Supply Chain Governance

Reviewing operational governance and the global organization of flows - essential prerequisites for optimizing the Supply Chain

Defining Supply Chain governance (organization, responsibility for inventory, costs or processes, internal service level agreements, etc.) with rules and clear indicators is an essential prerequisite to any improvement to its performance.

Defining the Supply Chain governance involves identifying the following:

  • Changes in roles and responsibilities between the Supply Chain and other areas of the company (Manufacturing, Marketing, Sales, Finance, and R&D)
  • Changes in models of collaboration with other internal and external players: mutual commitments, key processes, and performance indicators more

Defining Supply Chain governance within a business (organization, responsibility for inventory or processes, internal service level agreements, etc.) is an essential prerequisite to any improvement to its performance.

We firmly believe in the existence of Supply Chain models structured primarily around the complexity of the supply (the industrial complexity) and demand involved, and that the most efficient companies are those that succeed in defining a governance system that is consistent with these models.

The target Supply Chain model for the company, or of one of its business units, is essentially defined according to two fundamental criteria:

  • Complexity of customer demand
    • Complexity of demand-side management
    • Distribution channels
    • Management of shortages
    • Distribution levels
    • Strength of the product portfolio
  • Complexity of managing industrial supply
    • Supply-side management
    • Level of multi-sourcing
    • Sensitivity of capacity to the product mix
    • Impact of production campaigns on capacity 
    • Criticality of suppliers

Positioning in line with these two criteria determines which governance model(s) is/are best suited to the resolution of trade-offs in Supply Chain management:

  • Positioning of the Supply Chain function in the company organization chart:
    • Function accountable to senior management in Sales, Manufacturing, ...?
    • Degree of centralization of the Supply Chain functions (central/regional/local)
  • Accountability model for the Supply Chain KPIs, in line with the levers for action: e.g. who should be responsible for which inventory?
  • Collaborative model:
    • Which information is to be exchanged between those involved in order to manage demand, capacity, and inventory?
    • What mutual commitments are to be made on the basis of this information and for how long?
    • Which KPIs are to be used to assess whether these commitments have been met?
  • These Supply Chain models can be applied to all of the main links in the company’s global Supply Chain: procurement and supplier relations, the manufacturing of semi-finished and finished goods, and the distribution of product at the various levels of the distribution network.

How can Argon Consulting help you?

  • Organizational analysis (roles, responsibilities, KPIs, and collaborative models)
  • Definition of the target Supply Chain governance model. Acting as a great catalyst for speeding up design cycles and aligning stakeholders, its practical use will depend on the specific business context
  • Definition of Supply Chain management macro-processes and collaborative agreements as part of this governance model
  • Support in implementing the target organizational and collaborative models

Case Studies

Optimization of a leading petrochemical company’s MRO supply chain
Development of a program to reduce stocks and cut logistics costs
Adapt the purchasing and supply chain organization to support strong international growth
Deployment of Supply Chain processes, teams and information system
From the supply chain vision to the deployment of processes and the implementation of a supply chain planning information system
Boost performance by cutting stocks and improving the service rate by overhauling the processes and deploying supply chain planning tools
How we helped a leading European consumer goods supplier to build and deploy a flow management and supply chain planning target vision
Development of a stock reduction program
Transformation projects in the aeronautics sector: critical for supporting sector growth
Drivers for reducing inventory and increasing flexibility in the pharmaceutical industry