How Trigger Events Can Get the CEO's Attention

By Brian J. Gibson, Stephen M. Rutner, and Karl B. Manrodt -- Supply Chain Management Review, 11/1/2005

"I don't know what the hell this 'logistics' is that [General of the Army George C.] Marshall is always talking about, but I want some of it."

—Admiral E. J. King, Chief of Naval Operations

As Admiral King's comment to a staff officer in 1942 indicates, the highest levels of the U.S. military have long recognized the importance of logistics and supply chain management (SCM). Before World War II ended, everyone knew what General Marshall was talking about and Admiral King had plenty of logistics capabilities in the Navy.¹ These leaders and their successors recognized that logistics and supply chain capabilities often define an organization's operational limits. They understood, too, that supply chain considerations must be integrated with the strategic planning process.

Fast-forward to 2005. Today, the recognition of logistics and SCM among C-Level (CEO, CFO, and COO) executives in the private sector is nowhere near as strong as it has been among their counterparts in the military. Supply chain managers themselves clearly recognize the potential for their operations to cut costs, improve customer service, and grow revenue. But their senior executives may not have had their Admiral King-like epiphany with regard to this business discipline. Certainly, organizations like Dell, Wal-Mart, Amazon, and other innovators realize that effective SCM enables them to provide higher levels of service at lower costs. However, many C-level executives in other organizations have yet to understand—let alone appreciate—the connection between supply chain competency and corporate performance.

A recent study sponsored the Council of Supply Chain Management Professionals (CSCMP) sought to gauge C-level executive awareness of supply chain management.² (For more on the study's methodology, see sidebar on page 42.) That study, conducted by the authors of this article, analyzed senior executive perceptions of SCM from several different angles. The study's overarching goal was to identify what these top executives thought about SCM and, based on that understanding, to articulate how best to communicate its value to them.

Throughout the research, the supply chain professionals and C-level executives we interviewed provided a candid assessment of their supply chain management perceptions. In many organizations, executives are blissfully unaware of SCM as long as the supply chain is running smoothly. As one supply chain executive put it, "No one cares about supply chain management until there is a problem."

While this appears to be a harsh evaluation on the surface, the reality is that most C-level executives have limited time to devote to supply chain matters. Given their broad range of responsibilities, senior management's involvement with SCM issues tends to be sporadic and situation-specific. For that reason, supply chain professionals must be prepared to grasp those opportunities that arise from executive involvement in SCM. They must be ready to fix tough logistics problems, deliver value though supply chain initiatives, and support corporate strategy through supply chain operations. Such tangible contributions will showcase the impact that SCM can have on the organization and enhance the value perception among the senior executives.

The interviews, case studies, and document analysis conducted for this research revealed that certain developments—like an executive's situation-specific involvement in SCM—often serve as "trigger events" for change. Specifically, these developments provide and precipitate unique opportunities to change the way in which C-level executives view SCM—and in doing so, gain their support of and commitment to the discipline. It is important to note that trigger events will serve as catalysts of change only if supply chain professionals are able to recognize these situations when they arise and respond appropriately with successful solutions. In the words of study participant Joe Desarla, vice president of integrated supply chain at Honeywell Automated and Control Solutions: "You have to use a tipping point as the rallying point to get more people to believe in what the logistics group can do."

Four broad types of trigger events were identified in the research. They include:

• Occurrence of a compelling event.
• Emergence of a strategic visionary.
• Introduction of change agents.
• Encounters of serendipity.

In today's dynamic business environment, it's not uncommon for companies to encounter major opportunities and challenges that can have a huge impact on their business. From a supply chain standpoint, these compelling events can serve as catalysts for change. Whether they're faced with an opportunity (say, a global sourcing initiative or new product launch) or a challenge (for instance, changing customer requirements or a sharp increase in operating costs), supply chain professionals must be prepared to develop innovative strategies and deploy flexible solutions. Their ability to deliver effective, timely responses to a compelling event will have a decidedly positive impact on C-level executives' appreciation of SCM. Conversely, if the supply chain professionals falter in their execution, C-level perception will be influenced accordingly.

