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Our Take: Gartner COE Research Part 2 – Challenges and Considerations

By Mike Detampel  September 9, 2015

A couple of weeks ago we discussed Gartner’s research on centers of excellence (COEs) and covered several of the benefits of establishing a supply chain design center of excellence. Today in Part 2, we’ll discuss some challenges and considerations when preparing to launch your own COE.

Challenge 1: How Do You Define a COE?

Organizations face a number of challenges when forming their own supply chain design COE. One of which is as simple as defining it. The lack of clarity of how to define the COE’s mission and purpose has led to misapplication of the concept in some supply chain organizations.

So how can you combat this challenge? First (and perhaps surprisingly) it is important to not focus on the term “centers of excellence.” Rather, concentrate on the core tenets of what will make your organization successful in advancing your supply chain design capabilities, including focus, structure and resources.

Focus

What is your COE going to do? The focus of a center of excellence is on attaining and sustaining excellence, which means that it is not a group focused on the daily tactical execution of the business. The COE develops capabilities for the next stage of supply chain design maturity, while ensuring that best practices are well-implemented and sustained. These capabilities can be oriented by functional discipline (planning, logistics, manufacturing, and so on) or by capability (business process improvement, strategy, Six Sigma, talent development and analytics). And often times COEs will include both together in the same organization (process, capability and discipline-focused).

Additionally, will the COE focus exclusively on supply chain design, or will it have a broader analytics mission? We have seen implementation that span the spectrum from a narrow focus on network strategy to an all-encompassing mission to drive analytics throughout the supply chain. You have to determine the right approach for your organization and maintain focus to ensure that you do not get sidetracked by trying to be everything to everybody.

Structure

Start by taking structure quite literally: Is your COE a virtual center of knowledge or a physical location?

The manner in which this knowledge is leveraged across global businesses varies from being decentralized to center-led to centralized.  The decentralized model focuses COEs in each business unit while sharing best practices across those business units. Center-led organizations still have COEs in the business units, but also have a small central team that coordinates a small set of projects across the supply chain. Centralized COEs have everyone report to one group, although they may be geographically dispersed, with one core agenda, set of priorities and projects.

structure

Resources

Supply chain design is a people business, pure and simple. Making decisions will never be fully automated. As a designer, you need to have access to other people tackling similar problems. In short, supply chain designers absolutely need a community to support their continued growth and development. In many cases, these experts and resources already exist somewhere in the business, spread throughout various departments or business units, and have developed their own processes, priorities and standards for doing their work. Aligning them toward a common objective focuses the resources on corporate priorities and leverages knowledge across the entire supply chain.

 

Challenge 2: How Do You Get Executive Buy-In?

For any initiative to be successful, you need executive support. In the most general terms this means aligning yourself with the business. But aligning with the business is difficult – the business may not understand supply chain design; they want answers but don’t want to wait on the analysis; they have other priorities (like running the business) and so are too busy to do “theoretical” projects.

But aligning with the business is also necessary. They are your customers – their success is your success. If they don’t buy into the results of your analysis, it won’t get implemented. And they typically own the budget.

Successful organizations do this by linking Centers of Excellence to tangible value in the supply chain.  This value must be anchored in both the quantitative metrics of the business as well as the qualitative evolution of supply chain capabilities. A good place to start is by targeting “quick-win”, low-hanging fruit. Often minor tweaks can reap significant results. By seeing the benefits of these quick-wins, it is easier to gain executive support for larger initiatives and projects.

So, you need to:

  • Engage from the Top
    • Align yourself with the top-level supply chain officer who has span of control across the entire supply chain
    • Tangible examples with results related to KPI’s will get executives attention
  • Understand their language
    • Know your supply chain
    • Know their KPIs
  • Educate them
    • Don’t assume everyone knows what supply chain design is and how it can drive business value
    • Tell a business story, not an analytical one
  • Deliver, Document, Repeat
    • Deliver implementable results
    • Communicate, socialize, plan for next win

 

Challenge 3: How Do You Choose the Right Strategy?

Many organizations fumble out of the gate by not focusing on selecting the right strategy for their COE, or by trying to have their COE be everything. It’s best to start small, narrow the focus of your strategy and grow organically over time. One good principle: start your strategy with where you are today and look forward to where you want to go.

  • Understand your supply chain design level of maturity (*we have a model that can help)
  • Understand what competitors and others outside your industry are doing
  • Understand what best in class is and how to get there
  • Be realistic about what can be accomplished short term
Supply chain design stages of maturity.

*Supply chain design stages of maturity.

 

Take an honest assessment of your capability gaps (in IT systems, talent, disciplines, processes, etc.) and set goals for the future. What are your most pressing challenges today? Can you address one of those challenges while using it as a springboard to develop your talent and close the identified gaps?

At the same time, you must maintain a long-term view of your COE development, addressing three parallel (and occasionally conflicting) objectives:

  1. Establish a solid foundation – Get the basic structure of the COE in place, define the operating model, and determine how to run the team. Earn a reputation for delivering excellent, impactful work.
  2. Master supply chain design – Develop your team, establish and enhance your internal processes, and drive expertise throughout the organization. Invest in training and development and participate in the broader supply chain design community.
  3. Leave space for innovation – Establish some free space (and budget) to explore truly game-changing ideas or technologies that may not always pay off in the short term.

Some additional recommendations:

  • Don’t focus on the term “center of excellence.” Instead, understand the key elements of the definition in this research that will make the COE team successful.
  • Understand what COEs are, what they are not, and how they fit with other organizing strategies. Don’t focus on the terminology, but rather on the core tenets of what makes them successful. Clearly define who will have decision-making responsibilities on a local, regional and global perspective.
  • Understand the critical business problems that are stifling your success. Use that to determine the focus of your COE. Determine where the COE will focus, whether on process, system, policy and training or a subset of these.
  • Link the COE to tangible value in the supply chain, focusing on critical supply chain capabilities needed to serve the supply chain strategy.
  • Be careful of “over-proliferation” of COEs who are all talk and no action. Whether within the COE itself or in close alignment with the business, we still need teams to execute the initiatives – always remember that the ultimate purpose of a COE is to make decisions and take action.

 

Best of luck on your COE journey! And don’t forget, it’s just that.

Click here to learn more about how LLamasoft works with leading companies to develop their COE best practices and initiatives.