How to Speak Senior Executive Lingo: A Guide for Supply Chain Professionals

Editor’s Note: This contribution is authored by J. Paul Dittmann, PhD, Executive Director of the Global Supply Chain Institute,
The University of Tennessee, Knoxville. It is the first of a six-part series put together by UT.

Ten to 20 years ago, the supply chain leader in most companies held a title such as “vice president of logistics.” It was a largely functional role that relied on technical proficiency in discrete areas: knowledge of shipping routes, familiarity with warehousing equipment and distribution-center locations and footprints, and a solid grasp of freight rates and fuel costs. (S)he reported to the chief operating officer or chief financial officer, had few prospects of advancing further, and had no exposure to the executive committee. The way companies need to think of the modern supply chain executive has changed dramatically.

Today, the Need Goes Well Beyond Functional Expertise.
Supply chain professionals still need to be experts at managing supply chain functions such as transportation, warehousing, inventory management, and production planning. But the supply chain process extends end-to-end and even outside the firm, including the relationships with suppliers and customers on a global basis. Leading firms now see the supply chain functional leader as the necessary executive to coordinate the end-to-end supply chain process, even though he or she does not control it all.

Because of that added dimension of cross-function, cross-company coordination, senior supply chain executives must possess a number of unique characteristics, which we describe in detail below. In our interactions, we find many firms have not yet come to grips with that realization. And, in a Gartner study, 60 percent of companies still do not have an executive officer who manages even the normal set of supply chain functions. Further, in our experience, of the 40 percent who do have such a position, the vast majority still have not tasked that executive with full authority to coordinate the end-to-end process.

Supply Chain Leaders Must be Business People First
Supply chain leaders must be business people first and supply chain specialists second. Their foremost focus must be on enhancing economic profit and shareholder value, not simply on cost-cutting. Supply chains enhance economic profit by looking at everything from asset productivity to revenue generation. As one senior supply chain executive told us: “In manufacturing or sales, the cause/effect of cost or sales performance is often clearer, and even intuitively understood. But in a cross-functional supply chain, you have to essentially model a series of complex interdependencies to understand which button to push.”

Supply chain leaders must be able to speak the language of senior executives as easily as they can talk about fleet-truck efficiencies or demand forecasting. Terms such as EBITDA, ROIC, and economic profit should be part of their everyday parlance, and supply chain leaders should be as comfortable discussing cash flow with the treasurer’s office as they are with talking about delivery schedules with suppliers. Supply chain issues are often the least understood by the board and the CEO, and must be explained in their language.

Analytical thinking is an essential component of the business skills mix ― meaning that the supply chain leader must be driven far more by facts than by gut feel; and that he or she must be able to quickly find useful patterns in data, communicate them clearly and act on the findings ― in short, to be able to turn information into insight. Supply chain leaders who have worked as consultants often have a good grounding in such approaches.

One CEO shared with us his recent experience in interviewing several candidates for chief supply chain officer. One stood far above the others mainly due to her ability to discuss overall business strategy with the CEO. She peppered him with queries about the customers, the marketing and brand strategies, the nature of the board of directors; and she wanted to understand in detail the CEOs own objectives, the ones that really drove his bonus. As the CEO later said, “She had a real feel for the entire business and has become an invaluable member of my executive team.”

Supply Chain Leaders Must Address the Top Topics on the Minds of CEOs Today
In our discussions with senior executives across industry, there are six topics that are always top of mind for CEOs. Supply chain professionals would be well-served to make sure they address the six topics below. In the coming months, the University of Tennessee series of articles will address the following issues:

Talent Management
How do we find, acquire, develop, and retain the top talent necessary to win in the increasingly competitive global environment. This topic is always the number one concern when we survey senior executives.

Risk
Perhaps it’s the high profile natural disasters like the Japanese tsunami and earthquake that have brought this topic front and center. Senior executives rightly ask their supply chain leaders if they have robust plans in place to identify, prioritize, and mitigate risk in the supply chain.

Revenue Generation
CEO’s tell us that’s “it’s either grow or die.”  The company’s supply chain needs to be viewed as a critical engine for growth and not simply a way to cut cost.

Global Environment
Almost all companies have a significant global component. Either their customers or suppliers or both cover the world. Global supply chain excellence is a must.

Green
This is not your father’s environment anymore. Companies need a plan to protect the environment, and often the supply chain finds itself at the tip of the spear since it generates most of the emissions.

Cross-Functional Integration
This timely problem has plagued business since the dawn and has many dimensions. One executive was heard to lament, “How can we manage horizontally when we are organized vertically?”

Watch for articles dealing with these six topics in the months to come.

SC
MR