Report: It’s time to make supply chain managers a C-suite partner

Prior to the COVID-19 pandemic, manufacturers, retailers and other businesses worked to perfect the “just-in-time” inventory delivery system. The pandemic and ensuing supply chain disruptions threw that model into doubt.

Don’t have enough toilet paper to sell? Customers will shop elsewhere. Lumber is in short supply? Stop building houses. Need a semiconductor to finish that car? Just park it for now.

Disruption was everywhere, and it forced companies to rethink the just-in-time inventory model they had come to rely upon.

Capterra, a software consultancy for supply chain companies, has released a report based on recent surveys of industry leaders and it has found that the time may be right to move away from just-in-time, and even away from just-in-case, to the more useful just-the-customer approach.

“To meet these changes, businesses need to shift from strategies that prioritize cost reduction and efficiency to those that center around the customer. This will involve elevating the role of supply chain management from a ‘back of the house’ execution-only focused department to a strategic partner with a seat at the senior leadership table,” the firm said in the report.

Olivia Montgomery, associate principal supply chain analyst at Capterra, told Supply Chain Management Review that supply chain managers (SCM) have a lot of insight into the strengths and weaknesses of their suppliers, and need to be a “more strategic partner” to business leaders.

“The [SCM team] tends to be even-keeled, factually based,” she said. “They know the speed that the business can adjust at … so you don’t have companies making whiplash decisions at the whim of the customer.”

With that said, Montgomery and the report indicate that many businesses need to be more attune to the customer.

“You are continuously sensing what the customer is wanting. You are not looking to make changes immediately, that’s where the strength of supply chain teams comes in. They can set expectations,” Montgomery said.

Capterra conducted the Supply Chain Management Trends Survey in November 2022 among 300 supply chain professionals at small to midsize businesses in the U.S. The report also incorporated some findings from its Consumer Sustainability Expectations Survey, conducted in August 2022 among 759 U.S. consumers.

Among the key findings of the latest survey is that 80% of SMB supply chains plan to increase or continue to invest in sustainability efforts, but only 31% supply chain management (SCM) leaders meet regularly with IT and operations for planning and strategy meetings.

This can lead to a disconnect between departments and hamper efforts to achieve goals.

Montgomery said the inclusion of SCMs in the process can lead to more efficiencies such as reduction of paperwork, elimination of duplicate efforts, and improved customer service. She added that SCMs can also provide key benefits earlier in the process.

“They can help adjust and inform, especially when it comes to product design,” she said. “You don’t just want sales and marketing doing product design … we need supply chain managers in the room helping drive long-term goals.”

The benefits, Montgomery noted, are multifold, and extend all the way down to sustainability efforts. More efficient packaging, for instance, may mean additional product can be loaded onto trucks, reducing capacity needs and using less fuel.

According to the report, more than half of businesses (65%) plan to hire more supply chain talent this year, with 43% planning to promote and/or hire one or more SCM specialists into a senior leadership position.

All of it, though, needs to focus on a “customer-centric supply chain” that utilizes a “sense, shift, steer” approach to meeting customer demands, the firm said.

Sense the change

Capterra said customer-centric supply chains are dependent on the ability to identify what customers want. This requires partnerships with other departments to understand customer behavior and can include feedback on products sold, what marketing campaigns are resonating and why returns happen.

The company noted this type of work is atypical of traditional supply chain managers and may require hiring a person with expertise in this area.

“Focus your attention on the feedback and behavior specifically related to shipping and delivery, product quality and price, and inventory demands as these are the areas where you can have direct impact on improving the customer experience,” Capterra wrote. “Then compare your current suppliers, business processes, and operation goals to what your customers are saying to identify areas of opportunity, both short and long term.”

Shift priorities

Once companies identify what their customers want, they need to focus on shifting their own priorities and key performance indicators (KPIs) to align with the desires of customers.

In this approach, once those KPIs are set, review your supplier network. For instance, Capterra’s customer survey found that 84% of consumers purchased a sustainable product in the second half of 2022, and paid an average of 8% more to do so. Can your suppliers meet sustainability demands of consumers, and if they can’t, consider finding an alternate supplier that can.

Capterra also said to review shipping partners to ensure they can meet capacity needs, delivery expectations and sustainability demands. And finally, don’t be afraid to get involved in product design, especially as it relates to product packaging. Sales and SCMs can add value to this process, ensuring the product and its packaging display the priorities of the end customer.

Steer the strategy

While SCMs are gaining importance in the C-suite, there is still a lack of representation based on the Capterra survey. Just 43% of SMBs with supply chains plan to promote or hire SCMs into senior leadership positions. These means companies may be missing out on an opportunity to build a customer-centric supply chain.

“As the business develops long-term, customer-centric goals and strategies, SCM leaders offer insight on ways to meet these goals. Especially with priorities such as meeting consumer demand for sustainability, SCM leaders can help develop realistic and innovative ways to better leverage supplier and logistics relationships and capabilities to meet these expectations,” Capterra said.

The company recommended the inclusion of an SCM leader on a strategy steering committee that has customer behaviors and expectations front and center. This SCM leader also needs to collaborate with other departments to identify opportunities to enhance supply chain processes, or shift supply chain processes, with the ultimate goal of meeting a customer-first operation.

How to make this happen

To help speed this more inclusive environment, Montgomery said SCMs need to show their value and that is not always through logistics.

“I really recommend showing how much insight you have in optimizing product design,” she advised. “Generally, your senior leaders just want it to get it done [where] it doesn’t cost that much, so logistics is not always the way to get a seat at the table. Showing product design [expertise] is the way.”

Capterra found that only 31% of supply chain managers meet regularly with information technology and operations. While most meet as needed, Montgomery said she was surprised that number was a low as it was and said it was a number she would have expected pre-pandemic.

“That tells me there is a lot more work to do in the business as a whole to bring supply chain management leadership into the [overall] planning,” Montgomery said before adding that she was “excited to see where this goes. We are not replacing a just in time philosophy with a customer-centric supply chain. It’s just changing the priorities and meeting the customer demand in a thoughtful, long-term way.”

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