Opportunities can arise out of dire circumstances, as demonstrated by one of our case studies. Shortly after joining Honeywell Automated and Control Solutions, the vice president of logistics learned of a problematic enterprise resource planning (ERP) implementation that nearly brought an entire division to a standstill. While this new executive had no direct responsibility for the division and could have taken a hands-off approach, he spent weeks at the facility helping them address the situation. Past experience with ERP implementations enabled him to work around the problems and maintain the delivery schedule to customers while the implementation headaches were being addressed. By dealing effectively with this compelling event, the vice president avoided a devastating customer-service nightmare. This quick response helped the new executive build credibility with the division president and paved the way for the division's participation in subsequent supply chain initiatives.

According to executives at Whirlpool, having your very existence put on the line is a dramatic and highly challenging compelling event. They related this story. Whirlpool overall was on a positive trajectory with good demand growth, effective new product introductions, and new channels of distribution. The organization had only one problem—its supply chain. Frustrated by excessive finished-goods inventory, mediocre fill rates, spotty service, and high logistics costs, the president and chief operating officer (COO) had lost his patience. He called in his top supply chain people and gave them a two-word mandate: "Fix it." That meeting led to the development and implementation of a strategy that included new information technologies, logistics processes, changing roles of supply chain personnel, and the addition of new talent. Over the next four years, Whirlpool worked to turn their supply chain from a liability to a recognized competitive advantage—and it all was driven by the effective response of key supply chain professionals to the COO's mandate.

Like Admiral King, a strategic visionary is a high-ranking executive who recognizes a need for greater logistics and supply chain capabilities in the organization. Often, this person has witnessed other organizations using SCM to build competitive advantage and becomes the internal champion of similar efforts.

The executive may simply articulate a general expectation that a stronger supply chain would benefit the organization. But the true potential of a strategic visionary is much greater, as illustrated by this example from our research. A major clothing manufacturer had leveraged supply chain competency to attain its five-year sales growth forecast in less than two years. The company's CEO saw a tremendous opportunity to use SCM as a key building block for growth and as a way to address challenges such as how to satisfy retailers with demanding logistics requirements and how to manage a global supply base. As a result, the CEO has taken aggressive steps to ensure that the company has the proper supply chain structure, resources, and knowledge in place. The initiatives have included empowering one person to manage supply chain processes, investing in logistics capabilities even during lean periods, focusing on key customers via account prioritization, and analyzing key metrics such as customer completion rates (the company's version of the perfect-order metric).

Strategic visionaries may also arise in response to a strategic shift in the business. For example, Limited Brands faced a market situation in which discount retailers were encroaching upon their market space. Rather than get into heated competition over low margin items, the company chose to pursue innovative product lines that would generate higher margins. However, COO Len Schlesinger recognized that the company lacked the supply chain technologies and processes to sustain the speed-to-market requirements of the new merchandising strategy. So he personally championed efforts to move the company toward "integrated brand delivery." This involved relieving stores of logistics and processing tasks and creating a logistics information system to provide the visibility and control needed to support the business growth strategy.

At the highest echelon, a strategic visionary can dramatically enhance C-level understanding of SCM while providing the organization's supply chain professionals with the proper resources, authority, and support to create world-class supply chain operations. In a small but growing number of organizations, this strategic visionary is an individual who brings significant supply chain expertise to the executive level. Lee Scott, president and CEO of Wal-Mart Stores, and Steve Wunning, group president and executive officer of Caterpillar, are two such strategic visionaries who can draw upon their personal work experience in logistics and supply chain management. It is no surprise that organizations headed by such visionaries excel in logistics and supply chain management.

The emergence of a strategic visionary is perhaps the most potent trigger event for supply chain professionals to leverage. The visionary already "sees the light" and doesn't need to be convinced of the SCM value proposition. Supply chain professionals must act quickly to develop a dialogue with the strategic visionaries and understand their goals for SCM. Only then, is it possible to develop a comprehensive strategic plan, build supply chain capabilities, and make SCM a core competency of the organization.

