Operations Practice

Transforming supply chains:

Do you have the skills to
accelerate your capabilities?
Despite progress over the past several years, companies are still struggling to
build the capabilities that their emerging digital supply chains will need.

by Knut Alicke, Elena Dumitrescu, and Margarita Protopappa-Sieke

© Luis Alvarez/Getty Images

March 2022
 What expertise will your next generation of
warehouse managers require? Computer
programming? Data analytics? Advanced robotics?
Maybe all those things and more. If you are like
the 71 global companies that responded to a 2021
supply chain survey, you probably accelerated
your investments in digital technology as your supply
chain grappled with COVID-19 challenges.
What’s more, 99 percent of respondents to that
survey said they need more in-house digital
supply chain talent to support their current and
planned digitization efforts, a tenfold increase
on the previous year. That need is driving them to
look toward reskilling and redeploying today’s
workforce to achieve the required levels of
competency (Exhibit 1).
But what is the current state of supply chain capa­
bilities, and what will it take to accelerate them?
In 2017, we published the results of research into the
capabilities necessary to run digital supply chains.
We found that the majority of companies needed
greater numbers of well-rounded professionals who
had all the fundamental skills to manage supply
chains from end to end. We see this is as a pre­
requisite for the transition to digitally enabled supply
chains, in which skill profiles are redefined with
greater emphasis on data and algorithmic literacy,
exception-handling competency, and the ability to
make sound, integrated business decisions.
Since our last article, we have continued to measure
the evolution of supply chain capabilities at hundreds
of companies worldwide. Our analysis is based
on results from a psychometrician-validated tool that
assesses individuals’ knowledge in eight core
domains: supply chain strategy, order and demand
management, forecasting, inventory management,
production planning, supply planning, operational
logistics, and performance management. This
data set has more than doubled in size since our
2017 article (to more than 15,000 responses),
so we thought it timely to revisit our analysis to see
what has changed.

Exhibit 1
Talent
Talent mismatches increasecompanies’
mismatches increase companies’ focus
focus onon internal
internal reskilling
reskilling
and redeployment.
and redeployment.

Amount of digital talent, May 2020 How leaders reskill or redeploy their workforce,
% of respondents May 2021 % of respondents

No talent 12 Reskill today’s

in-house 55
8 labor force

Little talent 25 Hire new talent from

in-house the labor market 52
31

Some talent 53 Redeploy the existing

30
in-house 59 labor force internally

Sufficient talent 10 Hire external talent 21

in-house 1 temporarily

Source: McKinsey survey of global supply chain leaders (May 4–June 16, 2021; n = 71)

2 Transforming supply chains: Do you have the skills to accelerate your capabilities?
Change is happening but too slowly
The headline figures from our most recent analysis
look similar to our previous results. Overall,
companies’ average supply chain capability scores
are still clustered tightly around the 46 percent
mark, which is about where they were in 2017. We
have seen some movement in specific industries,
however. Comparing our sample of companies that
have applied the assessment to their workforce,
we notice an improvement in the average supply
chain capabilities of pharmaceutical organizations,
while the average performance of companies in
advanced industries (including automotive,
aerospace and defense, and semiconductors) and
the basic materials sectors (such as metals and
mining, oil and gas, and pulp and paper) has fallen
slightly (Exhibit 2).
These changes might be driven by shifts in
management focus. For example, pharmaceutical
companies are paying more attention to supply
chain efficiency in response to cost pressure from
customers and competitors, and they may aim to
improve efficiency through talent acquisition and
development. Many advanced industries have faced
increased technological disruption in both products
and production processes, which may have
shifted attention and investment away from further
developing people capabilities in supply chain.
As we found the first time around, there is still
significant variation in the performance of companies
within each sector. Regardless of geographical
market or industry, a company controls its own ability
to attract, develop, and retain top talent, and this
may influence its performance in the long run.
When we look beyond the averages, however,
evidence of more movement emerges. In 2017, almost
60 percent of supply chain professionals had an
expertise spike only in one area, measured as expert-
level achievement in that domain. Today, only
30 percent of people have such a narrow skills profile,
while 28 percent have mastered two to five areas.
The number of truly well rounded “end-to-end”
supply-chain-management experts has been stable

Exhibit 2

Since 2017,
Since 2017,some
someindustries’
industries’supply
supplychain
chaincapabilities
capabilitieshave
haveincreased, while
increased, while
others have
others have fallen.
fallen.
Level of supply chain capabilities by industry group,¹ %
2015–17 average results 2018–21 average results Score range of middle 2 quartiles, 2018–21

0 20 40 60 80 100

Overall

Pharmaceuticals

Chemicals

Consumer goods

Basic materials

High tech

Advanced industries

¹Subject to inherent bias in the sample of companies having assessed their supply chain employees’ capabilities.
Source: McKinsey Capability Building Assessment

