Good Supply Chain Governance ensures that all necessary resources are in place and that individuals or teams are working on agreed priorities, progressing to agreed time scales, and delivering the required benefits. It also ensures that the Supply Chain Governance program and program progress are well communicated and reported across the organization.
At the heart of a good Supply Chain Governance approach is a steering group; typically this is a senior team tasked with ensuring the ongoing success of the project or realization of strategic objectives. The steering group’s role is concerned with making decisions about the overall Supply Chain portfolio of Lines Of Business (LOBs), Strategic Business Units (SBUs), or geographic regions, and not the company's portfolio of individual logistical functions (procurement, inbound transportation, inventory control, warehousing, outbound freight, and distribution) to deliver the required results.
Poor transparency, inadequate corporate governance, and weak rule of law create an uncertain foundation for supply chain transactions when a weak regulatory and governing environment exists in an organization. Most essential as a key part of governance is ensuring that the right resources with the right capabilities are available when needed. With this insight, companies can identify and deliver the right education and training program to uplift their Supply Chain Governance capability.
In this context, Supply Chain Governance would mean:
- Collaboratively planning, establishing and communicating global policy guidelines, minimum performance expectations, risk assessment and mitigation plans, and compliance metrics.
- Corporate-wide visibility to actual supply chain expenditures by logistical function categories and contract compliance patterns.
- Planning and executing key initiatives incorporating supply chain governance factors.
- Tracking and reporting the status of initiatives and key measures of supply chain governance across internal customer departments; external vendors, suppliers, carriers, intermediaries, and providers; and key company stakeholders.
- Establishing continuous process improvements based on closed-loop monitoring and control of spend and compliance patterns.
Governance is a relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations. Naturally, it is important to serve the interests of multiple stakeholder groups. Companies need to establish, with governance, the right structure for your supply chain function. Governance is also the combined structure and approaches that are needed to enable a strategy, project or major initiative to be implemented effectively. Without good governance, it is likely that organizational goals will not be met, benefits will not be realized, and the project could fail completely. The right structure for your organization is essential and is something that needs to be properly considered. Care in evaluating the company structure, its needs, the markets in which business must be conducted, and the size of the operation, are the main considerations.
The necessity for a supply chain organization that creates leverage and scale, manages risk, delivers bottom line profitability, and conforms to a regulatory and environmentally friendly agenda, is a significant challenge that affects centralization. One way to help Supply Chain Governance is to create the role of Chief Supply Chain Officer (CSCO) in recognition of the central role that the supply chain can play in improving global business performance - which is considerable. The position of the CSCO is believed by many to have taken on increased significance in corporations, and the role is thought to have grown more strategic in recent years. Globalization, compliance pressures, and risk factors have triggered a trend toward centralization of the supply chain function for the purposes of company-wide standardization and leverage.
Centralized control by one headquarters department of all supply chain related functions is not uncommon among companies. The shift toward professional oversight of supply chain strategy and its day-to-day implementation may even accelerate the degree of control under a CSCO’s management. In addition to the obvious, two other large benefits will accrue. First, a centralized function helps provide greater transparency throughout the company, avoiding problems such as having a third party logistics provider that is blacklisted in one country but is a strategic partner in another. Second, it helps with the effective implementation of strategy. Standardization, for example, has to be more than saying it would be nice if you could standardize a bit, and then being ignored. Usually, a CSCO-led supply chain function can push these initiatives far better in a multi-national company’s end-to-end supply chain.
It is evident that Supply Chain Governance is fast gaining importance as a management tool to not only execute on Corporate Responsibility and Sustainability initiatives, but also to effectively execute on cost savings and cost avoidance opportunities beyond the norm. In addition, it also helps decentralize execution while maintaining control centrally. As a result, the Supply Chain Governance organizational structure establishes both oversight and management of logistical function capabilities by defining roles, responsibilities, and accountability.
In conclusion, plan accordingly.
This article is part of the monthly series authored by the Institute for Supply Management’s Logistics & Transportation Group Board Members, who are current practitioners, consultants, trainers, and educators. In future columns, they will continue sharing their views on a number of Supply Chain and Professional Development topics.
Thomas L. Tanel, CTL, C.P.M., CISCM, is the President and CEO of CATTAN Services Group, Inc., specializing in Logistics and Supply Chain issues. He is also the Chair of ISM’s Logistics & Transportation Group and can be reached at tanel@cattan.com or (979) 212-8200. Membership in the Group is open to all ISM members who are responsible for or have an interest in the Logistics & Transportation fields.
