Supply-chain leaders need seat in C-suite

Supply-chain leaders should be considered executives, reports show. (Getty/Oakozhan)

The supply chain is a critical part of a business, but it gets short shrift, new reports show.

For one, the chief supply-chain officer role is nonexistent at many organizations, leaving the C-suite void of supply-chain expertise, according to a CFO article. Management of the supply chain often falls to chief financial officers, who likely lack the time and know-how for the role.

“In most organizations, the supply chain affects more than 37% of operating expenditures,” the article said. “It also has an important influence on revenue. A company cannot produce and sell something if it fails to buy and receive the necessary raw materials. In addition, a company must deliver the finished product to customers, in a timely manner, effectively satisfying its customers’ own [supply-chain management] requirements.”

In other words, the supply chain affects every area of a business, including its bottom line. And although CFOs are well-versed with the numbers, “most don’t have the time, background, or technical expertise to delve into supply-chain issues that can enhance or detract from revenues, such as how managing the product mix can produce higher margins,” the article added.

Some companies are moving supply-chain managers up the rungs so they report to the CEO, but that’s not ideal, either, for three reasons, the article said. First, the role is often not well defined, which leads to “internal turmoil and significant opportunity costs.”

Second, hiring managers don’t always understand what expertise a supply-chain leader needs, particularly when it comes to how the supply chain affects marketing and sales.

Even when a chief supply-chain officer or similar role exists, many people identify the chief information officer or chief technology officer as key stakeholders, not the CEO or chief operating officer, according to a survey by Accenture (PDF).

That’s “a serious strategic oversight given the critical role of the chief finance officer in technology investment decision-making, and the rapidly developing role of the chief operating officer as architect of the flexible operating model and extended, end-to-end processes,” the report states.

Another disconnect lies in how supply-chain leaders see their role: “71% … believe that by the end of 2020 the supply chain will be a key driver of better customer service for their organizations, almost as many (68%) continue to see themselves largely as a support function. Only 53% view the supply chain as a growth enabler; significantly fewer than those [are] still prioritizing the pursuit of cost efficiencies,” the report said.