Chain Reaction
2020
Leadership Perspectives From the World’s Top Supply Chain Executives
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Introduction
The Chief Supply Chain Officer (CSCO) is a position that has always been critical to a company’s success. Today, that has never been more true; the ability to bring products to market quickly and efficiently—combined with global shocks such as COVID-19, rising customer expectations, and the digital revolution—has put the CSCO at the center of a company’s strategy.
At the same time, the role of the CSCO is shifting and becoming more complex, with many competing priorities. At Egon Zehnder, we have conducted more than 1,000 supply chain searches in the past five years. In order to better understand the responsibilities and concerns of this position, we decided to conduct a global survey of today’s CSCOs.
Who We Surveyed
In the fourth quarter of 2019, we surveyed 235 large company CSCOs across many industries, geographies (23 countries), and corporate structures. A full 82% of our respondents are the most senior such executives in their organization, meaning they are ultimately responsible for their company’s success or failure in creating an effective, efficient, and competitively differentiated supply chain.
235
CSCOs
23
Countries
Chile
Argentina
Brazil
Mexico
United States of America
Canada
United Kingdom
Sweden
Denmark
Germany
Netherlands
Luxembourg
Switzerland
France
Austria
Italy
Greece
Israel
United Arab Emirates
China
India
Singapore
Australia
COVID-19: The Ultimate Global Shock
The viral disease first appeared in China in December 2019, and as of April 2020, it had exploded around the world, disrupting economies, health care systems, and social norms. Supply chains, which depend on a global flow of goods and people, have seen massive impacts. In early March 2020, we conducted a flash survey of our respondents to get a sense from them of what had changed and how prepared they felt they had been. Said one respondent: "China handled the situation very well. It seems the Western world just stumbled into it.” Said another: “Resilience design in the supply chain is critical.”
READ MORE: Leadership in the COVID-19 Crisis
COVID-19: SUPPLY CHAIN LESSONS FROM ASIA
XX%
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72%
believed they were prepared for the impact of the virus on their supply chains
I think [COVID-19] has fundamentally changed the structure of the supply chain. And it will force people to change old behaviors that we know need to change.”
— Wilson Wei-Zhong Zhu, Chief Operating Officer of Li & Fung
Contents
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2
3
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Foreword
Who Is Today’s Chief Supply Chain Officer?
Supply Chain Champions
External & Internal Challenges
The Talent Shortage
Alignment
How Today’s CSCO Can Succeed
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Table of Contents
Chain Reaction 2020
For more details on our survey as well as a shareable copy, please use the following link:
Who is Today’s Chief Supply Chain Officer?
Overview
Today’s Chief Supply Chain Officer has more clout and experience than ever before. That’s one clear conclusion of our survey, where a full two-thirds of our respondents reported having at least 20 years of experience in the industry. Once considered a technical, logistics, and distribution-oriented role siloed from the rest of the C-suite, the CSCO now plays a key role in defining a company’s strategy—and is a core part of the customer experience. More than half of our respondents (53%) said they now report directly to the CEO, with another 24% reporting to either the COO, President, or CFO. And 55% of them manage teams of at least 1,000 people.
Who is today’s CSCO?
53%
report to CEO
at organizations with $6b+ in revenue
67%
20+ years of supply chain experience
82%
most senior supply chain leader
Collaborative and Centrally Led
For many years, the CSCO operated as an extremely centralized position with complete control over the supply chain. Then it became more decentralized as the business units came to understand how relevant the supply chain was to their own success. Today, the pendulum has swung back to somewhere in the middle: Nearly two-thirds (63%) of our respondents said they run a unit that is centrally led as opposed to decentralized, which means they share responsibility and accountability with the business unit leaders. It’s a key distinction, because it means that CSCOs must share power with many of the other C-suite leaders in the organization, building strong, customer-focused businesses together. They now work closely with other business units and together own the decision rights—which means that the leadership skills they require have changed as well. The need for a coordinated response to COVID-19 also has helped break down siloes.
Which of the following best describes your supply chain approach or organization?
