Knowledge

34 SCMPr August 2014

In Part 1 of this series, you may recall how we discussed some of the common challenges attributed
to managing supply chains efectively. We have recognised, that a key factor for dysfunctional
supply chains, is themisalignment between the business strategies. The level of adequate and
competent execution capabilities in the organisation, as another contributing factor that was
identifed in part 1. SCMPro brings y0u the second part.
34
Understanding
the Value of a
Supply Chain Structure
M
anaging the corrective actions
in such situations, will involve
a structured review process of
the organisation, the vision
and mission statements and the management
approach to driving company wide integrated
programs. Tis is a major process andwould
undoubtedly create a high degree of disrup-
tion to the organisation. It will also present
management with a formidable challenge and
requires decisive leadership in the organisa-
tion to initiate and sustain such a programs.
Whilst one might feel that this sounds so
familiar, they will be hearted to know, that
their company or circumstances, are not alone
in facing such issues. Surprisingly there are
Stephanie KriShnan
Honorary Fellow
and Lectures for
the University of
Wollongong.
Joe Lombardo
Over 3o years of
experience in corporate
logistics and supply
chain management has
founded ESP Consult.
raymon KriShnan
Currently serves
as President of the
Logistics and Supply
Chain Management
Society.
For more information on the articles or to contact the writers please email info@lscms.org
Knowledge
35 SCMPr July 2014 35
an overall super strategy to make
it all happen. Tis would seen
quite evident, but it is not always
clear on how it would be done and
who would be responsible for the-
executions of this activities.
Tis is in fact the 1ststep to
appreciate the Value of a Supply
Chain function within an organi-
sation, aclearly defned and struc-
tured system to enable the execu-
tion of the business strategies and
model.
In the illustration below, is illus-
trated a traditional business struc-
ture, in the classical chain of com-
mand. Te introduction of a supply
chain function would seem quite
easy to bring it into organisation,
which could be a dedicated supply
chain function working with all the
other functions as show below.
Tis approach would be easy
to implement and create the path
of least resistance, disruption and
cost. A solution that many in the
organisation would well subscribe
to, as it involves minimal change
to their departments, authority
and responsibilities. But before too
long, managing sucha structure
would prove to be very difcult,
yield low results and eventually
collapse. It will fail because the
only change made, was to create
a new horizontal functional layer
into the existing organisation, and
give it the name of supply chain.
Te expectation that the existing
vertical organisation would follow
the directives and coordination of
this new function, is a dream and
not sustainable.
Note: All the charts are de-
By cherry picking and applying snippets of
supply chain practises, one does not really
harness the full supply chain methodologies.
many organisations that fail to
embrace the knowledge and sci-
ence of managing supply chains.
Tis is also manifested in the
HR statistics of how few compa-
nies haveinvested in supply chain
competencies and strategic man-
agement education and training
in a consistent manner across the
whole organisation.
By cherry picking and ap-
plying snippets of supply chain
practises,one does not really har-
ness the full supply chain method-
ologies, that are able to integratethe
supply execution capabilitiesto the
business strategy.
In this part of the series, we
will examine the value of deploy-
inga supply chain structure into
the business model, irrespective
of size, market sector or the goods
or services involved. Most busi-
ness leaders are very familiar with
business strategies, business mod-
els, product strategy, marketing
strategies, investmentstrategy and
many other strategies relevant to
the business functions. But these
strategies, campaigns, product
launches and the like, are plans on
what and when to do something
that will bring revenue and proft
to the Enterprise. But what about
the how ?
The Business Strategy
What is crucial to achieving the
goals ofthe business strategies, is
the implementation and execution
of the strategic plans.Te various
strategies need to be executed in a
coherent and synchronised man-
ner or will be inefective in their
deployment. Te more the strate-
gies, and the increased business
complexity, the more critical will
be the timing, methodology and
accuracy of the execution model.
Managing the execution proc-
esses of a company business strat-
egy, and sustaining the business
model, would suggest the need of



2
2 Feature
This approach would be easy to
implement and create the path of least
resistance, disruption and cost. A solution
that many in the organisation would well
subscribe to, as it involves minimal
change to their departments, authority
and responsibilities. But before too long,
managing sucha structure would prove to
be very difficult, yield low results and
eventually collapse. It will fail because the
only change made, was to create a new
horizontal functional layer into the
existing organisation, and give it the
name of supply chain. The expectation
that the existing vertical organisation would follow the directives and coordination of this new
function, is a dream and not sustainable.
