Is Your Supply Chain Organization in a Talent Crisis?

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Supply chain executives at U.S.-based global companies believe their organizations lack the needed skills to evolve their supply chains using new technologies and operating models in contrast to top leadership who overwhelming believe their supply chain organizations have the skills required, according to a new Deloitte study. This big disconnect between supply chain executives and top leadership in assessing their supply chain’s talent could result in a serious talent gap impacting a company’s bottom line.

A key finding of the report, “2015 Supply Chain Talent of the Future Survey,” indicates that only 45 percent of supply chain and 40 percent of procurement executives are extremely or very confident that their supply chain organizations have the competencies they need today. In comparison, 77 percent of CEOs and presidents say they are extremely or very confident their supply chain organizations have the required competencies needed for today.

In addition, 54 percent of the CEOs and presidents say their supply chain organizations receive excellent or very good support from their human resources department, compared to only 24 percent for all other executives.

"Today's global economy demands a networked and efficient supply chain," said Kelly Marchese, principal, Deloitte Consulting LLP, and supply chain strategy leader, in a statement. "The disparities in viewpoints that exist between company leaders and supply chain professionals could materialize into actual barriers to success, particularly as companies try to evolve their supply chains through new technologies and operating model changes. Approaches to talent management must evolve with supply chains to ensure today's workers can meet tomorrow's challenges. That can only occur if executives at every level are informed and in agreement when it comes to their talent needs."

New technologies and capabilities such as advanced analytics could have a big impact on supply chain activities. One example cited in the study is using data sets created by supply chain activities in combination with “predictive analytics” that use other data sources to examine, as an example, how changes in the economy or competitive environment could impact demand, thus helping company’s optimize production runs and distribution plans.

While optimization tools and demand forecasting are in widespread use today, there are several other technical capabilities that have the potential to transform supply chains, according to the survey. These include real-time shipment tracking, integrated business planning, 3D printing, artificial intelligence, and wearable technology as well as control tower analytics and visualization. With the exception of one in Fig. 2, more than 70 percent of executives said either that their companies currently use them or they expect to in the future.

Interestingly, the survey finds that supply chain leaders, which tend to have higher financial performance, also are more innovative, using a wider range of technical capabilities. All supply chain leaders versus supply chain followers are more likely to use the 13 technical capabilities in Fig. 2 and in many cases by a wide margin, said Deloitte.

However, new technologies aren’t the only factors impacting the supply chain. If we look back to 2011 two major disasters coupled with economic uncertainty caused a wild swing in the supply chain. In the electronics supply chain, OEMs faced a year of up and downs marked with component and materials shortages and allocations.

These types of challenges lead to changes in operating model, focused on what Deloitte called a “center of excellence.” The survey finds that that “locating high-value added activities into Centers of Excellence” is the most popular of the operating model changes (See Fig. 3) with 48 percent of respondents stating they are very or extremely likely to make the change in the next five years.

This is followed by increased outsourcing of low value-added activities (44 percent); segmentation of supply chain strategies and offerings with customer/product segments (42 percent), and aligning physical network with evolving customer footprint (41 percent). All of these changes can add to the complexity of the supply chain, requiring different talents and tools, said Deloitte.

Similar to the adoption of technical capabilities, supply chain leaders also gravitate towards operating model changes. As an example, 60 percent of leaders expect to move to insourcing activities previously outsourced over the next five years, compared to only 28 percent of followers. While seemingly counterintuitive for leaders, said Deloitte, it shows their awareness of the constant shift in the economics of outsourcing.

The survey also finds that supply chain leaders have established supply chain management as a separate and distinct function in their companies, and rely on certain leading talent practices. “They have taken a holistic approach to management that recognizes their companies’ investments in enabling technologies and advanced supply chain management concepts must be matched by advances in talent management capabilities,” according to the study.

On average, 45 percent of all executives rate their employees as excellent or very good on seven leadership and professional competencies, such as strategic thinking and problem solving, the ability to manage global or virtual teams, and the ability to effectively persuade and communicate, according to the study. But interestingly, 65 percent of executives say these competencies will become more important to their supply chain during the next five years. This could create a talent gap that could have serious implications for companies and their customers, said Deloitte.

In the area of technical competency, analytics appears to be the most important skill in the future according to 67 percent of respondents. In comparison, only 46 percent see it as a strength today. Analytics competency is followed by compliance and regulatory expertise (62 percent) and process engineering/redesign (60 percent). No technical competence in Figure 7 was expected to become less important.

"Companies increasingly must extend their supply chain's talent base beyond technical skills to bring more leadership and professional skills into more levels," Marchese added. "This has the potential to empower and inspire employees at all levels to support constant innovation in fast-moving industries, and to generate new forms of leadership that can help create more engaged and effective supply chains."

The survey also finds that recruiting new talent is a bigger challenge than retention, which Deloitte said suggests that building skills internally is becoming even more important. “About two-thirds of executives say recruiting senior leadership for the director and senior director level is difficult, while less than half say retention is difficult.”

Deloitte believes that supply chain management is in a crisis even as it gains in importance at many businesses due to “critical shortfalls of talent.” This is due to headcount reductions over the years, training budget cuts, and retirement of highly skilled individuals coupled with the slow addition of graduates despite the growing number of supply chain programs, according to the study.