This presentation exposes the 5 Myths that prevent supply chain professionals from optimising their supply chains and ultimately improving business outcomes. It explores the idea that these myths endure as a result of ‘The Supply Chain’ often being thought of as an executional cost centre, rather than a strategic opportunity. It concludes that to achieve superior supply chain performance for your organisation you need to realise how to get there. And busting some myths, many of which are based on outdated business practices, is a pretty good place to start.

1. GRA Supply Chain Whitepaper
5 SUPPLY CHAIN MYTHS TO BUST TO
OUTPERFORM YOUR COMPETITORS

2. Executive Summary
As a supply chain professional, you’ll know that ‘The Supply Chain’ is often
thought of as an executional cost centre, rather than a strategic opportunity. As
a result, certain myths about supply chain performance have endured,
preventing organisations from optimising their supply chains and ultimately
improving business outcomes.
To achieve superior supply chain performance for
your organisation you need to realise how to get
there. And busting some myths, many of which are
based on outdated business practices, is a pretty
good place to start.

3. About GRA and Authors
GRA is Australia’s premier expert consulting firm specialising in supply chain and logistics strategy, planning and execution. We offer Consulting,
Professional Services, Systems, Training & Education and Benchmarking across a broad range of industries. Over the last two decades, we have
worked with more than 200 organisations to turn their supply chains into a competitive advantage and have helped our clients identify combined
savings of more than $10 billion in value. We can define optimal supply chain strategies and structures, design high performance facilities and
embed the best-practice operating processes and systems required for superior performance. We are results-focussed and have proven
approaches for quickly delivering sustainable improvements in working capital, cost and service level performance. We provide our clients with a
sustainable competitive advantage by significantly improving margins, asset efficiency and supply chain responsiveness.
Carter McNabb, Partner
GRA Melbourne
Adam Kidd, Senior
Consultant
GRA Melbourne
Zhenhan Huang, Consultant
GRA Brisbane

4. Myth #1: Supply Chain Is All About Lowest Cost - We Need To Be More Efficient
The obsession with lower cost can restrict the evolution of
supply chain performance in many organisations.
Many of us continue to battle the consequences of this viewpoint.
By focusing on costs, investment in many supply chains has been
limited to such an extent that innovation and competitive
advantage may be compromised.
Despite surveys amongst the Supply Chain community referring to increased expectation to manage complexity, retain talent, improve value
and manage risk, cost often remains the number one priority.
The real cost of
focusing on cost
Shifting from cost
to strategy
Getting your
Strategy right

5. Traditionally, supply chains were based on assumptions of
stability and consistency – and subsequently focused on
maximising throughput and return on assets such as manufacturing
facilities.
In this context, a preoccupation with efficiency is understandable.
Today’s business environment requires a broader approach, and
this should flow from business strategy.
This strategy – how you intend to compete and what your points of
difference are – should segment customers and channels
based on their needs and drive the configuration of your supply
chain.
These needs may be price, quality or service driven. The strategic
planning process should match your supply chain capability
against these needs whilst acknowledging that your organisation
can’t be all things to all people.
Developing your supply chain strategy this way will allow you to
differentiate your organisation from your competitors’ and
strengthen competitive advantage.
The real cost of
focusing on cost
Shifting from cost
to strategy
Getting your
Strategy right
Myth #1: Supply Chain Is All About Lowest Cost - We Need To Be More Efficient

6. The key to bringing strategy to life is a clear, objectively defined
Customer Offer. This should define the ‘rules of engagement’ with
your customers, establish what is required from the supply chain and, as
such, allow the front end of your business to match the back end.
Without this, your organisation will not be able to measure
performance and understand your cost-to-serve, profitability and
business sustainability.
The lack of a guiding customer offer can lead to other issues such
as loss of revenue via customer dissatisfaction or inefficiencies such as
over-servicing.
Managing costs will always be of relevance to supply chains, but the
question of costs should stem from a broader discussion of business
strategy and customer needs rather than be the starting point.
Instead of arbitrarily targeting lower costs, the question that needs to
be asked is: what is the right cost for your supply chain?
Additionally, cost should never be the sole measure of success for
a supply chain – KPIs and Metrics should reflect other strategic
priorities. Focusing on more than just executing at the lowest cost will
allow your supply chain to become a source of innovation, growth and
opportunity.
The real cost of
focusing on cost
Shifting from cost
to strategy
Getting your
Strategy right
Myth #1: Supply Chain Is All About Lowest Cost - We Need To Be More Efficient

