The Seven-Year Itch
Why Supply Chain Tools are Cyclically Rendered Ineffective
By Dale Rabenek, Principal SCMO2
One benefit of being an industry elder statesman is you can identify cyclical trends that develop over time. With more than 25 years of experience working with asset intensive organizations, I can attest to one consistent pattern that periodically emerges industry=wide without fail. I call it “The Seven-Year Itch.”
Every seven to ten years, asset intensive companies decide their supply chain processes and tools just don’t work anymore and something needs to be done to change them. This Seven-Year Itch always comes at a time when a company’s operating strategy has shifted, execution discipline has drifted, and the supply chain team no longer has the institutional knowledge to adapt the old processes and tools to meet the new realities. As a result, the supply chain operating model and practices deteriorate and are often replaced with workarounds, mostly built in Excel.
This deterioration in turn drives fragmentation across multiple functional organizations and ultimately leads to the collapse of the “single version of truth” necessary to run an effective business. The result? Increases in inventory buffers at multiple stages along the supply chain; customers gaming their order placements; interdepartmental second guessing; upsurges in expediting that impact operating efficiency; decreases in on-time delivery performance. And the list goes on.
So why does this happen?
There are three main reasons I have identified for why this phenomenon continues to happen.
First, operating strategies change. A company’s operating strategy generally has a significant change every seven to ten years. This rarely originates within a supply chain, but it most certainly affects how the supply chain needs to function. This is often influenced by several factors:
- A response to changes in the market such as substitute products, supplier power shifts, buyer power, new entries and competitive rivalries
- Internal forces, such as new corporate leadership, that drive new ideas
- Sub-par corporate performance, often emphasized further in a public company
- Input from the large consultancies (they always know best!)
Second, supply chain processes and tools are specific. Because they are designed to tightly fit and operationalize a specific strategy, a company’s supply chain processes and tools are rarely designed to be agile in supporting a wide range of strategies or flex for new conditions.
Third, the eventual ceasing of knowledge transfer within the organization. Seven to ten years represents generally two-and-a-half generations of workers moving through an organization (the average tenure of an employee within a company is four years and about three years in a single role). Original team members that were part of the project that defined and deployed the processes and tools are generally the strongest supporters of their use. They understand the underlying design decisions that were taken and can discuss the Why case in addition to the How.
But as they move on professionally, the second generation of users that come on board are not generally taught the Why case, focusing rather on just learning and teaching the How. Supply chain management starts being rote. Even if they are aware of some of the underlying drivers that led to the company using that operating model, their information is spotty at best and typically represents a corrupted, incomplete version of institutional knowledge.
Resetting the supply chain organization’s operating model is daunting enough, particularly in down-market cycles as companies tend to respond to challenges with highly reactive quick-fixes. Building a supply chain organization with processes and tools that can weather the inevitable changes in business conditions is even more difficult. But it CAN be done!
The Playbook: How to Break Out of the Seven-Year Itch Cycle
A supply chain playbook provides a structure for capturing and then communicating to each player the rules of the internal supply-chain game and how to best play that game. It helps define strategy for determining which plays to call, when to call them and finally, how to leverage the equipment during practice to drive consistent execution.
- Game theory, strategy and formation considers WHICH customers and markets an organization serves, WHAT products and services are delivered to these target customers and markets and HOW an organization configures its supply chain network to support these objectives by using a consistent operating model.
- Standard and special plays define HOW the organization, departments and individuals perform specific business processes to accomplish specific outcomes. Standard plays are planning process activities that will occur as part of a specific operating cadence or transaction set. special plays are processes that occur less frequently or may require special teams.
- Timely play calling considers specific operating time horizons and the plays that should be called based upon operating conditions.
- Consistent execution is the final set of playbook components which focuses on having the right players with clearly defined responsibilities, and the required tools and technical enablers to facilitate that consistent execution.
If you’re a veteran in this industry, let me know if you have seen this cycle as well. I don’t want to date myself, but it took witnessing it two or three times before I realized what was happening. Now I’ve seen it enough to define it and help our clients prepare for the inevitable Seven-Year Itch. In the long run, avoiding a full scale supply chain rebuild for no reason saves countless hours and dollars.