Click to explore
Percentage represents how many respondents ranked priority in their top three
63%
Centrally led but execution is decentralized
21%
Largely centralized
12%
Largely decentralized
3%
Largely outsourced to third parties
1%
Other
Supply Chain Priorities
We asked our CSCOs to rank their top three objectives in their current role. Two of the choices tied for most important: increasing the efficiency of the supply chain and improving operational speed and responsiveness to customer needs. Each of these was cited by 22% of respondents. The clear drivers for CSCOs today are twofold: Reducing costs remains at the core of the job, but equally important is the ability to be flexible and responsive to customers by understanding what is on their minds and how to help them succeed. Both concerns are equally vital if a company wants its supply chain to become a true strategic advantage rather than just one element of the business.
But it is not only about the technical side of things. When we ranked the responses to find out which priorities were consistently in the top three, another issue emerged: developing the talent /transforming the culture of the team, which 55% of respondents pointed to as a top-three concern. Talent and culture are, of course, critical for every C-suite-level executive, but as CSCOs' jobs become more collaborative and interactive, this is particularly relevant.
Another surprising insight pertained to the digital transformation of the supply chain. Only 7% of respondents said digital transformation was their top priority, although one-third of respondents made it one of their top three. To us, this is evidence of what a wide variety there is in digitized supply chains today. Some have folded it into every aspect of their work; others are only now grappling with what it means to be truly digital. It's fair to assume that COVID-19 has increased the acceleration of digital initiatives as increasing digital capabilities becomes key to survival.
What were your top three most important priorities when you transitioned into your current role?
Developing talent/transforming team culture
Improving cost/efficiency of supply chain
Improving operational speed/responsiveness to consumer needs
Reorganization of the supply chain model
Driving digital transformation of the supply chain
Scaling/expanding the supply chain capabilities for growth
Innovating the supply chain
Implementing new systems (e.g. ERP)
OTHER
55%
54%
51%
34%
31%
15%
13%
5%
Everyone is intensely working on digitalization; however, no one has gained any competitive advantage yet.”
— Supply Chain survey respondent
WATCH: Johnson & Johnson Worldwide VP Supply Chain, Strategy, Innovation & Deployment Wim Appelo describes how J&J modernized and evolved its supply chain.
Our Take
The CSCO role is more crucial—and complex—than ever. While having the ability to manage costs and improve operational efficiency remains at the heart of any CSCO role, the new, more collaborative aspects mean that many CSCOs need support. Hiring executives must seek out not just the classic “nuts and bolts” skills; they must also ensure that a CSCO leader can communicate in a way that other business leaders, both internal and external, will understand—both in times of crisis and in normal times. In addition, CSCOs will need to demonstrate a greater degree of strategic and customer orientation, linking the objectives of the supply chain to the overall company value proposition and being flexible and agile enough to respond to ever-changing market demands. If the current CSCO does not have these skills, he or she must acquire them—ideally, internally—or risk being replaced.
Johnson & Johnson Worldwide VP Supply Chain, Strategy, Innovation & Deployment Wim Appelo describes how Johnson & Johnson modernized and evolved its supply chain.
We asked our CSCOs to share the names of the companies that we believed were best-in-class in several areas: overall supply chain strength, innovation, and talent/culture.
Best in Class
In our survey, respondents were asked to volunteer the names of companies whose supply chain led the way in several categories. To get the overall ranking, we added up the total number of mentions overall.
Hover to see the leaders
#1
Amazon
#2
Procter & Gamble
#3
Unilever
#4
Walmart
#5
Target
Overall Leader: Amazon
Unsurprisingly, given its power and reach, Amazon was the clear leader in almost every category. Respondents said it had the fastest and most responsive supply chain, the most digitally advanced supply chain, and the most improved growth capabilities.