7. Key Skill
required to
become an
effective supply
leader
Strategic Big
Picture
capabilities
Collaboration
Risk
Management
People Skills
Communication
skills
It is often remarked by executives looking to fill Supply Chain Manager roles that
the most important, non-negotiable requirement is for strong functional and
technical expertise.
On the other hand, skills such as communication, leadership/people
management and cross-functional awareness are often weighted as ‘nice to
haves’ when assessing candidates.
The over-emphasising of these skills relative to other so called ‘softer’ skills is
misguided, and requires addressing for any organisation that proposes to utilise
their supply chain to drive competitive advantage.
This is not to discount the need for Supply Chain Managers to have significant
technical understanding.
However, the scope of the role should extend beyond functional silos and
incorporate additional areas of expertise. As the concept of supply chain has
broadened beyond simply being a functional Cost Centre, as discussed in Myth #1,
the role of the supply chain is increasingly recognised as central to success in many
organisations. A broad range of skills is required to meet these expectations.
Consider also the uncertainty, volatility and complex trade-offs that most Supply
Chain Professionals not only have to operate under but also successfully manage. As
such, the key skills required to become an effective supply chain leader and drive
improved supply chain performance should now include:
Myth #2: Supply Chains Managers Must Be Exceptional Technical Experts

8. Key Skill required
to become and
effective supply
leader
Strategic
Big Picture
capabilities
Collaboration
Risk
Management
People
Skills
Communication
skills
It is no longer adequate for Supply Chain Leaders to be narrow,
functional experts. In order to participate in the strategic decision
making process, they need to be able to think holistically, have a
strong understanding of strategy, and be able to anticipate and solve
problems at a business level, all while managing supply chain trade-offs
Similarly, the ability to be able to collaborate not only cross functionally
but also beyond your organisation with suppliers and customers will
provide your organisation with increased visibility, better risk
management and more potential sources of innovation.
These may include product quality and integrity risks, potential
disruptive events or humanitarian risks. As witnessed by events
involving garment retailers and OEM manufacturers in Asia, it is no
longer tolerable to be oblivious to supply chain risks. Being able to
better manage these risks will drive resilience and sustainability in
your supply chain.
Strategic Big
Picture
capabilities
Collaboration
Risk
Management
Myth #2: Supply Chains Managers Must Be Exceptional Technical Experts

9. Communication skills are vital. The ability to distil complex supply
chain concepts into need-to-know areas or communicate the
impact of a decision simply and clearly, especially while
explaining the competing trade-offs at work, is often more difficult
than understanding the theory behind it. This includes being able to
engage in finance terms where required.
Talent shortages are commonly identified as a significant looming
barrier to supply chain performance. As such, it is critical that Supply
Chain Managers are able to inspire and develop the next
generation of leaders and innovators.
In addition to skills assessments and catered training, this may
involve mentoring and jobs rotations as well as making the
supply chain appear an attractive place to work by providing
employees clarity of career paths and incentives to develop.
Key Skill required
to become and
effective supply
leader
Strategic
Big Picture
capabilities
Collaboration
Risk
Management
People
Skills
Communication
skills
Communication
skills
People
Skills
Myth #2: Supply Chains Managers Must Be Exceptional Technical Experts

10. Forecast
Risk
As many of us would have observed, forecasting often cops the blame for many
issues within the supply chain.
This has only been compounded by the proliferation of terms such as “demand driven
supply chains” increasing awareness of the importance of demand planning.
However, the inference that forecast accuracy is the sole cause of issues is dangerous
and stems from two main misconceptions.
Myth #3: If We Just Get Our Forecasting Right, We’ll Be Able To Execute
Perfectly And Solve Our Supply chain Issues

11. Firstly, forecast accuracy should not be considered
as an end in itself. Instead, it is one contributor to
outcomes that needs to be managed to deliver
expected results.
Secondly, despite of all best attempts, forecasts by their very nature
will never be completely correct. It’s much more important for your
organisation to recognise this fact and manage an understood level of
risk than to expend too much effort improving forecasting when it may
not translate to better outcomes.
Myth #3: If We Just Get Our Forecasting Right, We’ll Be Able To Execute
Perfectly And Solve Our Supply chain Issues

