S ignificant business change and fluctuating lev- els of complexity make it extremely difficult for companies with multiple, independent
supply chains to achieve internal supply chain alignment across divisions. Fast-moving consumer goods
(FMCG), consumer packaged goods (CPG), retail,
and electronics companies can be especially vulnerable to misaligned or fractured supply chains in the
face of volatile consumer demand, short product life
cycles, erratic supply, and high transportation costs.
To address those and other challenges, some companies have established supply chain centers of excellence (CoEs). A CoE is a designated specialty group
within the firm that works together to drive supply chain innovation, collaboration, and excellence
across the organization. While many companies use
“center of excellence” to refer to anything that is centralized or perhaps outsourced, in this article the term
refers to centers of competency focused on supply
chain design and flow-path analysis, route planning,
inventory deployment, and related advanced analytics. These organizations often serve to unite companies across their supply chain silos. (See the sidebar,
“Who could benefit from a CoE?”)
CoE experts excel at using models to conduct
sensitivity analyses and hypothesis testing. They use
their analytical skills to interpret wider data trends
for long-term supply chain planning. Since the sup-
ply chain best practices that CoEs engender rely on
multiple types of data from innumerable informa-
tion technology (IT) sources, these experts must be
capable not only of collecting and cleansing the data
(a critical step for accurate supply chain network
modeling), but also of building models, conducting
sophisticated analyses, and sharing repeatable supply
chain insights and knowledge across the organization.
As part of their purview, the CoE team often develops and manages an enterprisewide focus on balanced metrics (also known as holistic or aligned metrics) that can overcome business units’ biases while
reflecting the different aspects of the supply chain.
These metrics can be used to measure supply chain
performance and costs spanning inventory, transportation, warehousing, manufacturing, procurement,
and customer service functions. Accordingly, well-run CoEs ensure the best use of talent and resources;
reduce transportation, inventory, and warehousing
costs; and improve customer service levels while
ensuring more effective management of invento-ry-deployment costs across multiple supply chains.
Typically, however, they have limited (if any) operational responsibility.
CoEs thrive if they are viewed as bringing long-term strategic benefit to the organization. Their success rides on strong executive support and a thoughtfully developed long-term plan. Well-administered
and carefully nurtured CoEs can inspire superior,
long-term supply chain results that drive the changes
needed for a company to be market-responsive.
In fact, research conducted by the analyst firm
A center of excellence (CoE) staffed by analytics experts can drive
supply chain improvements across your organization. Here are
six recommendations for ensuring a successful CoE initiative.
BY JONATHAN WHITAKER
How to create a supply chain
center of excellence that works