Given their time constraints and scope of responsibilities, strategic visionaries typically turn to a supply chain specialist to fully develop the supply chain strategy and execution plans. By being given the responsibility to transform the organization's supply chain, this individual is being asked to be a change agent. He or she will act as the internal champion for SCM and must communicate its benefits throughout the organization to foster change and success.

Often, an individual with broad supply chain experience from outside of the organization is sought for this role. Such individuals are highly desired because of their ability to bring a fresh perspective to the current situation, to ask critical questions, and to make an objective case for supply chain transformation in both financial and operational terms. In addition, these "outsiders" are unlikely to be tied to long-standing processes, personal relationships, and other barriers to change. One executive we interviewed went so far as to say that internal managers ultimately resist change and only an outsider could truly be a change agent.

Radio Shack exemplifies a company that went outside of its own organization to introduce a supply chain change agent. The company's COO created the position of executive vice president of supply chain management and filled it with Mike Kowal, who previously worked with Radio Shack in the capacity of an external consultant. While Kowal had change management experience, his background in retail was limited. Yet the COO viewed this as more of an advantage than disadvantage because of concerns that the organization was becoming too insular and complacent. In carrying out his mission, Kowal has looked outside the retail industry for benchmarks, solutions, and opportunities that could improve Radio Shack's supply chain.

Change agents don't necessarily have to come from outside the organization. Some companies have successfully identified an insider and elevated that person to a new position with the appropriate latitude and power to effect the needed supply chain change. Such was the case at Whirlpool Corp. The company's supply chain operations had to support a vast global network that encompassed manufacturing facilities in 13 countries and sales in 100 countries. But Whirlpool's leadership team saw a critical shortcoming in the existing situation: There was no single individual with the authority or responsibility to manage supply chain operations across this network. In 2004, the leadership team created a new position of vice president of global supply chain and filled it with the executive who spearheaded the North American supply chain strategic turnaround described earlier. That individual became responsible for managing four work streams in Whirlpool's worldwide operation: the global operating platform, global capital budgeting, the global sales and operations planning process, and product architecture.³

Oftentimes, the strategic visionary/change agent trigger events work in tandem. Amazon CEO and Chairman Jeff Bezos is credited with recognizing early on that logistics competency and powerful supply chain software would set Amazon apart from the competition.⁴ However, he did not attempt to build the requisite supply chain strategy himself. Instead, in 1998 he hired Jimmy Wright, a former vice president of logistics at Wal-Mart, to transform an informal, start-up-focused distribution operation into an efficient, high-velocity supply chain network. During his tenure, Wright oversaw the expansion of Amazon's network from two distribution centers to eight facilities. He also integrated multiple independent supply chain functions into one smooth-running, integrated operation.

Change agents can have a dramatic impact on an organization's supply chain strategy, structure, and performance. Effective change agents will enhance the perceptions of C-level executives with regard to the supply chain profession and the ability of supply chain professionals to fulfill the organization's mission. Being a change agent, however, is not a simple task. Anyone taking on this role must have the determination and stamina to solve problems and make the supply chain visions a reality. Further, they must be willing to make difficult decisions, challenge powerful individuals to support the vision, and shepherd projects to completion. Those supply chain managers who find themselves working for a change agent need to develop the appropriate mindset and attitude. Specifically, they must be flexible, open to new ideas, and willing to be part of the solution rather than a barrier to improvement.

The biggest challenge associated with compelling events is their unpredictability. The supply chain professionals interviewed for this study talked about the difficulty of envisioning what the next major opportunity or crisis will be and when it will occur. Yet while compelling events are often unpredictable, supply chain professionals can take a number of actions to prepare for them when and if they occur. (The sidebar on the right list some of those steps.) In any case, it's critical to quickly recognize a compelling event and determine its likely impact on the supply chain. The supply chain professionals then must be able to marshal their resources quickly to develop effective responses to the situation.