12. Forecasts become even harder in an environment of
 increased volatility
 shortening product lifecycles
 complex customer fulfillment models.
This leads to the effort
required to improve
forecasts may not provide
the expected supply chain
benefits
Myth #3: If We Just Get Our Forecasting Right, We’ll Be Able To Execute
Perfectly And Solve Our Supply chain Issues

13. Forecasts become even harder in an environment of
 increased volatility
 shortening product lifecycles
 complex customer fulfillment models.
This leads to the effort
required to improve
forecasts may not provide
the expected supply chain
benefits
This is particularly true if you have broken links in your supply Chain. For
example, increased volatility will be reflected in increased forecast error –
and this should directly translate to the quantity of safety stock required.
However, if you are using a blanket safety stock policy such as weeks
cover, you won’t be able to benefit from or buffer changes in forecasting
performance or risk profiles.
Myth #3: If We Just Get Our Forecasting Right, We’ll Be Able To Execute
Perfectly And Solve Our Supply chain Issues

14. Forecasts are just one driver of performance. Without a
clear understanding of the expected level of error within your
demand plan, plans cannot be built that manage this risk.
However, if this risk is understood and the management of this
risk reflects current strategy, your organisation can drive
consistent, beneficial outcomes.
It’s more important that your organisation understands this
volatility, can anticipate the expected error of statistical
forecasts, and is able to manage this risk.
In fact, there has even been discussion that given the operating
environment that many organisations face, forecasting has little
relevance to the short-term, executional horizon and should
focus on buffering this variability while preserving demand plans for
longer-term capacity and strategic planning.
While such an approach may not be appropriate for every
organisation, the question that should to be asked in relation to this
is how right does your forecast need to be?
That is, what level of aggregate risk is manageable given
your customer offer and working capital constraints? The
balance between improving forecasts and managing risk via
responsiveness (including the use of inventory) should flow from
your organisational and supply chain strategy.
Myth #3: If We Just Get Our Forecasting Right, We’ll Be Able To Execute
Perfectly And Solve Our Supply chain Issues

15. Data
Systems
Process
People
In simplistic terms, supply chain capability can be conceptualised in terms of People, Process,
Systems and Data. To rely solely on the Systems element of this model to improve performance is
naïve at best.
Technology needs to be configured to reflect strategy and business rules and supported by
appropriate processes.
Even the best systems will not help your organisation make decisions regarding exceptions such as
capacity constraints, out of stocks or delivery delays.
Another common myth that prevails is that the latest and greatest piece of software is the primary source of innovation or advancement
available to drive optimised supply chains.
Myth #4: Technology Is The Best Source Of Supply Chain Improvement

16. Data
Systems
Process
People
Decisions around software should, again, flow from your strategy and the level of service and
response required by your customers.
From our experience, where we have seen the best results from software being used as source of
competitive advantage, is where organisations have identified Best-of-Breed tools – be it
demand planning, network modelling or warehouse management systems – that support their
desired supply chain model.
When compared to generic ERP modules, these tools have the ability to drive greater
performance - but again, only if appropriate to your organisation.
Use the example of inventory reduction, a generic ERP may deliver 5% inventory reduction
while maintaining service level whereas a Best-of-Bread Advanced Planning System
could deliver a further 10% in inventory reductions while also increasing service levels
by roughly 2.5%.
Myth #4: Technology Is The Best Source Of Supply Chain Improvement
Another common myth that prevails is that the latest and greatest piece of software is the primary source of innovation or
advancement available to drive optimised supply chains.

17. Strategy and
organisational
Culture
Process
Systems and
technology
Data
However, technology only paints part of the picture.
When technology is complemented and reinforced with process and culture
reform, benefits are almost repeated. That is, we have observed that
the benefits from software can be matched by the benefits of improving
processes in tandem with the software implementation, with a particularly
significant impact on excess or obsolete stock.
By solely focusing on a software project involving the implementation of
the tool, and neglecting the opportunity to review and revise related
business processes, is to by-pass many potential benefits that the
software brings.
Myth #4: Technology Is The Best Source Of Supply Chain Improvement

