by Vivek Sood

July 18, 2017

supply_chain_iconWhen I explain to people that supply chain 3.0 is real, in general, I get three type of responses.

Most of the McKinsey (or their clone) trained strategists ask me to show data to back up this assertion.

On the other hand, more intuitive executives (mainly from sales and marketing background, as I observe) ask me to explain the benefits of supply chain 3.0.

Finally, the third group – those who I call the transformational leaders ask a simple question – how can we use the power of supply chain 3.0 in effecting beneficial business transformations.

In this blog I will address the first question.

I will leave for later blogs the remaining two questions and other arising questions such as: how does supply chain 3.0 differ from the previous versions of supply chains, and, why it was even necessary to ‘invent’ supply chains in the first place.

It is an important question – “where is the data to clearly demonstrate that Supply Chain 3.0 is real?”

The data-driven crowd has a legitimate concern lest a couple of isolated examples be seen as heralding a trend. Having trained at a similar top-tier consulting house during my formative years in consulting, I fully understand and endorse their questions.

Why?

Because all of us have seen people taking isolated instances and exceptions and making them so big in their own and others’ perceptions that these appear to be the predominant trends. Nay-sayers will take a few stray instances of setbacks, blow them out proportion to support their naysaying. On the other hand, almost all investment projects also have their share of overly optimistic projectionists.

In the end, only data reveals the overall picture and clarifies the confusion.

For this reason, when I wrote the bookThe 5-STAR Business Network“, our team did a 6 year longitudinal study of the top 1200 corporations around the world. There were other reasons why this study was conducted – which are given in Chapter 14 of the book. The full research methodology and the resulting ranking of the companies are also given in the book, but for our purpose here it is interesting to note that 62 companies out of the entire starting sample of the top 1200 companies in the world scored 20 points out of 25, which is our cut-off for the Supply Chain 3.0.

Also, interesting to note is that Apple – the darling of supply chain crowd – is only ranked #60 in the rankings. And, due to its low margins, Amazon – just missed the cut. So who are the top 35 companies in these rankings?

You can see them in figure 1 below. For the time being ignore the 5 colour coding, as well as funny three-letter acronyms (TLAs) in the figure. I am absolutely sure, that this figure is unlike any other figure you might have seen before.

Firstly, the companies themselves come from around the globe – Novo Nordisk is from Denmark while Fanuc is from Japan and Falabella is from Chile.

That was to be expected – if you make your research wide and deep enough you will find good companies everywhere. No country or continent has a monopoly on excellence.

So much for all the hype about the Asian century. Sure, development in Asia is creating unprecedented opportunities – but good companies around the globe are using that trend to their benefit. You do not need to be an Asian company to be excellent, but neither are all non-Asian companies uniformly good.

Figure 1: Top 35 companies out of the 62 companies with Supply Chain 3.0
Figure 1: Top 35 companies out of the 62 companies with Supply Chain 3.0

 

Secondly, because this ranking is based on a study conducted over 5 years (not at a single point in time) the standards of excellence are much higher. Also, this is a global study hence the sample base was much wider.

For this reason, many of the usual suspects that you might have seen elsewhere in magic circles etc. are missing. Another reason, the usual suspects might be missing is because we looked far beyond tactical operations into the strategic contribution of supply chains to corporate results. For example, rarely has anyone tried to gauge the impact of supply chain collaboration on innovation, new product development, the pipeline of products, product phasing etc.

But in our research, we took these into account.

For details of the research methodology, caveats, cautions and warnings about not applying these results for investment decision making please read Chapter 14 of the book The 5-STAR Business Network“. This is critical because I do not want you to take the results out of context and make a decision based on flawed assumptions.

Time has come to talk about the 5 funny acronyms in the figure. This is because we want to see how these are linked to the strategic contribution of supply chain management to overall corporate results. So, what do these TLAs stand for? Figure 2 below shows the details:

5-star-meaning
Figure 2: Five cornerstones of Supply Chain 3.0

Each of these names is quite self-explanatory and most people reading this blog will not need too much explanation.

I will only briefly outline them here, because detailed explanation and examples mean that I will be recreating the book “The 5-STAR Business Network” or a version of it in this blog.

One more important conclusion needs to be drawn from the data presented in Figure 1. You will notice that rarely is there a company which ranks high on each of the five key cornerstones of supply chain 3.0. Yet, all the 62 excellent companies that meet our criteria for supply chain 3.0 excel in at least three of the five key cornerstones.

That shows you do not have to perfect to arrive at supply chain 3.0 – you only need spikes of excellence in at least three of the five key areas. In the next two entries, I will write about each of these five pillars in more details.


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Notes:

  1. These ideas and concepts will be usually expressed by our thought leaders in multiple forums - conferences, speeches, books, reports, workshops, videos and training. The date shown above the article refers to the day when this website was last reformatted. This blog post or article may have been written anytime prior to that date. 
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Vivek Sood

MORE INTERESTING READING
  • What a wonderful blog on research methodology on supply chain & the 5-star business network.
    See what I researched on supply chain methodology was, When choosing a research strategy, there are tradeoffs in control, realism, and generalizability. Quantitative research methods optimize control and generalizability (external validity), while qualitative research maximizes realism (internal validity). Logistics scholars agree that logistics and supply chain management are steeped in the positivist paradigm and that past research is primarily normative and quantitative. An imbalance exists in the conduct and publishing of rigorous qualitative research studies such as grounded theory, ethnography, phenomenology, semiotics, and historical analysis. At the same time, the business environment in which logistics and supply chain phenomena are located is becoming increasingly complex and less amenable to using just a quantitative approach. In order to accurately describe, truly understand and begin to explain these complex phenomena, research streams should include more studies using qualitative methods. Researchers who exclusively choose one approach or the other seriously delimit the scope of their inquiry and, thereby, their ability to contribute to the body of knowledge…[https://bit.ly/2OW9MRX]

  • I found this blog while research for my case-study, while I get so many important info through this blog. I thankful to the author for a great blog about SCM 3.0.

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