Ten Traits of the Best Supply Chains

This is an excerpt of the original article. It was written for the July-August, 2010 edition of Supply Chain Management Review. The full article is available to current subscribers.

July-August, 2010

I’ve always liked that old saying that good fortune favors the prepared mind (though I’ve faltered in my adherence to the principle as often as not). Reading the feature articles in this July/August issue only affirms the validity of that wisdom, this time in a supply chain context. From several instructive perspectives we learn about the value of carefully thinking about what you want to accomplish, how you want to accomplish it, and why you need to be flexible enough to respond if things don’t go exactly to plan. As our cover illustration suggests, it’s really about executing a supply chain game plan.

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Our premise is basic: A concerted effort to find optimized conditions across an extended supply chain network will yield superior business results. These gains can be sustained and enhanced if those directing the effort set their sights on achieving a level of competence on each of ten traits that distinguish the best supply chains. We take a broad view of the supply chain that incorporates the firm’s downstream and upstream partners and relationships. The 10 supply chain traits serve as standards against which any firm in any business can calibrate itself, determine the current gaps in performance, and develop a strategy for gaining parity. By reaching excellence across these traits, a firm will improve its business performance and positioning in the marketplace.

To validate our premise, we must provide convincing evidence that sustained attention to supply chain management (SCM) as a business improvement tool will yield substantial results and that pursuing the 10 specific traits will move the business consistently forward. The required validation can best be met by answering these questions:

• Does SCM bring significant, measureable results?

• How much better are the supply chain leaders than others? What is the impact of the opportunity for lagging firms?

• Who are the leaders in terms of industry? Companies? And why will they remain leaders?

• What traits characterize the best supply chains?

• How will adoption and execution of these traits lead to improvements for my business?

To begin, SCM is not just a business fad or the latest application du jour. The results of our Global Survey of Supply Chain Progress repeated over the years, coupled with other recent research, confirm that a serious supply chain improvement effort can reduce costs while increasing revenues and raising customer satisfaction. Overall profitability, earnings per share, shareholder value, and stock price performance are among the metrics positively impacted by SCM. A typical concerted supply chain initiative will provide two to four points of new profit after approximately three years. The leaders, in fact, have recorded as much as seven to eight or more points of new profits after a decade of implementation and some have doubled earnings per share.

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