Techniques to achieve effective strategic supply

chain management

This podcast gives an overview of the techniques to achieve effective strategic supply chain
management.

This section looks at approaches to developing and implementing supply chain collaboration.

For the procurement professional, managing relationships between customers and suppliers is
a clear strategic role. It may include developing preferred suppliers to reduce the focus on price
reduction within contract negotiations and demonstrating a willingness to co-operate in order
to transition from transactional forms of supplier relationships.

Collaborative relationships need to be approached in a structured way, using techniques that

enable the procurement organisation and the supplier to communicate their expectations,
agree goals, develop a plan to achieve those goals, and develop measures by which success can
be monitored.

In order to achieve this in collaborative relationships, both parties need to invest resources to
establish an effective and mutually beneficial supply chain strategy. They must then work
together to implement the strategy throughout the supply chain network.

Whipple and Russell identified the key building blocks for collaborative relationships, which are:
developing mutual objectives with relevant performance measures, integrating policy,
developing decision-making domains, establishing mechanisms for information sharing, and
aligning rewards and incentives.

They also identified three types of collaborative approach:

• Type 1 is collaborative transaction management

• Type 2 is collaborative event management, and

• Type 3 is collaborative process management.

It is important to define a clear way of working for the parties involved in the collaborative
relationship. Defining the nature of the relationship will allow the supply partners to move
beyond acting purely competitively, and instead begin to deliver shared value and relational
benefits.

This brings us to the end of the section on approaches to developing and implementing supply
chain collaboration.

Now answer these questions to check your understanding. Pause the podcast to write down
your answers.

Leading global excellence in procurement and supply

1. Write down an example of collaboration in the supply chain.

2. Name at least three of the building blocks for collaborative relationships.

3. What are the three types of collaborative approach identified by Whipple and Russell?

This section looks at the approaches to change management when working with stakeholders.

Gauging acceptance of strategic change involves considering whether the stakeholders are
receptive towards the change, whether they believe it can be achieved and whether they are
embracing the change journey.

There are three aspects that should be considered when gauging acceptance. They are the
reaction to the change, the way in which people’s behaviour is changed or influenced as a result
of the strategic change process, and the way that stakeholders apply the strategic change to
tasks and activities that they are responsible for. Stakeholders who accept strategic change will
continue to reflect on their experiences and find new ways of applying what they have learned
through the strategic change process, so this is the desired effect.

A number of evaluation methods can be used to gauge the acceptance of strategic change, for
example, interviews, group reviews, feedback and surveys, observation, process mapping, and
assessment tools such as the organisational readiness change assessment tool. The methods
should be set up at the start, so the impact of the change can be monitored throughout.

The information obtained can be fed into the change management process to determine
communication plans with key stakeholders and create an understanding for the procurement
professional as to what additional activity would be needed to improve acceptance of the
strategic change process.

This brings us to the end of the section on the approaches to change management when
working with stakeholders.

Now answer these questions to check your understanding. Pause the podcast to write down
your answers.

1. What three factors are assessed when gauging acceptance of strategic change?

2. What is the benefit of stakeholders accepting change?

3. Write down at least three evaluation methods that can be used to gauge acceptance of
strategic change.

This section looks at the approaches to measuring supply chain performance.

Key performance indicators (or KPIs) are focused on important elements of supply chain
performance, for example, quality, speed, dependability, flexibility and cost. There is no set
number of KPIs that is considered ‘right’ for the supply chain. However, too many KPIs can dilute
the effectiveness of performance measurement and make it difficult to identify areas for
improvement or challenge.

Leading global excellence in procurement and supply

KPIs should relate to the strategic objectives of the overall business strategy, be relevant to the
needs and requirements of customers, and focus on how the supply chain is performing in
relation to the activities of competitors to ensure that the organisation maintains its competitive
advantage.

Measuring and analysing performance against KPIs enables the procurement professional to
identify any component of the supply chain that is underperforming, or where bottlenecks may
be accumulating. Collecting data and publishing metrics only adds value if it’s used for
monitoring and control in order to improve performance in the supply chain.

The procurement professional needs to ensure that the performance metrics applied help to
identify both the symptoms and the root cause of performance issues.

A balanced scorecard is a performance management tool. It can be used by supply chain

managers to ensure suppliers are performing to the agreed standard. It can also be used to
report on supplier performance to key stakeholders. The balanced scorecard is multi-
dimensional, reinforcing to the supplier the importance of performing, in equal measure,
against a range of different measures.

The balanced scorecard provides a framework that can be adapted to the business context of
the organisation, and provides a suitable template for measuring performance that can be used
at every tier of the supply chain and throughout the supply partner network.

The performance measures that are included in the balanced scorecard have a significant
influence on the behaviour of supply partners throughout the supply chain.

The measures should be linked at each level of the supply chain and should focus on efficiency
and effectiveness in order to ensure supply partners focus on the same outcomes throughout
the supply chain. This can lead to improvements in productivity and profitability.

The conventional scorecard, devised by Kaplan and Norton, focused on four key areas of
performance: internal processes, customer, financial, and learning and growth. However, these
can be adapted to suit the organisation’s specific requirements.

This brings us to the end of the section on the approaches to measuring supply chain
performance.

Now answer these questions to check your understanding. Pause the podcast to write down
your answers.

1. What five factors are KPIs usually based on?

2. What is the purpose of the balanced scorecard?

3. What are the four perspectives that should be included in the balanced scorecard?

This section looks at the development of knowledge and skills that can help achieve effective
strategic supply chain management.

Competency analysis involves evaluating the scope and work required for a particular supply
chain task or activity in comparison with other tasks or activities within the supply chain.

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Competencies are a list of statements that outline how an individual employee or supply chain
partner is expected to carry out job tasks, and what skills and knowledge they will need to be
able to do the job tasks effectively. The statements provide information about what knowledge
and skills will contribute to success, and how that links to organisational performance.

The CIPS Global Standard can be used to identify the competency requirements of teams and
individuals, enables the procurement professional to develop fair and unbiased criteria for
choosing who to employ in a particular role, and ensures everyone is assessed against the same
framework.

The competency framework can be used in a number of different human resources processes
including developing job descriptions, recruitment and selection, performance management,
learning and development, and talent management and succession planning.

The competency framework may also outline the behaviours that the procurement and supply
function values in supply partners and the expertise needed to achieve the strategic objectives
of the organisation.

This brings us to the end of the section on how the development of knowledge and skills can
help achieve effective strategic supply chain management.

Now answer these questions to check your understanding. Pause the podcast to write down
your answers.

1. What are competencies?

2. What is the CIPS Global Standard?

3. What HR activities can the competency framework be used in?

This is the end of this podcast. You should now be able to:

• Evaluate approaches to developing and implementing supply chain collaboration

• Evaluate approaches to change management when working with stakeholders

• Analyse approaches to measuring supply chain performance, and

• Analyse how the development of knowledge and skills can help achieve effective strategic
supply chain management.

Leading global excellence in procurement and supply