Placeholder for Amazon CSCO Interview
Leaders by Category
Click each tab to see the leaders
FASTEST & MOST RESPONSIVE
MOST DIGITALLY ADVANCED
STRONGEST TALENT & CULTURE
UPS
Airbus
Zara
Coca-Cola
3M
Philips
Nike
Alibaba
Schneider
Bayer
Johnson & Johnson
Shopee
MOST IMPROVED GROWTH
ABI
Roquette
Nordstrom
AGCO
Spectris
XiaoMi
Medline
MSFT
Apple
PepsiCo
Nestlé
Mars
Boston Scientific
Medtronic
Danone
L’Oréal
We asked our survey respondents to list the leaders in the categories above and then ranked them by the number of mentions.
Talent and Culture Leader: Unilever
Unilever, known for its culture of purpose, was the clear winner in this category. Notably, this was the only category where Amazon lagged.
WATCH: Former Unilever CEO Paul Polman on the Corporation's Role in Society
The best leaders—and there was quite a lot of agreement among our CSCOs about who those leaders are—are those who have succeeded at both the cultural and the operational aspects of the supply chain. Amazon, for example, has both created an environment in which innovation and creative dissent are championed, and has put digital at the heart of its business. They and others have smashed existing paradigms—in part because of their global reach, which in turn allows them to attract the best supply chain teams. Said one survey respondent: “Anywhere that has scale to move people across functions, and into/out of the field and headquarters, tends to develop solid talent.”
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According to Polman, the world requires drastic change to keep functioning and leaders courageous enough to steer purposely through it.
Click to learn about each type of challenge
External
Internal
Biggest External Challenges Facing Supply Chain Leaders
We asked our CSCOs to rank the top three external challenges they were facing (this survey was conducted before the onset of COVID-19, which presumably would have changed responses). The top answer, selected by 21% of respondents, was rising cost pressures (half named this as one of their top three issues). This was no surprise to us; competitive advantage in this space is still all about efficiency and cost. But even before the outbreak, what came second—global economic uncertainty—underscores just how challenging it is to be in this role.
CSCOs today must deal with universal uncertainties that are suddenly challenging the existing model of globalization, ranging from COVID-19 to market fluctuations to increasing tariff and trade disputes. Large companies are feeling this pressure even more intensely: 56% of large companies named global economic uncertainty as a top-three issue, compared with 30% of small companies. But what are organizations doing to address these challenges? How does one strike a balance between cost management and risk mitigation?
What are the top three external supply chain issues holding your organization back right now?
Increasing cost pressures
Global economic uncertainty (e.g. tariffs, exchange rate volatility)
Rising demand variability
Rising customer expectations
Availability of key skills and talent
Pressures on reaction and fulfillment times
Volatile commodity prices
Increasing sustainability concerns
Shrinking product life cycles
Disruptive technology
17%
10%
9%
8%
6%
4%
2%
View Internal CHALLENGES
It’s about managing risks. And it’s risks from an environmental perspective, it’s risks from what's happening in trade and in the world around us, it’s geopolitical risks. I think in my mind it really fits the changing role; the downside of focusing solely on efficiency and cost could create a really vulnerable supply chain.”
— Wim Appelo, Worldwide VP Supply Chain, Strategy, Innovation & Deployment at Johnson & Johnson
Biggest Internal Challenges Facing Supply Chain Leaders
When we asked respondents to list the three biggest internal challenges, the growing complexity of the supply chain itself came in first, with nearly half of CSCOs citing this as a top-three issue. Significantly, the next two challenges were talent shortages and the organizational culture—which bears out what we are seeing consistently in our work with C-suite executives.
And although budget concerns were only the fifth-most-cited challenge, when we asked a specific question about resources, we got a very different answer: Only 38% of respondents agreed or strongly agreed that their supply chain had adequate resources to meet future challenges—which means that 62% think they do not. Companies with between $3 billion and $10 billion in revenues were particularly concerned about this issue, with just 27% agreeing or strongly agreeing. This may mean that despite CEO and top-level support for the work of the CSCO, there still is not enough understanding of just how much time and money is required to modernize and streamline the supply chain.
What are the top three internal supply chain issues holding your organization back right now?