At the heart of a good Supply Chain Governance approach is a steering group; typically this is a senior team tasked with ensuring the ongoing success of the project or realization of strategic objectives. The steering group’s role is concerned with making decisions about the overall Supply Chain portfolio of Lines Of Business (LOBs), Strategic Business Units (SBUs), or geographic regions, and not the company's portfolio of individual logistical functions (procurement, inbound transportation, inventory control, warehousing, outbound freight, and distribution) to deliver the required results.
Poor transparency, inadequate corporate governance, and weak rule of law create an uncertain foundation for supply chain transactions when a weak regulatory and governing environment exists in an organization. Most essential as a key part of governance is ensuring that the right resources with the right capabilities are available when needed. With this insight, companies can identify and deliver the right education and training program to uplift their Supply Chain Governance capability.
In this context, Supply Chain Governance would mean:
- Collaboratively planning, establishing and communicating global policy guidelines, minimum performance expectations, risk assessment and mitigation plans, and compliance metrics.
- Corporate-wide visibility to actual supply chain expenditures by logistical function categories and contract compliance patterns.
- Planning and executing key initiatives incorporating supply chain governance factors.
- Tracking and reporting the status of initiatives and key measures of supply chain governance across internal customer departments; external vendors, suppliers, carriers, intermediaries, and providers; and key company stakeholders.
- Establishing continuous process improvements based on closed-loop monitoring and control of spend and compliance patterns.
Governance is a relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations. Naturally, it is important to serve the interests of multiple stakeholder groups. Companies need to establish, with governance, the right structure for your supply chain function. Governance is also the combined structure and approaches that are needed to enable a strategy, project or major initiative to be implemented effectively. Without good governance, it is likely that organizational goals will not be met, benefits will not be realized, and the project could fail completely. The right structure for your organization is essential and is something that needs to be properly considered. Care in evaluating the company structure, its needs, the markets in which business must be conducted, and the size of the operation, are the main considerations.
The necessity for a supply chain organization that creates leverage and scale, manages risk, delivers bottom line profitability, and conforms to a regulatory and environmentally friendly agenda, is a significant challenge that affects centralization. One way to help Supply Chain Governance is to create the role of Chief Supply Chain Officer (CSCO) in recognition of the central role that the supply chain can play in improving global business performance - which is considerable. The position of the CSCO is believed by many to have taken on increased significance in corporations, and the role is thought to have grown more strategic in recent years. Globalization, compliance pressures, and risk factors have triggered a trend toward centralization of the supply chain function for the purposes of company-wide standardization and leverage.
Centralized control by one headquarters department of all supply chain related functions is not uncommon among companies. The shift toward professional oversight of supply chain strategy and its day-to-day implementation may even accelerate the degree of control under a CSCO’s management. In addition to the obvious, two other large benefits will accrue. First, a centralized function helps provide greater transparency throughout the company, avoiding problems such as having a third party logistics provider that is blacklisted in one country but is a strategic partner in another. Second, it helps with the effective implementation of strategy. Standardization, for example, has to be more than saying it would be nice if you could standardize a bit, and then being ignored. Usually, a CSCO-led supply chain function can push these initiatives far better in a multi-national company’s end-to-end supply chain.
It is evident that Supply Chain Governance is fast gaining importance as a management tool to not only execute on Corporate Responsibility and Sustainability initiatives, but also to effectively execute on cost savings and cost avoidance opportunities beyond the norm. In addition, it also helps decentralize execution while maintaining control centrally. As a result, the Supply Chain Governance organizational structure establishes both oversight and management of logistical function capabilities by defining roles, responsibilities, and accountability.
In conclusion, plan accordingly.
This article is part of the monthly series authored by the Institute for Supply Management’s Logistics & Transportation Group Board Members, who are current practitioners, consultants, trainers, and educators. In future columns, they will continue sharing their views on a number of Supply Chain and Professional Development topics.
Thomas L. Tanel, CTL, C.P.M., CISCM, is the President and CEO of CATTAN Services Group, Inc., specializing in Logistics and Supply Chain issues. He is also the Chair of ISM’s Logistics & Transportation Group and can be reached at tanel@cattan.com or (979) 212-8200. Membership in the Group is open to all ISM members who are responsible for or have an interest in the Logistics & Transportation fields.