Transforming supply chains: Do you have the skills to accelerate your capabilities? 3
 at 5 percent of all supply chain roles in the average
organization. Capabilities seem to be broadening,
although slowly, in line with our expectations that
organizations’ capability requirements expand as
digital supply chain initiatives grow (Exhibit 3).
In addition to the traditional functional topics,
the assessment introduced a new module in 2020
that focuses on digital and advanced analytics
applications for supply chain management. This
module has been deployed at 25 manufacturers in
five industry groups, for a total of nearly 5,000
respondents. The overall average score (40 out of
100) for knowledge of digital topics is somewhat
lower than the average score for traditional
functional topics, which is 46. But network analytics
and demand-planning functions, two of the
most frequently implemented digital supply-chain-
transformation initiatives, show somewhat
higher scores: 46 and 49, respectively. This finding
suggests a correlation between higher levels of
talent and advances in supply chain processes.
Moreover, despite the argument that digital skills
favor the young, the data show that the highest
command of applied digital and analytics topics lay
with senior executives, followed by midlevel
leaders. This hierarchy also exists for traditional
supply chain topics. Although more junior
employees may have the technical understanding
and educational background for digital, they
may lack a broad perspective on value creation from
applying data science methods and advanced
technologies to business problems.
Together, these analyses suggest that most
companies face the task of ramping up their supply
chain capability-building efforts—across the
whole supply chain workforce, not just for their most
promising experts. The accelerating pace of
automation and digitization is likely to make this all
the more urgent in the coming years. According
to McKinsey Global Institute research, half of today’s
tasks are expected to be automated by 2055,
resulting in process transformations and the implicit

Exhibit 3
Skills across supplychain
across supply chainareas
areasare
aredeveloping,
developing,even
evenififfew
fewprofessionals
professionals have
have
achieved end-to-endmastery.
achieved end-to-end mastery.

Share of supply chain employees in the average company at each level of knowledge achievement,¹ %
58
2021
37
2017 30 28
21
15
5 5

No particular supply 1 area of supply 2–5 expert-level End-to-end supply

chain expertise area chain expertise functional areas chain mastery

¹Subject to inherent bias in the sample of companies having assessed their supply chain employees’ capabilities.
Source: McKinsey Capability Building Assessment