Note: All the charts are designed for illustration of the point of principle and are not intended to represent the optimum supply chain
model or structure.
What is a Supply Chain ?
At this point, we should pause to reflect on the definition and components of what makes up a supply
chain and then to appreciate how it becomes relevant to an Enterprise.
There are many interpretation and definitions of what is a supply chain. Some imagine it to be a
complicated methodology where you need tohave highly skilled and intellectual graduates to
understand it and work it. Whilst others confuse or interchange terminologies, to make simple things
sound more sophisticated than what they really are.
The simple and unambiguous definition of a supply chain, can be described as,A series of tightly
interconnected and related processes that form the backbone of an Enterprises capabilities to
transform and deliver its revenue generating goods and servicesto its Customers.
To illustrate this fundamental definition, let us consider atypical business model.
It starts, with a Customer order, and ends with a Customer delivery, and in between we have an
internal process of transformation. In chart below we show this business model, as having 3 major
blocks in the company business cycle.
As this model is fundamental to understanding the basics of the supply chain management, we must
focus all the company activities that revolve around the 3 major blocks of a companys businesscycle.
When one can visualiseacompany business
cycle, modelledin this manner, it will be
clearer to see how the business strategy,
can be effectively executed. Creating a
logical structure around the company
business cycle,will enable all the
organisational functions to better identify
their roles in the model. The processes and
mechanisms to connect the 3 major blocks
of the business cycle, becomes the supply
chain execution model.
Having set-up the fundamentals of the
supply chain model,each of the major blocks will have a clear visibility of where and how their
operational functions are linked and contributeto the overall supply chain. By re-focussing the company
ESP Consult
enablingsustainableperformance
Supply Chain Model
Enterprise Overview
BusinessStrategy
BusinessModel
SupplyChainModel
2
Organisa on
Strategy
Financial
Strategy
MakeorBuy
Strategy
Sales&
Marke ng
Strategy
Product
Strategy
ESP Consult
enablingsustainableperformance
Supply Chain Model
Customer
DemandFulfilment
Demand
Management
Demand
Crea on
4
CompanyBusinessCycle
Knowledge
36 SCMPr August 2014
more sophisticated than what they
really are.
Te simple and unambiguous
defnition of a supply chain, can be
described as,A series of tightly in-
terconnected and related processes
that form the backbone of an En-
terprises capabilities to transform
and deliver its revenue generating
goods and servicesto its Customers.
To illustrate this fundamental
defnition, let us consider atypical
business model.
It starts, with a Customer order,
and ends with a Customer delivery,
and in between we have an inter-
nal process of transformation. In
chart below we show this business
model, as having 3 major blocks in
the company business cycle.
As this model is fundamental
signed for illustration of the point
of principle and are not intended
to represent the optimum supply
chain model or structure.
What is a Supply Chain ?
At this point, we should pause
to refect on the defnition and
components of what makes up a
supply chain and then to appreci-
ate how it becomes relevant to an
Enterprise.
Tere are many interpretation
and defnitions of what is a sup-
ply chain. Some imagine it to be
a complicated methodology where
you need tohave highly skilled and
intellectual graduates to under-
stand it and work it. Whilst others
confuse or interchange terminolo-
gies, to make simple things sound
to understanding the basics of the
supply chain management, we must
focus all the company activities that
revolve around the 3 major blocks
of a companys businesscycle.
When one can visualiseacom-
pany business cycle, modelledin
this manner, it will be clearer to
see how the business strategy, can
be efectively executed. Creating a
logical structure around the com-
pany business cycle,will enable all
the organisational functions to bet-
ter identify their roles in the model.
Te processes and mechanisms to
connect the 3 major blocks of the
business cycle, becomes the supply
chain execution model.
Having set-up the fundamen-
tals of the supply chain model,each
of the major blocks will have a
clear visibility of where and how
their operational functions are
linked and contributeto the overall
supply chain. By re-focussing the
company vertical functions in this
manner, we are now able to better
defnethe processes,monitor the ef-
fectiveness and measure perform-
ance of the supply chain.
Connecting the key points of
the business model
Put very simply, the supply chain is
the Blood Line that connects in
a structured manner,the activities
of all the relevantfunctions of an
Enterprise in coherent and inter-
connected fows.
However, these supply fows, do
not happen by chance, nor work
on their own in isolation. But they
are driven by vital stimuli to sus-
tain the overall performance.
It is the synchronised coherence
to the business strategy that creates
the positive supply chain fows. Te
business functions in the supply
chain, are the basic enablers and
will provide the operating capabili-
ties to execute the business strategy.
