Tunnel Vision.

Gartner is out with their “Top 25” list of supply chain performers for 2017.  Number 1 is Unilever, followed by McDonalds, Inditex, Cisco Systems, and H&M.  Scroll all the way through and there is no doubt:  it’s an impressive and diverse group of high performing supply chains.

Yet there is a conspicuous gap.  Where are the government supply chains?  Where are the defense folks?  Where are the NGO’s?  In Gartner’s defense, stories of ineffective performance in government, defense, and NGO procurement are common.  But does that mean that all of these supply chains are inherently poor performers?  Or is Gartner the victim of tunnel vision and selection bias?

The government establishment is surely guilty of tunnel vision.  According to Forbes magazine, “The Pentagon has long relied on the incumbent Beltway-centric contractors, which build overpriced, underperforming, custom-made products.”

Insular thinking and tunnel vision are dangerous.

I browsed through the Gartner results sitting in a Starbucks – another company recognized on this year’s Top 25 list.  I was nibbling on a muffin, drinking coffee, and sipping from a carton of milk.  The milk came in one of those boxy cartons, where you push the straw through a hole in the top, using the straw that comes taped to the side of the carton.

Then the light bulb came on.  I first became acquainted with that style of packaging in Iraq, sitting in a Forward Operating Base (FOB) military dining facility (DFAC) eating dinner in 2007.  That fresh milk outside of Baghdad was not sourced locally.  That milk came, along with fresh fruit, vegetables and just about everything else we ate, all the way from the West.

That high performance supply chain was managed by a private sector service provider under a government contract.  Fresh milk, fresh fruits, and fresh vegetables served in a barren, scorching, desert war zone, delivered by a private sector defense contractor.  Why aren’t there any government supply chain actors on Gartner’s list? 

Consider Boeing.  These are the folks who, among other things, support NASA and help keep the crews on the International Space Station supplied.  Now that’s a logistics challenge that few others have ever tackled.

And then there is Lockheed Martin.  As far as I can tell, LMCO is the last government contractor to crack the Gartner “Top 25” list, back in 2010.  They remain formidable logisticians, providing supply chain services at a high operational tempo, from Korea to Southwest Asia, but they do no crack the list.

And let’s not forget The American Red Cross.  Quoting directly from their website, “From small house fires to multi-state natural disasters, the American Red Cross goes wherever we’re needed, so people can have clean water, safe shelter and hot meals when they need them most.”

Looping back to Gartner’s list, it is impressive and there are lessons to be learned from everybody on that list.  That said, high performance supply chains do not necessarily have high inventory turns or align to “corporate social responsibility goals,” as selected and applied by Gartner.  The metrics used by Gartner may be appropriate for some organizations, but not all sectors fit the Wall Street template.

Supply chains success is about delivering high impact outcomes, and while that may be congruent with commercial success, it is not synonymous.

Government spending accounts for something like a third of Gross Domestic Product, and while not as big as the private sector it is significant.  NGOs perform many “hard to do” functions that save and preserve lives in emergency and austere environments.  To fulfill their missions, government contractors and NGO’s often need world class supply chain capabilities.

To have a full spectrum view of logistics excellence, don’t ignore the Defense Contracts and NGO’s.

What’s in a name? Wrestle over the threat, not what people choose to call it.

"What's in a name? That which we call a rose by any other name would smell as sweet." - William Shakespeare, Romeo and Juliet

Consider the term “Supply Chain Risk Management,” or the acronym SCRM.  Raise the issue, and a logistics leader will likely ask you to take a seat.

On the other hand, think about “cyber.”  Say that word to a logistician, and you’re likely to be sent down the hall to the folks in IT. 

Cyber considerations are all over the supply chain.  There are times when the first stop in a cyber threat is IT, but there are also a slew of issues where the operators need to lead.

Cyber is a risk, we have to manage it, and it’s in the supply chain.  How do cyber considerations impact sourcing?  Shipping?  Communications?  Subcontracts?  ECO's?  Industrial base management and oversight?  Payment methods and international money transfers?  The list is almost endless, and none of these examples are IT centric and all have a cyber component.

Here’s a citation the Defense Acquisition University offers to help students get their arms around Supply Chain Risk Management.  “Supply chain risk management (SCRM) is ‘the implementation of strategies to manage both everyday and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity.’”

Cyber issues are just one of the risk vectors to consider in SCRM, and a good chunk of responsibility for that risk sits with the operators, not the techies.  If you’re more comfortable grappling with Supply Chain Risk Management, fine. 

