Over the past four decades, supply chain departments have taken on a much broader role within companies. They are still responsible for optimising end-to-end business processes, but something essential has been added, says Hans van der Drift, partner and consultant at Involvation. He calls this Integrated Business Management or, in plain English, ”enabling other departments to make decisions that contribute optimally to the business strategy”.
In a trend interview for Supply Chain Media, you would expect an expert to reflect on recent developments in artificial intelligence (AI) or Donald Trump’s import tariffs. Hans van der Drift of consultancy firm Involvation takes a broader view. ”If you look back at how the field of supply chain management has developed over the past forty years, you see many trends, but also one underlying megatrend: supply chain has become the connecting factor that facilitates other departments in making strategic choices.”
Commercial decisions
A concrete example of this is the role of the supply chain in determining the ‘service strategy’. Which markets are you going to serve, which products are you going to offer and what delivery times are you promising your customers? ”If you apply the same delivery times across Europe for your entire product range, this will have major consequences for your stock and the structure of your chain. Supply chain professionals are excellent at identifying that impact, and then the question is: is that really what you want as a company? Do you actually want to incur those costs, or would it be wiser to segment and, for example, apply a longer delivery time for C products? Ultimately, it is commercial considerations that decide, but supply chain identifies the trade-offs.”
Strategic goals
He emphasises that how this trade-off is made must always be related to the business strategy. ”Do you want to increase your market share? Are you aiming for the highest level of service? Or do you want to optimise your profit margin? If you haven’t determined this for each product-market combination, you can’t make good decisions at all.” One example is how a company deals with uncertainty in the supply chain. ”Do you go for lean and minimal inventory costs, or do you choose to maintain buffers to absorb disruptions? The latter can give you a huge competitive advantage as a company, but it also has financial consequences. As a supply chain, you map these out and also provide insight into the extent to which these buffers contribute to the achievement of strategic objectives.”
S&OP as an intermediate step
Van der Drift assists companies with strategic supply chain programmes and has noticed that Integrated Business Management is becoming increasingly important. ”First, of course, we had Sales & Operations Planning. This integrated planning has brought companies a lot, but it was mainly focused on optimising volumes. I really see S&OP as an intermediate step; commerce and finance provided input, but kept their own planning processes. With Integrated Business Planning and the enormously advanced technology that is available for this today, we have turned this into a single process.” He believes that the concept of Integrated Business Management goes a step further than IBP, because it also covers topics such as service strategy and resilience.
This gives the supply chain director an increasingly broader role. They are still responsible for stocks and physical processes, but also act as an enabler for the rest of the company to make the right decisions. Supply chain has evolved from a department focused on integrated goods management to a growth engine focused on monitoring the business strategy.
