Firms are most at risk from non-traditional suppliers such as Elon Musk © Britta Pedersen-Pool/Getty Images
Firms are most at risk from non-traditional suppliers such as Elon Musk © Britta Pedersen-Pool/Getty Images

'Cut supply chain management layers to take on disruptors'

18 January 2021

Firms should cut layers of management in supply chain to react quicker and compete with disruptive businesses like Tesla, according to a report.

A report by Gartner said chief supply chain officers (CSCOs) should reduce levels of command and internal silos to speed up decision-making for supply chain processes.

While large organisations are often controlled by many levels of management, companies can benefit from having “less hierarchical organising and leadership models”, said the report.

Instead, supply chain teams should be guided by centre-management but have the autonomy to carry out their own ideas.

Organisations believe they are most at risk of being disrupted by “non-traditional” competitors in the coming years, including Alibaba, Amazon, Apple, Tesla and Uber.

According to Gartner, an agile supply chain organisation is a critical part of developing a “non-traditional supply chain” that can compete against disruptive companies. Almost two-thirds of CSCOs (61%) said they were using or implementing short lines of command and non-hierarchical supply chain organisation to increase agility and innovation.

Supply chain executives, interviewed as part of research, said: “Non-traditional competitors are better fit to navigate the new forces impacting their businesses and supply chains... reshaping industries through disruptive innovation, the ability to meet the needs of varying customer expectations and very agile supply chains.” 

When asked what organisational capabilities they are using or are working to implement to increase agility, 76% of CSCOs said sharing best practices and innovations across all our regions and business areas, 66% said they had integrated end-to-end supply chain functions that only report to one CSCO, and 64% gave people the ability to make data-driven decisions at any level of the organisation.

US cigarette producer Phillip Morris International reinvented its supply chain model recently, and now uses a strategy with the aim to “operate as agile and fast as a startup” in order to work with new distribution channels and the decline in tobacco demand, according to a case study within the report.

Companies emphasised the importance of creating an “innovative culture” to enable procurement to make productive, data-driven decisions on a daily basis.

Electronics manufacturer Ericsson was used as an example of a supply chain that changed its structure to allow procurement teams to have more control over decision-making and new ideas “without central coordination”. 

The firm also fostered innovation by creating a “Shark Tank setup” where people could present an idea to get financing for a proof of concept.

The report used data from Gartner surveys with over 1,200 supply chain executives.

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