4 Transforming supply chains: Do you have the skills to accelerate your capabilities?
 need to reskill and upskill workers. We’ve known for
some time that nearly 70 percent of all transformation
programs fail, and a main reason is that employees
do not have the necessary skills and capabilities to
support the transformation program.
Knowing where to start
The most effective capability-building programs
invest in foundational, end-to-end supply chain
knowledge building, coupled with advanced
functional, technical, and leadership training based
on the business’s aspirations and existing capability
profiles. But one major challenge often faced by
organizations is identifying the specific skills they
need to develop and grow competitive people
capabilities. In our recent global survey of supply
chain executives, we found that only 6 percent
of the 71 companies that responded have a formal
perspective on their organizations’ strategically
important skills and competencies. While most of
these organizations said they have a corporate
capability-building academy—30 percent of which
now include new data and analytics programs—only
one in 20 respondents believed that those
programs effectively build the skills needed to
deliver on strategic aspirations.
Without a clear road map of either their current
capabilities or their future skills needs, supply chain
organizations are working in the dark. Many
end up relying heavily on external talent pools, using
contractors for specialized areas or projects and
to fill immediate skill gaps. This practice presents its
own risks, however. A manufacturing company
in the energy sector, with a strategy that involved
contingent workers providing a spike of core
capabilities in critical planning and distribution roles,
tested its workforce using the standardized
assessment. The responses showed that the external
talent population had, on average, lower skills than
the company’s full-time supply chain employees.
These results suggested that the company’s existing
selection processes were failing to identify
the best talent or to boost the overall functional
knowledge of its supply chain group.
1
Steve Glaveski, “Where companies go wrong with learning and development,” Harvard Business Review, October 2, 2019.
Transforming supply chains: Do you have the skills to accelerate your capabilities?
An effective capability-
building formula
Companies that have a clear perspective of what
they need regarding talent still rely on external
talent pools to fill urgent capability gaps quickly, but
they also take a strategic approach to the develop­
ment of skills across their existing workforce.
The business case is there: organizations that invest
in developing their people while launching
a transformational change program see a higher
success rate than those that do not—by a factor
of up to fourfold.
Designing a successful capability-development
program is not easy, with most programs failing
to produce sustainable results.1 But the experiences
of exceptional companies show that successful
capability-building programs are typically designed
around five elements:
— focusing on the skills that matter, which is often
hindered by a lack of understanding of what
“good” looks like or what it takes to be “great”
— using diverse and effective learning methods
— incentivizing participation and engagement
— setting up the program to scale beyond the
initial pilot
— and driving for impact on company’s
operating performance
The formula in action
What does a successful supply chain capability-
building program look like? Take the example
of a high-tech company that embarked on a large-
scale, two-year effort to upgrade the skills of
more than 3,000 employees, many of whom had
been working in the organization for 20 or 30 years.
The company had no systematic capability-
building program in place for experienced staff
and had made only limited efforts to import
external best practices. That organization’s supply
5
 Organizations that invest in developing
their people while launching a
transformational change program
see a higher success rate than
those that do not.
chain was underperforming too, with low service
levels and significant order backlogs despite high
on-hand inventory. As it embarked on a holistic
supply chain transformation, the company’s leaders
suspected that success would depend on a
significant shift in the skills and mindsets of its staff.
Their fears were confirmed by the first step in the
development of the new program, in which the
company, using assessment-based benchmarking,
defined the required core capabilities of its future
supply chain and compared those with the skills it
had available across its current staff. That work
revealed a big gap: the average scores were around
50 percent lower than those seen in the highest-
performing organizations.
To close its capability gap, the company designed a
learning road map that structured the learning
journeys into multiple stages. Initially, it focused on
building foundational supply chain knowledge
that leveled up skills and established a common
language across more than 3,000 members
of the supply chain organization. This intervention
was delivered via video—allowing broad
participation of the supply chain community and
adjacent functions, as well as interaction with
experienced faculty who could take questions and
ensure that participants understood the material.
6 Transforming supply chains: Do you have the skills to accelerate your capabilities?
Next, the company focused on the development
of functional expertise for the core group of
approximately 1,400 supply chain professionals.
This part of the curriculum covered principles
for supply chain configuration and basic methods for
inventory management, demand forecasting, and
balancing of demand and supply through integrated
sales and operations planning. Interventions
included in-class and online self-paced sessions.
The in-class elements were led by expert trainers
who could provide context, examples, opportunities
for open reflection, and answers to learners’
specific questions. Dedicated online sessions
supported the in-person learning with a variety of
training formats, including interactive video
sessions with expert faculty, content slides,
interactive exercises, and quizzes.
Finally, for a selected group of around 100 high-
potential participants, the company developed
a mastery-level program covering advanced
concepts in supply chain management. In addition
to classroom and online learning approaches,
this part of program incorporated site visits to model
warehouses and group discussions. Using a “train
the trainer” approach, some expert staff were
encouraged to become faculty in the organization’s
in-house capability-building academy, helping
to develop the supply chain management skills of
colleagues and members of adjacent functions.
In line with adult-learning best practices, the entire
program placed significant emphasis on experiential
learning, giving participants the opportunity to
see new skills in action, apply them in practice, and
teach them to others. This hands-on experience
was delivered in a variety of formats, including
interactive case-study sessions, role-playing games,
and simulations. This included, for example,
the long-established beer game, in which players
coordinate a simulated beverage supply chain
in the face of inaccurate forecasting, misaligned
incentives, a lack of transparency, and poor
information sharing. The sight of inventory piling up
and the sense of the supply chain running out of
control provides an immediate and vivid lesson that
is rarely forgotten.
The company measured the impact of its
program using a variant of the assessment it used
for benchmarking. Participants improved their
performance by an average of 20 percentage points
over the duration of the program, and the company
established a permanent pool of internal trainers,
together with a group of change agents and experts
in different functions to further disseminate
learning, transfer knowledge through practice-
sharing communities, and promote continuous
skills improvement.
Building a capability accelerator
Developing the capabilities needed to run modern
supply chains takes time and commitment,
but the job doesn’t end when companies fill their
immediate skills requirements. Companies
will want to continuously monitor the alignment
between their capabilities and their strategic
goals, together with the operating performance
of the organization. When new gaps become
apparent, this continual awareness makes it easier
to move rapidly to close them.
These cases illustrate how the most successful
supply chains of the future will likely be those that
that build accelerated capability building into
their DNA. These organizations will use mechanisms
such as communities of practitioners and in-house
supply chain academies to share emerging best
practices and deliver training at scale. They will set
up their staff incentive systems to encourage
continuous personal development, and the message
will be reinforced by the involvement of senior
leaders, who will act both as program sponsors and
role models for the new learning culture.

Knut Alicke is a partner in McKinsey’s Stuttgart office, Elena Dumitrescu a senior knowledge expert in the Toronto office, and
Margarita Protopappa-Sieke is a senior knowledge expert in the Cologne office.

The authors wish to thank Daniel Gass for his contributions to this article.

Designed by McKinsey Global Publishing

Copyright © 2022 McKinsey & Company. All rights reserved.

Transforming supply chains: Do you have the skills to accelerate your capabilities? 7