Supply chain executives might view this as the most controversial Insights column I've written to date. I discuss whether large integrated supply chain organizations run by “czars” are needed for supply chain management (SCM) to be successful in the future. Put another way, I question whether large integrated groups will be needed during the next phase of SCM to further foster supply chain integration. In their place, I envision a distributed set of individual thought leaders whose purpose is to be “integrative.” These will be the missionary zealots who drive a culture of coordination among functional organizations—to do what is best for the whole business, not just their own functional domains.

A supply chain guru from a high-tech company recently visited the MIT Center for Transportation & Logistics. While we discussed a lot of things, the one conversation that stuck in my mind was about the new career path his company created. The company previously had a commonplace two-track approach to employee development. One was the traditional track into management, while the other was a technical track that leads to a particular area of expertise. This technical track was reserved primarily for employees in the product development area, who were focused heavily on and rewarded for product innovation. Aspiring supply chain gurus had no real technical track because their expertise was in process, not product innovation. So de facto, they followed the management track as the only way to climb a company ladder. To solve this problem the company created a third technical track for supply chain leaders. I think this company is addressing an issue whose time has come in the evolution of SCM… to which I'll digress a bit.

While the SCM term was coined by Booz Allen Hamilton in 1982 in a financial newspaper, it did not become a preeminent business concept until the mid-1990s. One watershed event was the founding in 1996 of the Supply Chain Council, which focused on developing a supply chain process model called the SCOR (supply-chain operations reference model). Around that time, the council was likely the first association to hitch itself to the SCM bandwagon. Industry began wholeheartedly embracing the SCM concept, with consultants, software companies, and practitioners touting its successes in significantly improving business performance. Many studies were done assessing SCM's value and the number of supply chain events mushroomed.

Eventually this led to the advent of “supply chain organizations” with titled individuals like vice presidents of supply chain to run them. The intent was to break down the functional silos that were rampant in the industry at that time. Often (some might say too often) what really happened was that the VP of manufacturing, operations, or logistics was just given a new title. So while this individual was theoretically charted to drive supply chain integration, in reality he or she still acted as the VP of that organization, continuing to mostly represent its interests and maintaining the functional silos that previously existed.

In contrast to this approach to supply chain integration, some companies established supply chain czars who managed organizations cobbled together from various supply-side functions. The czars managed large integrated organizations comprised of functional groups such as logistics, manufacturing, operations, and customer services. This approach helped to get rid of the functional silos on the supply-side of business operations. Since the czars had significant clout in their companies, some were also successful in influencing and getting the attention of C-level executives.

The advent of supply chain organizations, VPs and czars successfully elevated the importance of SCM in the business community. It also helped to bust the silos that existed among various supply-side organizations. This resulted in more optimized (versus sub-optimized) supply-side operations, primarily in terms of reduced costs and inventories.

This development did little, however, to address the functional gaps that existed between supply-side organizations with their marketing, sales, and finance cousins. Since optimizing the matching of supply and demand is the noblest goal of SCM, that desired objective remained largely unmet. Optimized supply-demand matching is focused on optimizing profitability and other corporate-wide goals and is enabled by busting these functional silos. (Indeed, a misguided SCM czar might be powerful enough to make matters worse by further widening the gaps with demand-side organizations, possibly leading to overly constrained supply and sub-par corporate performance.)

The lefthand side of Exhibit 1, shows an “integrative” SCM organizational construct. This type of organization is aligned to be the nexus among all functional groups to foster optimality when balancing supply and demand. The SCM group is chartered with coordinating efforts, with a corporate view. Contrast this with the “integrated” SCM organizational construct depicted on the right-hand side of Exhibit 1. While it is possible that this type of SCM group might attempt to balance the supply and demand sides, it would be more likely to put its supply-side constituents first.

So to achieve that noblest goal of supply-demand matching, the next phase of SCM requires an integrative rather than integrated approach. How should SCM be organized to get the discipline to its next level?

Here's where I get back to my discussion about a third track for supply chain gurus. I propose one way to organize SCM might be to develop gurus via this track and embed them in organizations dealing with supply-demand issues. (Is it too far fetched to have supply chain gurus in sales, marketing, and finance?) These gurus might report on a dotted-line basis to a corporate SCM organization responsible for ensuring process excellence and the achievement of corporate goals.

Would this be a good way to organize SCM in the future to make it more integrative? Or would the current SCM VPs, czars, and integrated organizations eventually achieve this objective? I obviously favor the former approach. I believe the innovative high tech company mentioned earlier in this article is on to something. SCM is not just a title or an organization representing its own interests, it should be part of a company's DNA.