In the chart below we show the
revised Enterprise chart, where
Put very simply, the supply chain is the Blood
Line that connects in a structured manner,
the activities of all the relevant functions of an
Enterprise in coherent and interconnected fows.



3
3 Feature
vertical functions in this manner, we are now able to better definethe processes,monitor the
effectiveness and measure performance of the supply chain.
Connecting the key points of the business model
Put very simply, the supply chain is the Blood Line that connects in a structured manner,the activities
of all the relevantfunctions of an Enterprise in coherent and interconnected flows.
However, these supply flows, do not happen by chance, nor work on their own in isolation. But they are
driven by vital stimuli to sustain the overall performance.
It is the synchronised coherence to the business strategy that creates the positive supply chain flows.
The business functions in the supply chain, are the basic enablers and will provide the operating
capabilities to execute the business strategy.
In the chart below we show the revised Enterprise chart, where we put at the centre, the business cycle
and the supply chain execution model. Wethen connect the execution model to the vertical functional
organisation and to the business model, that supports the business strategy.

If the enablers are aligned, balanced and
driven by a competent leadership in all
functions, it will bethis momentum that will
lead to an effective and successful
execution of the business strategy.
An effective supply chain structure should
not be complicated nor mysterious in its
design and operation. The value of the
supply chain should include all the elements
relevant to the business model, scalable in
its deployment, agile to adapt to changes in
the business and operating conditions,
whilst able to consistently deliver the
required supply chain performance targets relevant to the business strategy.
Note: The charts contained in this series, are designed for illustration of the points of principle and are not intended to represent the
optimum supply chain model or structurefor any specific company or industry
Complicated organisation charts, elaborate job titles and strange job positions,that have evolved over
time, sometimes also due to legacy reasons, often confuse and distort the real supply chain functions.
When reviewing a supply chain structure, it would be very productive, to discard all the elaborate
organisation charts, job titles and thepeculiar job positions andimagine what the organisation could be
if we applied the basics that we described above. This approach will facilitate and engage the
management and key decision makers,in a complete re-think of a relevant functional organisation.
Anorganisational focus,must be made on the core functions, that are relevant and mandatory to create
the necessary capabilities to deliver the results. These are the resources and competencies that should
be embedded into the organisation, that can create the capabilities necessary to achieve the
Enterprises deliverables.
In Part 4 of this series, we will discuss in more detail optimising people and competencies in supply
chain organisations.
The value and benefit from a structured supply chain function.
Understanding and using the business cycle andsupply chain model overview, we are now able to
developa more effective organisation and functional sub-organisations This would synchronisebetter
the existing resources and remove the non-contributing elements from core supply chain activities. A
structured approach also enables a better alignment of relevant resources and will also reduce
operating costs and improve overall profitability.
ESP Consult
enablingsustainableperformance
Supply Chain Model
Enterprise Overview
BusinessStrategy
BusinessModel
CompanyBusinessCycle&SupplyChainModel
5
Organisa on
Strategy
Financial
Strategy
MakeorBuy
Strategy
Sales&
Marke ng
Strategy
Product
Strategy
Knowledge
37 SCMPr August 2014
we put at the centre, the business
cycle and the supply chain execu-
tion model. Wethen connect the
execution model to the vertical
functional organisation and to the
business model, that supports the
business strategy.
If the enablers are aligned, bal-
anced and driven by a competent
leadership in all functions, it will
bethis momentum that will lead to
an efective and successful execu-
tion of the business strategy.
An efective supply chain struc-
ture should not be complicated nor
mysterious in its design and opera-
tion. Te value of the supply chain
should include all the elements rele-
vant to the business model, scalable
in its deployment, agile to adapt to
changes in the business and operat-
ing conditions, whilst able to con-
sistently deliver the required supply
chain performance targets relevant
to the business strategy.
Complicated organisation
charts, elaborate job titles and
strange job positions,that have
evolved over time, sometimes also
due to legacy reasons, often con-
fuse and distort the real supply
chain functions. When reviewing a
supply chain structure, it would be
very productive, to discard all the
elaborate organisation charts, job
titles and thepeculiar job positions
andimagine what the organisation
could be if we applied the basics
that we described above. Tis ap-
proach will facilitate and engage
the management and key decision
makers,in a complete re-think of a
relevant functional organisation.
