The Supply Chain Transformation Report 2022

The Supply Chain Transformation Report 2022 Where are supply chains and their companies on their transformation journey into the Age of SMART Technology

FOREWORD If you are attempting to transform your enterprise supply chains, you are in effect transforming the whole business- such is the omnipresence of supply chains in most contemporary corporations. Given that supply chains are composed of structural, technological, and human components, they are by default the ideal platform for change. But, it takes leadership to acknowledge this reality, and a touch of daring to follow through with implementation at ground level. This is especially the case for those companies that are on the wrong side of the ‘great divide’ – the separation between Stages 3 and 4 on the maturity curve identified in this report. They have to get going now, with purpose, or be left behind in the highly competitive world of the future. The findings in this report make an important contribution to our accumulated knowledge on change efforts to date, and provide useful pointers for future action.

Dr John Gattorna

Supply Chain Thought Leader & Author

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LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

EXECUTIVE SUMMARY This report, based on input from supply chain leaders across the industry spectrum, examines where supply chains are on their evolutionary journey in a time when both the technical and human dimensions of business are undergoing massive transformation. It also provides supply chain leaders with a framework to guide the change process, not only in their supply chains but also for the business as a whole. This is important because technology and greater overall people and process maturity are making it possible to replace deep hierarchical and siloed structures in the business as a whole with those that more closely follow the horizontal flow of work from and to the customer. Because this horizonal flow is primarily the domain of demand-driven supply chain leaders, they now find themselves in the front lines of both supply chain and business transformation. Future Insights Network collaborated with McLagan International, Inc. to conduct this research in order to help supply chain leaders better understand the transformational dynamics operating in their businesses, as well as to provide a possible framework for taking leadership actions in these times of business, technological and societal disruption. 257 mid/executive level respondents from 161 companies from around the world completed an in-depth survey launched as a prequel to the Future Insights Network’s annual TransformFest Conference. Questions focused on important supply chain business results and internal organizational conditions “TECHNOLOGY AND GREATER OVERALL and practices related to both people PEOPLE AND PROCESS MATURITY ARE and technology management. MAKING IT POSSIBLE TO REPLACE DEEP Responses were filtered through HIERARCHICAL AND SILOED STRUCTURES a six-stage maturity model where IN THE BUSINESS AS A WHOLE WITH we examined the relationships THOSE THAT MORE CLOSELY FOLLOW between maturity stage and THE HORIZONTAL FLOW OF WORK external and internal variables. FROM AND TO THE CUSTOMER.” The survey confirmed seven internal and external variable groups – factors -- that supply chain leaders can use to examine the evolutionary status of their enterprises: three internal factors: organization design, information flow efficiency, and unleashed human energy; and four external factors: dynamism, customer centricity, socio-environmental responsiveness, and strategic potency. All seven are

significantly stronger for organizations in later maturity stages (stages 4,5, and 6) that have crossed what we call “the Great Divide” where the orientation of the business turns horizontal to and from the customer. We also correlated digitalization status with maturity. We found that later maturity stages are seeking and getting higher value from that technology. In addition, the data and their interrelationships show that transformation is held back more by people management processes, legacy systems, skill levels, and structures than cultural barriers like lack of trust or engagement. This data indicates that there may be more latent cultural goodwill in organizations than is traditionally thought, even though even these areas are not yet strengths. The biggest barriers exist in areas where leaders must act – what we call Leadership Impact Areas. There are few clear strengths in any area covered by this research process. But a comparison of relative strengths and weaker areas paints a picture of supply chains and their businesses huddled around a significant transformational cross-over point (“the Great Divide”) where the traditional business paradigm gives way to structures and operating models that more closely follow how work actually flows. Organizations are spread across the six maturity stage spectrum, although the last two stages are only emerging and will likely require more technological and human maturity as well as innovations and business infrastructures that are yet to materialize. But supply chains are on the move. It’s the goal of this research to provide the insights and frameworks to guide assessments and actions that will help accelerate and shape that continued movement in both the technical and human dimensions of the business. We thank all the people who participated in this research.

Patricia A McLagan, CEO McLagan International, Inc.

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CONTACT US for information about creating a

Benchmarking report for your Supply Chain.

Pat McLagan

patmclagan@mclaganint.com

Rory Pilbrow

roryp@futureinsights.org

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LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

CONTENTS Introduction: Organizations Undergoing Deep, Supply Chain-Driven Change

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The Leadership and Transformation in the Supply Chain Diagnostic Survey and Framework

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Survey Findings: What the Data Says

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Where are Supply Chains on their Maturity Journey? Supply Chain Related Business Results

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Internal Organization Conditions and Practices Internal Business Conditions Related to Transformation Leadership Impact Areas Breadth of Strategy Participation Digitalization Moving into the Supply Chain and Business

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The Bigger Picture: Summary and Perspective on Leadership and Transformation in the Supply Chain Back to the Survey Framework: A Statistical Analysis of Survey Data Summary Observations and Discussion Action Implications for Supply Chain and Business Leaders Leadership and Transformation in the Supply Chain and Beyond

26 26 28 29 31

The Authors

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Appendix: Statistical Charts

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A-1 Factor Analysis of External Variables A-2 Factor Analysis of Internal Organization Variables A-3 Causal Model Based on Regression Analysis A-4 Canonical Regression Appendix: Figures

33 34 35 35 35

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The Supply Chain Transformation Report 2022

Published on Apr 6, 2022

Future Insights Network

How is organisational structure impacting the rate of successful transformation and the ability to serve the needs of customers? Purchase the report for unlimited online access and the option to download your own copy! Supply chains are at a crucial transformational crossroads - the intersection of human and technological capabilities are making way for new organisational designs. Smart technologies & digital capabilities are helping leaders to remove traditional silos & hierarchies to enable the free flow of information along value chains from procurement of materials through to the customer. In this report we examine what technical and human dimensions are involved in the process of moving up the organisational structure maturity scale and how this can subsequently unleash improved business performance. The full report is based on a survey and analysis of 257 mid - executive level supply chain practitioners from 161 companies, undertaken by Pat McLagan in collaboration with the Future Insights Network.