Supply Chain, Value Chain...Whatever! Does the Terminology Really Matter? | AMR Research - Supply Chain Management Experts

Supply Chain, Value Chain...Whatever! Does the Terminology Really Matter? | AMR Research - Supply Chain Management Experts: "companies"

Let me start by confessing to intentionally using the slippery quality of words to an advantage, subtly shifting from “supply chain” to “value chain” in order to make a point about the morphing role of the discipline in business. Just this past week in a webcast with E2open’s CEO Mark Woodward, I found myself drifting from one term to the next, trying to convey what best in class looks like in 2010. Mr. Woodward’s examples of multi-party collaboration among companies like IBM, LSI, and Celestica conveniently reinforced how much has changed in the high-tech industry, where sourcing has swallowed manufacturing and true value chain organizations are beginning to emerge.

My colleague David Aquino led some interesting research on supply chain talent last year, finding that fewer than 50% of the 198 companies surveyed across industries were organized with manufacturing reporting to supply chain. Most companies included sourcing, distribution, and planning in their supply chain organizations’ span of control, but only a minority had new product introduction, customer service, or technology enablement. The upshot to all this is that “value chains” are still somewhere out on the horizon for most of us.

Cisco’s living, breathing value chain

One live example of a true value chain organization, however, is at Cisco Systems, where Angel Mendez leads a group called Customer Value Chain Management (CVCM). I was in San Jose recently to get an update on this group’s strategies and results.

Customer Value Chain Management includes not only traditional supply chain functions like sourcing and supplier management as well as order management and planning, but also new product introduction, customer service and support, product reuse and recycling, and, yes, even manufacturing. The group comprises 14,000 direct report employees around the world.

Mr. Mendez’s team includes a quality function led by a former customer, Rich Goldberg, who joined Cisco from AT&T. What’s interesting about the way Customer Value Chain Management handles quality is its customer-centric view. Instead of just focusing on manufactured quality like defects, the quality group populates a Customer Experience Dashboard that’s built backward from the customer’s perspective to identify in detail how Cisco is performing in the field in software quality, hardware quality, and, the most important metric of all, reliability.

The whole exercise is overseen by a Quality Experience Board co-chaired by Randy Pond, EVP of operations, processes, and systems. It also includes senior executives from sales, development, operations, finance, and even marketing. The board meets at least once a month to drill into issues and progress across the entire customer base.

It’s not just the squeaky wheel that gets the oil

Cisco completed 111,120 customer surveys in 2009, each containing 130 answers. Any low satisfaction responses automatically triggered e-mails to sales with copies to engineering. Plus, all the data was diced and sliced using Siebel Analytics to track down common threads and root out source problems.

Having not personally surveyed Cisco’s clients systematically, I can’t say how well this is working in the field, but to the question of what is “supply chain” versus “value chain,” it’s clear this model takes customer service well past the ship-and-forget ways of old.

Innovation excellence on the fast and cheap

Even more compelling, perhaps, was what I heard about innovation in the CVCM organization. AMR Research has long emphasized the importance of not only pursuing operational excellence in the world of supply chain, but innovation excellence as well. While this doesn’t imply that pure R&D functions belong in supply chain, it does mean new product launch should absolutely fall within scope for a value chain organization.

Cisco’s approach includes a creative use of the internal venture capital model to foster disruptive innovation fast and on a shoestring budget. The group creates teams of cross-functional leaders who are pulled out of their regular jobs in a six-month rotation to fast track developments in the same super-lean way that a pre-venture startup does. Each team must present to an internal venture board that approves or denies the go-ahead for a given launch. By doing it this way, Cisco is able to dramatically lower the capital and time risk in product innovation, making more shots at the blockbuster product possible.

One example of the kind of project this approach has tackled is consumer TelePresence. For anyone who has used Cisco's TelePresence system, the experience is a breakthrough. Imagine being able to get one at Best Buy. That’s what we mean by innovation excellence: using supply chain disciplines to bring Star Trek-caliber technology to the masses.

Expect a switch

So as supply chain becomes value chain, org charts need to be redrawn. I’m reluctant to jump terminology too quickly because most business cards in my stack still say XVP of supply chain, and that’s who I aim to help. But between us, it’s all heading toward value chain, and before long, the rest of the executive suite will get wind of the shift.

I can be reached at komarah@amrresearch.com.


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