwise.
Leading supply chains identified as part of the Supply Chain Top 25 (which through peer and analyst voting rank the best performing and highest regarded supply chains) shows a higher probability of these leaders owning enabling stations in three of the four areas as well as owning five of the seven functional stations. Leading companies have fought through the politics of early-stage supply chain organizational design. These efforts have led to greater responsibility particularly in critical areas such as “Make,” “New Product Design and Launch,” and “Technology Enablement,” shown in Exhibit 1.
The Transformation Journey
Many organizations have struggled with handling the transformation from functional expertise to broader integrated competencies that has been taking place. In many cases, the shift took a lot of power away from the commercial units who were left having to work with the global organization after being used to having a great deal of control over the supply chain.
Gaining greater span of control is not a simple assignment, given the traditional functional orientation of most supply chain activities. Acceptance of a broader, more clearly-defined supply chain organization needs to be built upon an understanding of the competitive advantages it can deliver. Certainly, aggressive senior level leadership goes a long way in navigating and in many cases eliminating the historical fiefdoms that reside in either headquarters or in regional or local business units. Mature, leading organizations told us that their hard-fought gains came through demonstrated performance, continuing education of senior executives on supply chain operations, and building recognition of the potential value that a more centralized strategy could offer compared to functional thinking and execution.
But though the going might get tough from time to time, it's helpful to keep in mind this revealing finding from research by Booz Allen: “In organizations where supply chain management is part of the overall business strategy—and therefore a CEO-level agenda item—annual savings improvements in the 'cost to serve customers' a broad measure of manufacturing costs, were nearly double those of firms where SCM responsibility resided lower in the organization, 8 percent versus 4.4 percent.” ¹
Why such focus on span of control when thinking about supply chain talent education? Quite simply, aside from the performance benefits both in prior studies and in our recent Supply Chain Top 25 evaluation, industry has acknowledged that much of the confusion surrounding needed skills results from the lack of a clear and accurate definition of the scope of the discipline. A legitimate starting point in the development of a coherent, comprehensive supply chain curriculum at the university level is development of a common and compelling definition. This will help all companies—regardless of where they reside on the supply chain organizational maturity continuum.
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