Out of the Silos

Real progress begins to happen when individuals realize that they can accomplish far more through collaboration than they could ever do alone.

By Joseph C. Andraski -- Supply Chain Management Review, 4/12/2007 7:00:00 AM

When I was at Nabisco, I was given the opportunity to build a supply chain network of technology, processes, and an organization that was considered to be second to none in the fast-moving products industry. We established rules to live by:Everyone in the company was a customer of the logistics/supply chain management organization and was to be treated as such. That meant each phone call and every request for information received a prompt, relevant response. Our people showed up at meetings prepared and on time. In addition, we had a simple rule for logistics efficiency: Move products the fewest number of times, the shortest distance.

It was a culture that we built over time, one that earned the respect of the matrixed organization that we served. We had many masters, including the business units, sales, marketing, manufacturing, finance, senior management, and most importantly the customer. To this day, Nabisco alumni point to the technology (event management) and other aspects of our supply chain management as being 15 or more years ahead of where many companies are today. I share this with you with dutiful humility and with the acknowledgement that it couldn’t have happened without the support of our senior management.

What does all of this have to do with the central question? Though we had great success at Nabisco, I’ve learned in my current roles at VICS and as a senior executive with a software company that there’s no common supply chain blanket that can be thrown over all companies. Each vertical—food, apparel, electronics, hard lines, convenience, and so forth—has unique characteristics and requirements. The supply chain challenges of these verticals are many and diverse. They include the rules and regulations of the countries in which products are being produced, the numerous requirements to create electronic information, customs and security issues—and that’s just to get the products into the United States. Then there is the challenge of getting the product to the right place at the right time, for example, to meet the seasonal promotional plans.

Let’s go back to that rule of moving the products the fewest number of times and over the shortest distance. Now the goal is lowest landed cost at the highest degree of customer service reliability. To achieve that we need to consider such techniques as bypass programs where the product does not enter the supplier’s conventional distribution system, but goes directly to the retailer’s distribution center. We need to think about consolidating multiple suppliers into a single shipment. We must consider all opportunities to take cost out of logistics, to reduce the number of distribution centers, to reduce the amount of fuel consumed.

In this current environment, what are the main barriers to progress? The same as they have been for years—a silo mentality, the reluctance to change, the lack of senior management engagement. Some suppliers have told their customers, if you want us to meet your requirements, escalate the request to our management because if you don’t, nothing will happen.

Much has been done, much is left to do. However, we live in a world that has moved from silos of excellence to networks of trusted trading partners that share mission-critical information for the benefit of the customers. The real winners will be those who don’t get bogged down in demanding a fair sharing of the gains, but who understand that collaborative relationships result in consumer satisfaction, improved sales, improved profits, and reduced fixed and variable expense. Doesn’t this define the meaning of success?