Study findings highlight growing importance of supply chain management to Canada’s economy
Today’s supply chain teams are increasingly being challenged to demonstrate how they provide a sustainable competitive advantage and move beyond the traditional boundaries of supply chain functions.
This approach is far removed from the time when supply chain management was perceived as little more than an order processing function aimed at ensuring there were enough raw materials in the warehouse to meet a production line’s needs and fulfill orders.
“We would like to see a greater recognition of the wider contribution that professionals in supply chain management can make such as risk mitigation, customer satisfaction and innovation.”
The performance and growing importance of supply chain management professionals now tells a different story, one that shows them playing an increasingly important role not only in their organization’s success, but also Canada’s competitiveness.
This shift is evidenced in several recent studies including a National Employer Market Survey that showed 80 per cent of employers surveyed believe it is important that their organization think more strategically about supply chain management and its contribution to corporate efficiencies and competitiveness. (For more study results, see opinion editorial on page SCMA 2.)
Cheryl Paradowski, president and CEO of the Supply Chain Management Association (SCMA), Canada’s premier association for supply chain management professionals, says supply chain management is moving away from being simply a tactical and transactional function.
“More and more organizations are recognizing that supply chain management can play a more strategic role,” she says. “For example, Amazon, Walmart and Apple have turned that ability to be responsive into a distinct competitive advantage.”
It helps that Apple’s current CEO and the last three Walmart CEOs come from supply chain management backgrounds and have instilled supply chain management cultures in their organizations, adds Ms. Paradowski.
“On the flip side, we’ve seen organizations in Canada struggle when they don’t get their supply chain right, with Target being the most recent example – customers were finding some store shelves empty when they went in to shop,” she says.
Ms. Paradowski points out that Canada’s vast geography and relatively sparse population in some regions makes supply chain management even more important and, in many ways, more challenging.
“The companies that can figure it out, whether through their distribution system or their procurement controls, have an advantage over competitors in Canada and internationally,” she says.
But not all companies are figuring it out, and part of the challenge, according to Ms. Paradowski, is that the supply chain management function is not always given the respect and attention it deserves by senior management.
“It’s a relatively behind-the-scenes function that tends to be largely invisible when it’s working well,” she says. “And while some aspects have direct customer implications, it’s not seen in the same light as marketing, for example. In some organizations, supply chain management only gets noticed when there’s a problem.”
Part of the challenge, she points out, is that it’s a profession in transition, and while SCMA’s latest research shows a high level of appreciation among senior management of the value of professionals in supply chain management, they tend to be regarded primarily as people who control costs rather than contributors to the organization’s overall strategy.
“We would like to see a greater recognition of the wider contribution that professionals in supply chain management can make such as risk mitigation, customer satisfaction and innovation,” adds Ms. Paradowski.
The challenge for SCMA is to convert the appreciation that senior managers seem to have for supply chain management professionals into a commitment to giving them a bigger role in strategic management and providing more resources to train and educate their supply chain management staff.
Jerome Ferber, manager of supply chain at Veresen and chair of SCMA’s national board, says companies spend huge amounts of money for finance and accounting staff and expect them to be well qualified, but tend to skimp on certified supply chain management professionals.
“These are team members who are forward-spending large amounts of money through purchase order commitments and are in charge of long-term contracts often worth hundreds of millions of dollars, but many companies seem to think that they don’t need to be properly trained and certified,” he says.
Mr. Ferber believes the failure to fully recognize the true value of supply chain management professionals is fairly widespread in Canadian business, although some sectors, such as retail, have embraced it as a key part of their competitive process.
“The best way to change that is through communication and education,” he says. “We have to get the message to the right people, particularly senior managers who are not always as concerned about supply chain management as we would like them to be.”
Mr. Ferber says professionals in supply chain management have a particularly important role in Canada’s current constrained economy.
“Whether you’re in oil and gas or retail you are going to be challenged to find ways to reduce the cost of doing business,” he says. “Supply chain is now on the front line and plays a leading role in activities such as profit leveraging, inventory optimization and reducing the cost of sales.”
Mike Owens, vice-president of physical logistics at Nestle Canada, says the value of efficient supply chain management becomes very clear when considering free cash flow, one of the most important financial metrics.
“Accurately managing your inventory is critical to free cash flow,” he says. “If you have a lot of inventory, you’re tying up cash; it’s as simple as that.”
Customer service is another area that’s being impacted by supply chain management, adds Mr. Owens.
“At Nestle, for example, we deal with big retailers across Canada, and they expect between 98 per cent and 98.5 per cent fulfillment on orders. Telling them we’re short of something and can’t ship is not an option,” he says.
While the importance of supply chain management in the food sector is now acknowledged far more than it was 10 years ago, many other organizations still don’t see it as a critical component of their business, says Mr. Owens.
Paul Snow, executive vice-president of global procurement at Highliner Foods, says supply chain management has traditionally been fragmented in organizations where responsibilities are often split between a number of different departments.
“Under these conditions, it’s more difficult to see the total impact that supply chain has on the organization on things like spend and the opportunities to increase efficiencies and reduce costs,” he says. “However, this is changing as companies recognize the value that integrated supply chain activities can bring, and they are assigning roles where one individual oversees the entire supply chain as a member of the senior management team.”
Adopting this type of approach is important because of the transformation in supply chain activities, which are becoming more global, adds Mr. Snow.
“Globalization has extended the supply chain, and there are many more factors that can influence its effectiveness,” he says. “Many supply chain management professionals these days source from a number of different countries, so understanding the culture and business operating practices in a country becomes critical.”
With nearly 8,000 members working across the private and public sectors, the Supply Chain Management Association (SCMA) is Canada’s leading association for supply chain management professionals. It is the national voice for advancing and promoting the profession, and sets the standard of excellence for professional skills, knowledge and integrity. SCMA was the first supply chain association in the world to require that all members adhere to a code of ethics.
SCMA was formed in 2013 through the amalgamation of the Purchasing Management Association of Canada and Supply Chain and Logistics Association of Canada. It is the principal source of supply chain training, education and professional development in Canada. Through its 10 provincial and territorial institutes, the association grants the Supply Chain Management Professional (SCMP) designation, the highest achievement in the field and the mark of strategic supply chain leadership.
View full report online at supplychainfeature.scmanational.ca