Today, once again I found myself looking at organisational charts of companies in the scale-up/SME category, where I found an eerie familiar problem that still pertains to many (some industries and growth paths are worse than others, but it is still more prevalent than many of us think it would be).

Doesn't really matter which way your company is growing.

What really matters is this: it is worthwhile paying attention to organisational structures and reporting lines, specifically for your supply chain organisation and adjusting it with the changes.

It can make or break your supply chains, let alone discussing ESG or sustainability aspects or simple improvements.

Why?

• Communication lines & decision making: the shorter the better (just like sustainable supply chains)
• People: building trust and empowering all levels
• Functional knowledge: if it is not there, hard to deliver results & build organisational buy-in for changes (quite frequent in supply chains)

So what is the problem that I observed yet again and over the last years?

Members of the supply chain organisation reporting everywhere else, but the head of supply chain or the supposed leader of the function at global levels. They report locally to GMs or Head of Plant, Finance, Commercial mostly....with or without a dotted line to the supply chain lead.

Where is the problem? Organisations are running on matrix setup for decades as we say, right?

Well, not exactly. It might work for big companies as they have structures built over decades, but certainly doesn't work for scale-ups and SMEs.

When reporting lines aren't within the supply chain and companies grow, then:

1. Decision making processes get sketchy & ineffective, delayed or in worst case, decisions don't happen simply and that's what you can't afford
2. Escalation & authority areas are unclear and therefore don't work (people run around like headless chickens or firefight) or fight with each other (that's the stage when even JDs are unclear or weren't even done )
3. Value chains usually don't get documented (as no one has the overarching ownership), therefore not known and not understood to stay on top of it...that's when inefficiencies and costs creep up, sustainability goes out of the window and companies struggle
4. Supply chain teams see less development opportunities, have considerably less trust in their superiors and get frustrated, which leads to losing talented individuals
5. Functional knowledge significantly decreases at higher levels of decision making (or isn't there from the start), so it leads to losing trust from the teams and decisions that will be executed half-heartedly (down the line comes again point #4)

So do yourself a favour:

Document your supply chains and take time to iron out organisational structures, i.e. let supply chain teams report to supply chain leadership.

I have to share the top counter arguments I heard over the years, so here we go:

1. Respective leader loses control over supply (typically from GMs or Commercial)
2. Respective leader loses control as such (typically from Finance)
3. Respective leader loses power by losing FTE reporting to them (from all)

Let me tell you the secret sauce:

Supply chains in general, therefore the teams working in supply chains, cannot ever be successful if they don't make you successful (i.e. commercial, finance, production, etc....all departments in a business basically). There is no such thing as losing control or power over their actions as the primary control inputs come from your respective cross-functional departments.

Supply chains serve the whole company. Therefore all of their measures can only come to fruition if your measures bloom (if this isn't the case, then I recommend looking into conflicting incentives being in place, same for the last point regarding number of FTE representing power).

The only thing you can lose by not having supply chain teams reporting to supply chain leadership is your profitability, scalability and finally your business.

Obviously right at the start, you don't have a full blown functional organisation as most people wear multiple hats (ergo reporting lines aren't clear anyway), but please think of hiring a diverse team where supply chain expertise is strong and ensure you have clear structures in place by the time you start scaling up and you'll save a lot of pain & cost.

#supplychain #leadership #organisationaldevelopment #ESG #scaleups #SMEbusiness

If you'd like to know more, just reach out!