Manufacturing Executive - January/February 2009 - (Page 48) Mark Halper reports from Budapest ROADTRIP Business unusual Like Budapest’s famous “chain bridge,” supply chain innovation can have unexpected beginnings. Play word association with “Budapest,” and a lot of possibilities might spring to mind: “paprika,” “Danube,” “Habsburg,” “Magyar,” “Bartok,” “Lugosi,” “goulash.” But probably not “Scotland.” For all the attributes of things Scottish and things Hungarian, the two generally do not pop up in the same random thought pattern. So I was surprised to learn that a Scotsman, Adam Clark, built the capital city’s famous stone-towered suspension bridge — a gracefully muscular “chain bridge” that spans the Danube — to link Buda and Pest in 1849. The moral for manufacturing CEOs is simple: Innovative schemes can come from unlikely sources, both inside and outside the company. That notion certainly applies to supply chain innovation, and it resonated at two recent supply chain conferences, including one in Budapest, where the Supply Chain Council, an industry association, gathered for its annual European confab in October. With Clark’s Victorian handiwork hovering as a reminder outside our conference room, Nando Galazzo of Vienna-based plastics maker Borealis spelled out the lesson learned. “Supply chain doesn’t necessarily have to be invented in the supply chain,” Galazzo said as he explained how Borealis implemented changes throughout its manufacturing, buying, and selling processes in order to rein in lead times, transportation costs, and working capital. Galazzo knows about improbable origins. Although he spearheaded the company-wide supply chain initiative, he is not a supply chain executive. He’s vice president of procurement. “I’ve stretched the boundary of my own role,” he told an audience full of titular supply chainers. Borealis started its overhaul in 2006 with one supplier, German chemicals giant Evonik Degussa. That triggered other internal and customer process changes that, Galazzo says, will generate savings well in excess of the money Borealis is spending on new processes, including €10 million on new storage facilities. After Budapest, I attended London’s Demand Driven Supply Chain conference, where other supply chain afi- cionados reminded the audience to look beyond the usual sources for ideas. As the conference moniker suggests, these pundits urged executives to take supply chain cues from customers. “Leading companies are thinking about change from the outside in,” said Roddy Martin, vice president of value chain strategies for research firm AMR Research. “Outside in,” he explained, “is taking the customer’s viewpoint and looking back into your own operations, your global supply networks, and seeing what needs to change.” In contrast, traditional, outmoded “inside out” thinking prioritises internal planning and operations without genuinely considering customer requirements. The big challenge is changing embedded thinking, which typically entails imposing new systems for operations such as order tracking and inventory, and in which sales and operations might speak to each other without input from Great Scot! Budapest’s finance, customer support, and “Chain Bridge” other departments. Internal turf wars also can intervene. You could almost feel the fists flying at Borealis when procurement boss Galazzo remarked, “We do have a VP of supply chain in Borealis, so the question you might ask yourself is, ‘Why is it that procurement is talking about a matter that belongs to another person?’ ” A talented CEO can shepherd the company through such flash points. Speakers in both Budapest and London implored CEOs to get involved. In Budapest, presenters from Celanese, Saab Aerotech, and German optical network company ADVA all said supply chain changes didn’t pick up steam until top bosses bought in. “You’ve seen companies like Samsung, Procter & Gamble, and Toyota where value network discussions are led by CEO-, CXO-level executives,” said AMR’s Martin in London. “It’s no longer just a supply-chain-driven initiative.” As CXOs steer supply chain changes, they should look deep inside and far outside of the company. Doing so could help them free-associate with one word on all business minds: profits. —Mark Halper, with apologies to the Hungarian Scottish Society ME 48 Manufacturing Executive JAN/FEB-09
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