One of the major impediments to implementing efficient and effective supply chain management is usually found in the organizational aspects of start-up. By its nature and definition, a supply chain demands a horizontal perspective that stretches from source to customer. Yet most firms are organized in a vertical command-and-control structure.

Enter the infamous "vertical silos" when the supply chain implementation team attempts to overlay a horizontal concept on a vertical structure. Typically the results are neither pretty nor productive. Managers rush to protect their turf. Guerrilla warfare breaks out at sites throughout the organization. Malicious obedience becomes the norm. Customers pick up the tab (in the short run) for these internal troubles in the form of poor, or at least indifferent, customer service.

This probably oversimplifies the problem, but it does highlight the essence of the issue: The merging of horizontal organizations with vertical cultures. To some extent the results are predictable, so there is little excuse for not carefully planning this important part of supply chain integration. It should be noted that this problem did not begin with supply chain management. Before the word was in common use, many firms decided it was necessary to have a logistics division that separated sales flows from product flows. Approximately 15 percent of firms with logistics organizations, in fact, have adopted this approach. Similarly, many companies also organized national account managers and/or key account teams to focus on the special needs of important customers.

So what options and principles are available to minimize the risks of organizational change? There is no fully guaranteed "silver bullet" for managing any kind of change—particularly organizational change. But planning can play a critical role in the process. Assuming that the firm has done careful process mapping of current relationships and processes as baseline input, the supply chain executive is ready to plan the implementation strategy. Note that this process-mapping step is neither trivial nor quick. It may take a qualified task group six to nine months to complete a comprehensive organizational and functional process-mapping task.

With that groundwork in place, supply chain executives can embark on the process of organizational change guided by the following principles.

For an organization to be "changed," the reward system (and the sanctions) must be congruent with the organization's goals. This may seem rather obvious, but many vertically organized firms have one set of incentives for sales, another for manufacturing, a third for logistics, and so on. The incentives match within silos, but not between silos. The Principle of Congruence requires that rewards or incentives and sanctions match across the organization. Applying this principle to supply chain implementation also requires that the incentives and sanctions match outside of the enterprise to the supply chain partners.

One dialog currently raging revolves around the importance of supply chain metrics. What really matters is not the lists of how we measure supply chain performance, but the congruence of the lists across the supply chain. It is difficult if not impossible to implement an efficient supply chain unless (1) the goals of the organization are clearly understood, (2) information is transparent across the supply chain, and (3) rewards and sanctions are understood by all of the chain's internal and external partners.

Many firms have successfully pursued a strategy of separating the initial implementation from the ongoing organization. This could be as simple as a "skunk works" to complete high-level process mapping and explore organizational and channel options. It could consist of a cross-functional team that includes customers, vendors, and third parties. The team might be located off site and report directly to a senior executive. Another option is to retain a consulting firm to provide alternative strategic scenarios for supply chain implementation. For this option, the firm must provide continuous input and review or it might end up with an unacceptable plan. A third option is to pilot change on a small division of the firm and migrate it to a larger division.

As noted above, no one has discovered the silver bullet that works in all cases. The Principle of Separation, though, says that the change-management process must start in the lab and not affect ongoing operations until the product is pre-tested and validated.

Some firms are replacing distribution divisions with supply chain divisions or groups. In some cases, these entities are line organizations; in other cases, they are staff groups. In either case, however, the Principle of Facilitation suggests a grass-roots approach to building supply chain awareness and implementation. Customer, vendor, and third-party personnel often are domiciled at each other's sites to facilitate communication and process management. Systems also are integrated so that information becomes transparent both internally and externally to the partners.

In this regard, a great deal of change and experimentation is taking place today among U.S. and global firms. Results from a recent Ohio State University research study, for example, suggest that 72 percent of respondents (U.S.) had cross-functional teams in place by mid 1997, and 88 percent expected to have them in place by the year 2000. Another 73 percent of the respondents suggested that they would have a strategic relationship with a third-party provider by the year 2000.

In any organization, the one thread that runs through supply chain management implementation is the need for a process champion. Without such a leader, backed by the full support of top management, the supply chain vision will remain on the drawing board.