A CEO’s Perspective

As supply chain management becomes increasingly strategic, logisticians and 3PLs experience
a growing need for expertise in presenting their proposals to a CEO. Everyone wants to know how to
win his or her cooperation. Given my wealth of experience as a CEO and a 3PL supplier, I am often
asked to share my recommendations on how to win CEO endorsement. I do so gladly.

Jim Davidson

The question is universal. everyone has a boss they need to win over now and again, whether to ask for a raise, a larger budget, a new widget or an operational overhaul. When it comes to supply chain management, the request is usually for some alternative application, perhaps a logistical innovation specific to the organization. The presentation is usually initiated by sales and operations personnel and often involves a 3PL supplier.

Begin the process by thinking strategically. Clear, strategic thinking is the electrical current that powers the C-suite. By definition, strategy is an act, device or plan employed by a leader to achieve victory over competitors. It encompasses a winning attitude (some say a killer instinct) and relentless measurement and evaluation of results. CEOs gauge everything in dollars and sense—practical sense that zeros in on increasing market share and maximizing return on investment.

By strategy I don’t mean operational effectiveness, although the two go hand in hand. Operational effectiveness encompasses all that your company does to deliver the highest quality, lowest price and best service. In any industry it amounts to best practices that are readily copied and tend to make companies look and operate the same. Strategic thinking is what makes a company different, unique, difficult to imitate. Strategy is what sets you apart from the competition and what culminates in a competitive advantage.

In building your case for any CEO, you have to devise a plan that transforms the supply chain into a value chain. Use core competencies to create unique value. Mix things up a little. Think outside the box. Be the company that everyone wants to imitate but doesn’t know how to. Look for ways to perform more effectively and efficiently that optimize every aspect of the chain.

This relentless dedication to streamlining and innovating in the supply chain often leads to very creative solutions that achieve great results. Take, for instance, the company that significantly lowered its distribution costs by closing its Atlantic Canada warehouse in favor of shipping from Montreal. Sounds like it would increase costs, but it didn’t. Staffing and inventory were trimmed, property was sold and, with our assistance as the 3PL, the company reduced overall distribution costs by more than 50 percent.

Every CEO dreams of attaining comparable results. But big results demand a big commitment—one that requires a significant investment of people, resources and dollars. As the slogan says, “No pain, no gain.” Specifically, what investment does your plan require and how will the return on investment be measured? Every good plan must state distinct, measurable goals by which it will be judged. Your plan may provide unexpected rewards as well, but know what you’re going after and how it will be calculated. Will you accomplish a reduction in distribution costs or an increase in market share? Other quantifiable results may include improved inventory turns, reduced overall inventory costs, conversion of fixed costs to variable, or improved service response time and overall quality of service—all of which are significant measures of a worthy plan.

Other considerations are equally influential in the mind of a CEO, not the least of which is what happens if the plan doesn’t work. You can’t achieve significant reward without corresponding risk. When you articulate the goals, identify the risk. Know how it is defined and what it means to the company. Will the new process or venture have a negative impact on pre-existing situations? How will it affect your customer and your customer’s customer? Does it fit with the overall strategic direction of the company?

Risk is most readily identified as the barriers that have to be overcome in executing the plan. Ideally, identify as many hurdles as possible. By making some assumptions, you should be able to offer solutions to the problems or threats you are anticipating. Do your homework, and do the best you can. Strategic thinking is forward thinking that requires answering a lot of “what if” questions. In structuring your plan, consider the key factors of cause and effect. Don’t jump off the cliff unless you are equipped to sprout wings on the way down. One good way to overcome or minimize risk is to offer a pilot program. Test your plan in a remote or small market. By limiting a new program’s size and scope, you limit the potential risk to the rest of the organization.

Admittedly, some proposals have been rejected because the risk was perceived to be too great or the barriers too much to overcome. Some changes are just too big or too costly to consider. Don’t be disappointed if, despite all your hard work, the CEO rejects your proposal. You will have learned something in the process.

Consider my own experience. At the May 2008 LQ Symposium I shared a case in which C-level executives of the Canadian operations of a multinational brand-name company adopted our proposal for development of a new distribution channel. We tested the program in Atlantic Canada and the results were astounding: a more than 40 percent reduction in distribution costs accompanied by a 12 percent increase in market share, most of which was grabbed from their major competitor. We were about to roll out the program in Ontario when we were stopped dead in our tracks. The U.S. parent bought control of the Canadian division and immediately reverted to an old business model, one that was based on depreciating the assets. The moral of the story? Not everyone has the courage to change their ways, even when it can result in a bigger payoff.

CEOs often need encouragement to consider the supply chain as a source of competitive advantage; their tendency is to look elsewhere for economies and efficiencies. Be the one prepared to demonstrate how strategic thinking can be applied to the supply chain, and I guarantee you’ll have an audience. Your level of preparation will determine whether you get a favorable response.