Sometimes, supply chain issues come to the attention of the organization and C-level executives more by accident than by design. The best way to describe this phenomenon is serendipity—good luck in making unexpected and fortunate discoveries. Serendipity could come in the form of a C-level executive "discovering" SCM while reading an article or conversing with a peer from another company. Or it could be in the form of a request by a key customer for supply chain assistance. Whatever the reason for the senior executive's "discovery," supply chain professionals within the organization must leverage the situation into something highly positive. As is the case with compelling events, supply chain managers must put themselves in a firm position to seize such opportunities, address problems decisively, and showcase the capabilities of the supply chain to the top executives and the organization overall.

Patience and advanced preparation helped Limited Logistics Services (LLS) take advantage of a serendipitous opportunity to sell its vision of supply chain process integration. LLS leadership had been trying to build momentum and interest in the integration concept but ran into resistance from the Limited Brands executives. The brand execs were simply not convinced that the integration effort would provide any real value to their retail operations. Not to be deterred, the LLS leaders stuck with the idea, built a foundation for the integration initiative, and worked to educate people "below the radar screen."

In the meantime, Limited Brands began experiencing significant sales growth among its major retail brands. With that development, it became increasingly clear that existing systems could not support the growth or the company's desired speed to market for new products. New processes were clearly needed—and LLS used the fortuitous opportunity to sell their integration vision again. By showing that investment in the supply chain could add value as an enabler of the growth being experienced, LLS gained the support and resources needed to move forward with the supply chain integration initiative.

Another story of pure serendipity surfaced in a case study interview conducted as part of the research. When Honeywell International brought in David Cote as the new CEO, he was not hired for any particular supply chain experience. However, Cote had led cycle-time-reduction initiatives in his previous organization and brought an intense focus on timely customer deliveries to Honeywell. Any operation that performs poorly on the company's timeliness metric receives a personalized "letter of recognition" from the CEO. Somewhat serendipitously, Cote's passion for performance on a key supply chain issue has created a rallying point around which Honeywell's supply chain professionals can gather to interact and share ideas for improving supply chain performance across the various divisions. That's particularly important since these professionals are organized in a matrix structure.

When discussing serendipitous trigger events, an old adage comes to mind: "It's better to be lucky than good." But for supply chain professionals working in today's business environment, they need to be lucky and good. Like a running back, they must be able to see the fortunate slivers of daylight that open up. Then, they need to have the talent to quickly take advantage of the brief and serendipitous openings. The key to success, according to one study participant, is clear: "You've got to be in the right place at the right time. But, you also have to build the baseline of effective logistics processes and talented logistics people."

The four trigger events are not mutually exclusive. In fact, organizations typically experience all of them—sometimes simultaneously, sometimes sequentially, and sometimes in random order. Regardless of how the trigger events play out in any given organization, the keys to successfully leveraging them are rapid recognition, appropriate solution development, and proper execution. The consensus advice of the participants in the study mirrored the time-honored Boy Scout motto, "Be prepared."

Of course, that's a fairly broad prescription. As the research indicated, supply chain professionals should take certain steps to prepare their supply chains for these trigger events.⁵ The key activities in this regard include:

1. Develop an understanding of the wider organizational picture. Rather than become totally immersed in supply chain matters, strive to appreciate the challenges that C-level executives face, corporate strategies and goals, opportunities that should be exploited, and trouble spots that must be resolved.
2. Conduct a self-assessment of supply chain strengths and limitations. Develop a realistic picture of existing capabilities to know what types of trigger events the current staff and processes can—and cannot—effectively solve. This will prevent the problem of making promises that can't be delivered on.
3. Build key relationships within the organization and across the supply chain. Strive to understand the needs of key constituencies and make them aware of the capabilities of the supply chain organization. This cooperative approach will increase the likelihood that supply chain professionals are kept in the loop when strategic plans are being made or special challenges emerge.