Making Talent Part of Your Supply Chain Strategy
By Joseph Roussel, PwC | Industry Week
There is no disputing that talent is a top challenge for companies worldwide. In PwC’s 2014 CEO Survey, 93% of participants said they recognize the need to change their strategies for talent, but 61% acknowledged that they haven’t yet taken the first step. The challenge is especially acute in supply chain operations, which is facing a talent shortage—despite an increasing number of undergraduate majors, MBA concentrations and entire programs in supply chain management.
The talent wars are not likely to end anytime soon. Various trends—including the widespread adoption of digital technologies, the increasing need to tailor operations for different customer segments, and a heightened focus on supply chain risk—will continue to raise the bar for supply chains and, by extension, the skills required to manage them.
For many organizations, the talent problem is exacerbated by the desire to keep headcount costs down. Indeed, supply chain headcount costs can be considerable, easily reaching 10% of revenue, according to PwC’s Performance Measurement Group benchmark research. Yet focusing exclusively on the cost component of the talent equation can ultimately prove detrimental, given that some of the positions needed to manage today’s supply chains demand higher salaries than they did even a few years ago.
Industry leaders regard talent to be as critical to superior supply chain performance as organizational structures, processes, tools and systems—if not more so. While these companies don’t neglect cost management, they make strategic talent investments to help establish the supply chain that supports their business objectives.
Managing the 3 Categories of Supply Chain Talent
Top companies examine their talent across the three categories of supply chain activity: planning, execution and enabling. In each category, supply chain talent can support basic capabilities that are needed to keep pace with the competition, or a differentiating capability that, when combined with other capabilities such as product innovation, provides competitive advantage.
Planning: These are positions held by sales and operations planning leaders, demand planners, supply planners, and inventory planners, who together assess customer demand and determine the resources needed to meet it. This is not an easy task, given that demand is variable and often must be accounted for across multiple supply chains. Consequently, robust planning talent is vital for companies that want to meet revenue goals while managing operating costs and working capital.
Schneider Electric is a €25 billion (US$31.6 billion) global company that provides energy management solutions to a broad range of industries. With 87,000 people dedicated to purchasing, manufacturing and logistics alone, it’s a large operation, responsible for a wide range of product and service solutions.
“Supply chain planning has gone way beyond just understanding demand and supply and balancing the two,” notes François-Martin Festa, global head of planning. “Given the diversity of our customers, a one-size-fits-all approach to planning doesn’t work. We have to align demand, supply, inventory and financial plans while respecting our different customer buying behaviors and business models, which range from delivering complex engineer-to-order solutions on one end to make-to-order products at the other end. Tailoring planning to our different business models is a must to create added value, first for our customers and of course for Schneider Electric.”
To meet this challenge, the company has developed a global planning community of more than 2,000 people distributed across operations, regions and the product divisions who work together to make sure customers get the products and solutions they need, where and when they need them.
Execution: These positions enable customer orders to be produced, delivered, and invoiced. The key challenge for many companies is determining which execution skills should be kept in-house and which should be outsourced. This issue has recently reemerged in many industries as a result of shifts such as rising manufacturing costs in China, which challenge existing operations footprints and raise questions about which assets and people and where to locate them. Companies need to make these decisions only after determining what each position contributes to the supply chain’s ability to create differentiation and customer value.
Consider, for example, a leading North American fashion retailer known for offering a wide selection of fresh items in its brick-and-mortar stores. Robust purchasing, therefore, is critical to this capability. Unlike competitors, the company requires its buyers to focus not only on major categories like women’s accessories but also on sub-categories like jewelry, which requires them to forge close relationships with suppliers and develop a deep familiarity with their latest product lines. As a result, the retailer has a higher purchasing headcount than the industry average, but the cost is thoroughly justified: This specialized talent is essential to delivering a distinctive in-store customer experience.
Enabling: This category comprises the positions responsible for designing and implementing the operating model, processes, and data underpinning the supply chain. Supply chain network designers, performance analysts, risk managers, data and process analysts, and transformation program managers are good examples. Because of more frequent adjustments to supply chains and the growing importance of analytics, this category is where the competition for talent is the greatest. The key challenge here is determining which enabling activities should be carried out by full-time specialist positions, and which should be covered on a part-time basis or as part of a project. Moreover, it’s important to determine whether the enabling positions work in a centralized team or are distributed across the organization. These decisions are further complicated by the fact that it’s generally easier to attract top-notch enabling talent with full-time positions.
The agriculture division of a large multinational company is using its enabling positions to create value from the business units’ enormous trove of supply chain data. The division’s small dedicated team of analysts assesses delivery performance data that’s updated daily from over 400 shipping points around the globe. Posted online, the team’s analysis allows the division managers worldwide to see delivery performance experienced by the customer. The division’s performance measurement team also produces monthly reports on logistics costs, inventory, and customer service that allow managers to take action on a timely basis. Thus the division centralized an activity in one team that companies often distribute across a number of departments. The critical mass of this centralized team of full-time analysts has proved essential to creating value from supply chain information.
Making the Most of Your Supply Chain Talent
The right talent is at the heart of a differentiated supply chain capability–and key to using that capability to attain competitive advantage. To leverage your supply chain talent fully, first make sure that senior management is aligned on the distinctive capability the supply chain can provide in support of your company’s business strategy. This step will allow you to identify the positions that contribute to your basic capabilities, as opposed to those that drive differentiation.
Next, look at your existing positions across all three categories: planning, execution and enabling. Determine whether the current positions support the desired supply chain capability. You may find you need to redeploy existing talent into new positions.
Developing that existing talent is equally important. Since many supply chain positions are occupied by people with deep expertise in a focused area, career progression needs to be based on more than managerial skills. A specific career path for experts can be an excellent way to attract, develop and retain talent in these areas.
Industry leaders know that identifying and developing the right people are fundamental to creating a differentiating supply chain capability. For this reason, these companies place great emphasis on managing talent in their supply chain organization. While they keep an eye on costs, they are ready to spend more where it counts to deliver the distinctive capabilities needed for a competitive edge.
As you explore supply chain talent as part of your next strategy round, talent review or budget meeting, here are three questions we recommend you consider:
- Are you clear about how your supply chain supports your strategy, and how it can help you achieve the differentiation you are looking for?
- Are you clear about what you are looking for in your supply chain talent to build the strategic supply chain capability that will lead you to success?
- Are you managing your supply chain talent pool such that it will help build and develop the distinctive capabilities of your company?
The war for talent will continue as long as the demands on the supply chain—and the bar for supply chain performance—continue to rise. Companies that make talent part of their supply chain equation will be best prepared to address these challenges moving forward.