18. It stems from a lack of understanding that
results in people focusing on the physical
elements of the supply chain, as well as
the way warehousing and distribution
costs appear on an organisation’s books.
As a result of this misunderstanding,
warehousing and transportation projects
may overlook potential opportunities
and sources of improvement. That is,
the bigger picture – including upstream
causes – may be lost in the desire to get
quick cost savings.
Illustration of
Misunderstanding
Consider the perspective of a Financial Controller who notices that
freight costs are rising and begins to renegotiate freight rates. If this has
not been done for several years, this process may yield some results.
However, given the commodity nature of freight rates, it’s likely most
rates are already competitive and there’s not a lot to be gained.
In addition, if these costs are rising as the result of something such as
changing customer behaviour or an outdated inventory policy,
this undertaking will never get to the root cause of the issue.
1
2
3
Myth #5: It’s All About Trucks and Sheds

19. Review your Supply Chain Network Design in light of current strategy.
Focus your supply chain planning capability on the drivers of
inefficiencies.
Analyse the delivery and order fulfillment task for potential
improvements.
1
2
3
Instead of focusing too much on the physical and financial elements of supply chain, consider the following steps to tackle
supply chain holistically:
Review your Supply Chain Network Design in light
of current strategy.
This may be as involved as running a detailed
network modelling project (also known as Supply
Chain Network Optimisation) or as simple as
mapping out your current network and looking for
potential bottlenecks, constraints or redundancy.
Regardless, your network should be capable of
supporting your Customer Offer in an optimal
manner.
Myth #5: It’s All About Trucks and Sheds

20. Review your Supply Chain Network Design in light of current strategy.
Focus your supply chain planning capability on the drivers of
inefficiencies.
Analyse the delivery and order fulfillment task for potential
improvements.
1
2
3
Focus your Supply Chain Planning capability on
the drivers of inefficiencies.
Having reviewed and possibly revised your
Supply Chain Network, focus effort on improving
planning to reduce noise and imbalances in
inventory as well as redistribution and expediting
costs.
The potential for improvements from better use
of inventory can far outweigh the benefits of
better freight rates.
Instead of focusing too much on the physical and financial elements of supply chain, consider the following steps to tackle supply
chain holistically:
Myth #5: It’s All About Trucks and Sheds

21. Review your Supply Chain Network Design in light of current strategy.
Focus your supply chain planning capability on the drivers of
inefficiencies.
Analyse the delivery and order fulfillment task for potential
improvements.
1
2
3
Analyse the Delivery / Order Fulfilment Task for
potential improvements.
As a final step, it may be worthwhile to improve
your transport utilisation, such as by running a
Route Optimisation analysis, and remove further
redundancy at the execution stage
Instead of focusing too much on the physical and financial elements of supply chain, consider the following steps to tackle supply
chain holistically:
Myth #5: It’s All About Trucks and Sheds

22. Reduce Costs
Strong
Technical
Skills
Perfect
Forecasting
Implement
Strategy
Renegotiate
Freight Rate
Traditional View on Improving Supply Chain
Performance:
Suggested View on Improving Supply Chain
Performance:
Customer
Strategy
Leadership
Capability
Measure &
Manage Forecast
Risks
Complement
Strategy with
Best-of-Breed IT
Supply Chain
Network Design
Conclusion

23. Suggested View on Improving Supply Chain Performance:
Customer
Strategy
Leadership
Capability
Measure &
Manage
Forecast Risks
Complement
Strategy with
Best-of-Breed IT
Supply Chain
Network Design
While these steps are not necessarily linear or dependent on
the prior step, what should be evident is that all subsequent
steps flow from, but also guide, your strategy.
While activities from both models may deliver results, without this
link to the greater business, results from the initial five
activities may be short-term, unsustainable and offer less
opportunity for improvement than the others.
It’s also important that all parts of the business are singing from
the same song book – that is, that your supply chain
initiatives support and complement, rather than contradict,
current strategy. No supply chain should operate in isolation of the
business context it operates within.
Conclusion

24. Take action
GRAis Australia’s premier, expert consulting firm specialising in supply chain & logistics strategy, planning and execution.
We offer consulting, professional services, supply chain systems, training & education and benchmarking across a broad
range of industries.
At GRA we understand the complexity of Supply Chain Management
We are Australia’s premier expert consulting firm specialising in supply chain and logistics
strategy, planning and execution.
We offer Consulting, Professional Services, Systems, Training & Education and Benchmarking a
cross a broad range of industries.
To find out more, call (03) 9421 4611 or visit www.gra.net.au