Strategic Supply Chain Management - Supply Chain Online

CHAPTER 3 Core Discipline 3: Design Your Organization for Performance 113
core supply chain processes. Group the major activities, keeping in mind
that every participant in each process is both a customer and a supplier
and that every supply chain event or task has both an input and an output.
Identify the people responsible for executing the plan, source, make,
deliver, and return processes, focusing on the tasks they perform rather
than on the name of the group to which they report.
As you begin to sketch the lines around the groups responsible for supply
chain planning and execution, remove the real or perceived boundaries
between functions and bring complementary skill sets closer together. By
setting up a new supply chain planning department, Agere was able to both
consolidate planning activities within a centralized group and remove the
boundaries between the business units and the supply chain organization.
Be aware that removing the borders between groups destroys the
traditional functional organization and may result in managers becoming
individual contributors, presidents reporting to managers, or whole groups
dispersed and reallocated elsewhere. In some cases you may create an
entirely new division organized around supply chain processes.
IBM did just that in 2002, when it established the integrated supply
chain (ISC) organization. 5 Within just 12 months, IBM pulled together all
the pivotal functions of the supply chain, combining its front-end customer
support teams, manufacturing, procurement, and logistics into a
new unit. In so doing, it brought together about 19,000 employees in 100
locations in 59 countries. IBM had long used a solutions-based business
model—one that combines technology, products, and services—and
wanted to adapt its supply chain to support this model. It found that just
changing the reporting structure, moving like skills together, and breaking
down the walls between manufacturing, procurement, and distribution
yielded immediate benefits. The next steps were to establish common
goals and objectives, well-defined roles and responsibilities, and a strong
management system with clear measurement and accountability.
Kraft Foods North America also created an organization designed
around core supply chain processes with the expectation that streamlining
the supply chain would reduce the cost of goods sold and improve the
company’s bottom line. 6 It structured an organization that encompasses all
the activities that go into delivering products to customers, from planning
and production scheduling to transforming raw materials into finished
goods and then packaging and distributing those goods.
The goal of an effective supply chain organization is to optimize
the end-to-end order-fulfillment process—not individual functions—
all the while achieving the lowest total cost. Kraft willingly invests in