On the other hand, if somebody knocks on your door to talk about cyber, ask them to take a seat and shock them with how cultured we are in the Supply Chain:  quote Shakespeare.

Five things government and government contractors should think about

I recently read an interesting email newsletter from a friend of mine, Ann Noder at Pitch Public Relations™, and I salute my friend’s skill at getting my attention. 

Her piece was called “Ways to Take Control of Your Supplier Management Processes,” and a lot of her material has bled into this post. Supplier management is all about process, but how often do we turn our attention to the process we use to manage the supplier relationship management process?

According to Ann, “Supplier relationship management is hard enough—don’t make it harder by giving in to internal disorder. Starting with that first key step of going paperless, these simple suggestions will help your organization focus on improving efficiencies, supporting compliance, and building healthier supplier relationships while mitigating risk.”

In February of 2017, the GAO issued their latest review of risk areas in the Supply Chain. Their key findings: 

Inventory management

DOD's inventory management practices and procedures have been ineffective and inefficient. DOD has experienced high levels of inventory that were in excess of requirements and weaknesses in accurately forecasting the demand for inventory items.

Materiel distribution

DOD has faced challenges in delivering supplies and equipment, including not meeting delivery standards and timelines for cargo shipments as well as not maintaining complete delivery data for surface shipments.

Asset visibility

DOD has had weaknesses in maintaining visibility of supplies, such as problems with inadequate radio-frequency identification information to track all cargo movements.

Sadly, the DoD is not unique. Every government department faces challenges. These challenges are compounded by the government’s inherent instinct to overlay bureaucracy on any process and the vast amount of data on the loose in the supply chain. In the land of government contracting across the supply chain, streamlining the supplier relationship management process isn’t just low-hanging fruit; it’s a field of ripe watermelons lying on the ground.

So, let’s overlay five  recommendations in Ann’s column—drawn from Progressly, which helps companies move from paper to digital—against the federal government. 

1. Go Paperless

The government is ahead of their private sector support contractors. For example, the federal government has established a central repository, the System for Award Management (SAM). This is an official website of the U.S. government. There is no cost to use SAM. You can use this site for FREE to register to do business with the U.S. government, update or renew your entity registration, and generally take care of what needs to be taken care of to maintain certifications.

Contrast this to the processes used almost universally by prime contractors. They typically organize by project, and so for every new opportunity or engagement the subs need to fill out a new batch of paperwork. Great from the primes point of view, but adds to overhead and total cost, and introduces opportunity for error. Hardly best business practices.

2. Maintain Your Records

Keep your records up to date. Having a clear assessment and inventory of existing contracts is vital, and the best way to do that is to digitize. The same holds for performance level agreements and performance reports. Have a single point of contact accountable for the portfolio, and do a management review quarterly. Unfortunately, with the constant turnover in government programs, both on the government side and the contractor side, this level of diligence is necessary.

3. Make Sure Internal Controls Are Efficient

Effective control is more than password protection or a lock on the file cabinet door. Design the process and streamline it. There is a military department that has defined a rigorous and logical supply chain oversight process. Unfortunately, it is serial, and each step on the review process goes all the way up to the top of the organization, with check steps at each level of the hierarchy. Sometimes the duration of the performance review cycle—and this is a logistics oversight process—can take months.

4. Simplify Your Collaboration Tools

Email isn’t a collaboration tool. Maintaining files in the cloud can be. Shared databases surely are.  Standardize date, eliminate duplication, and focus on the vital few. Data is a means to an end, not an end in itself. 

Estimates of the additional oversight costs associated—as reported by a study performed at the University of Tennessee—may be as much as 25% of the budget. The Federal Acquisition Regulation (FAR Part 15) is the antithesis of streamlined and efficient supply chain oversight.

5. Drive Accountability and Transparency

There are key steps you can take to boost efficiency without sacrificing quality. Apply good management practice and assign ownership. If everybody owns it, then nobody owns it.  Use technology that ensures the approval process is both easily accessible by key stakeholders and easy for them to understand and navigate. Make sure integrated technology and tools gives decision makers centralized access to everything they need to move a plan or a contract forward. The less time an approver spends digging around for missing info, the better.

Once defined and agreed upon, shared processes will drive accountability on both sides of the table. Ideally, your process management solution will also enable you to assign tasks and gain visibility on outputs and performance. These open collaboration tools will ultimately enhance collaboration as you shift from problem-finding to problem-solving—together.