Anorganisational focus,must
be made on the core functions,
that are relevant and mandatory
to create the necessary capabilities
to deliver the results. Tese are the
resources and competencies that
should be embedded into the or-
ganisation, that can create the ca-
pabilities necessary to achieve the
Enterprises deliverables.
In Part 4 of this series, we will
discuss in more detail optimising
people and competencies in supply
chain organisations.
The value and beneft from
a structured supply chain
function.
Understanding and using the busi-
ness cycle andsupply chain model
overview, we are now able to devel-
opa more efective organisation and
functional sub-organisations Tis
would synchronisebetter the exist-
A structured approach also enables a better
alignment of relevant resources and will also
reduce operating costs and improve overall
proftability.
ing resources and remove the non-
contributing elements from core
supply chain activities. A struc-
tured approach also enables a better
alignment of relevant resources and
will also reduce operating costs and
improve overall proftability.
Te cost reductions that we
expect from this process, will be
the elimination of overlapping ac-
tivities, wastages in time and efort
but also create a leaner more re-
sponsive organisation able to adapt
to changes in market conditions.
Tis will enable the manage-
ment to identify the critical proc-
esseswithin each contributing
function, which can be defned,
measured andcontrolled. Te re-
sult would give a more visible sup-
ply chain model, with performance
indicators in a coherent structure.
It is the collective optimised
KPI results of each business block,
that gives the comprehensive vis-
ibility of the overall company per-
formance. Part 6 of this series will
be dedicated to Performance Man-
agement of the supply chain where
we will expand the above discus-
sion points further.
In part 3 of this series, we will be
looking at Building and Sustaining
an Enterprise Supply Chain Model.
Tis will be relevant to all compa-
nies, large and small, mature and
growing, as the business models are
never static, and so are supply chain
continuously evolving. It is crucial
that refreshing the supply chain ef-
fectiveness can only be derived by
sustaining the necessary capabili-
ties, that are relevant to delivering
the Enterprises goals.



2
2 Feature
This approach would be easy to
implement and create the path of least
resistance, disruption and cost. A solution
that many in the organisation would well
subscribe to, as it involves minimal
change to their departments, authority
and responsibilities. But before too long,
managing sucha structure would prove to
be very difficult, yield low results and
eventually collapse. It will fail because the
only change made, was to create a new
horizontal functional layer into the
existing organisation, and give it the
name of supply chain. The expectation
that the existing vertical organisation would follow the directives and coordination of this new
function, is a dream and not sustainable.
Note: All the charts are designed for illustration of the point of principle and are not intended to represent the optimum supply chain
model or structure.
What is a Supply Chain ?
At this point, we should pause to reflect on the definition and components of what makes up a supply
chain and then to appreciate how it becomes relevant to an Enterprise.
There are many interpretation and definitions of what is a supply chain. Some imagine it to be a
complicated methodology where you need tohave highly skilled and intellectual graduates to
understand it and work it. Whilst others confuse or interchange terminologies, to make simple things
sound more sophisticated than what they really are.
The simple and unambiguous definition of a supply chain, can be described as,A series of tightly
interconnected and related processes that form the backbone of an Enterprises capabilities to
transform and deliver its revenue generating goods and servicesto its Customers.
To illustrate this fundamental definition, let us consider atypical business model.
It starts, with a Customer order, and ends with a Customer delivery, and in between we have an
internal process of transformation. In chart below we show this business model, as having 3 major
blocks in the company business cycle.
As this model is fundamental to understanding the basics of the supply chain management, we must
focus all the company activities that revolve around the 3 major blocks of a companys businesscycle.
When one can visualiseacompany business
cycle, modelledin this manner, it will be
clearer to see how the business strategy,
can be effectively executed. Creating a
logical structure around the company
business cycle,will enable all the
organisational functions to better identify
their roles in the model. The processes and
mechanisms to connect the 3 major blocks
of the business cycle, becomes the supply
chain execution model.
Having set-up the fundamentals of the
supply chain model,each of the major blocks will have a clear visibility of where and how their
operational functions are linked and contributeto the overall supply chain. By re-focussing the company
ESP Consult
enablingsustainableperformance
Supply Chain Model
Enterprise Overview
BusinessStrategy
BusinessModel
SupplyChainModel
2
Organisa on
Strategy
Financial
Strategy
MakeorBuy
Strategy
Sales&
Marke ng
Strategy
Product
Strategy
ESP Consult
enablingsustainableperformance
Supply Chain Model
Customer
DemandFulfilment
Demand
Management
Demand
Crea on
4
CompanyBusinessCycle