Complexity of supply chain
Talent shortages: lack of key people/skills
Organizational culture
A “business as usual” attitude
Budget pressure
Insufficiently agile supply chain design
Lack of a clear, integrated strategy
Too little focus or understanding of technology
A lack of senior management commitment
Contractor relationships
48%
44%
37%
33%
28%
18%
14%
7%
View External CHALLENGES
The world around us is changing at an unbelievable pace. And so if there’s anything that keeps me up at night, it’s, ‘Are we going fast enough? Are we making the changes at a pace that we need to?’ Because the world isn't waiting for us.”
WATCH: J&J's Appelo describes how they modernized and evolved their supply chain.
Agree or Disagree?
Our supply chain is adequately resourced to meet future challenges and deliver value.
All Respondents
< $3BN Revenue
$3 - $10BN Revenue
> $10BN Revenue
Strongly Agree
Agree
Neutral
29%
Disagree
Strongly Disagree
41%
36%
19%
Flexibility Is Key: Being a Chief Supply Chain Officer has always meant having some comfort with uncertainty. But today, it’s an absolute requirement. In addition to having the skills needed to manage complexity, CSCOs must be personally comfortable with constant change and must know how to create a more variable cost structure. They must manage their supply chain with the expectation of regular change and exogenous shocks rather than reacting out of fear or uncertainty. Such rapid shifts only highlight the need to create alternatives within the network or to think about using creative sourcing options such as contract manufacturing, as J&J has done recently.
The lack of qualified talent is a major issue for CSCOs today. Although 44% of respondents said that they’d already identified a potential successor within their organization, they expressed more anxiety around the building of effective teams. Nearly three-fourths (72%) of our respondents said that they were concerned about the current skill level of people in their organization, and a full 79% said they were worried about their ability to recruit people able to handle the increasing pace of change. This concern was greater in Asia even before COVID-19 hit, where a full 86% of respondents worried about finding people with this type of flexibility, compared with the Americas’ 78% and Europe’s 74%. So what are companies doing to address the talent problem? Spending money on leadership development, for starters; nearly three-quarters (73%) say they have increased investment in this area. They are also, increasingly, paying more for talent (73%) and hiring supply chain experts from outside their own industries, perhaps because of scarcity; 52% of respondents say they are currently doing so. Yet there is an even deeper issue here, one that’s not addressed by poaching or higher salaries. It’s the fact that 37% of respondents said that the biggest challenge of all was the lack of leadership competencies in potential candidates. It appears that many supply chain experts simply do not currently possess the leadership skills needed to succeed in this new world. At Philips, SVP & Global Head of Supply Chain Ivanka Janssen is very focused on developing talent internally. “I think supply chain is a very hot area,” she says. “Many people are looking for the same type of people with the same type of experience, especially when it comes to digital capabilities. So what we do is create an environment internally where we encourage people to learn as much as possible,” she says, citing programs such as reverse mentoring.
What are the top barriers to you recruiting the right talent?
Lack of leadership competencies
Lack of available applicants
Compensation expectations
Lack of technical competencies
Lack of industry experience
Lack of internal alignment on the right talent profile
27%
79%
said they were worried about their ability to recruit people able to handle the increasing pace of change.
WATCH: Ivanka Janssen, SVP & Global Head of Supply Chain at Philips, shares her insights on the supply chain function.
The global war for talent will continue to be an issue for supply chain executives, particularly during difficult times. Companies need to know that in the short term, they must spend money to get the right leaders on board, while in the longer term they must think aggressively and creatively about developing talent. With an increased focus on strategy, customers, and internal collaboration, they may wish to encourage more movement across functions or evaluate candidates more on their leadership potential as opposed to technical capabilities. It is true that some of these executives will be poached by others—and also that they will have to shell out more in salaries and incentives to refill their coffers—but the supply chain function is far too important to scrimp on. The table stakes for future CSCOs will remain the ability to drive cost and efficiency; the best leaders will understand how to work more broadly across the entire organization.
Ivanka Janssen, SVP & Global Head of Supply Chain, Philips, shares her insights on the supply chain function.
Are CSCOs properly appreciated and understood within their organizations? The answer, our survey clearly shows, is yes. Three-quarters of them (77%) said that their board of directors is aligned with their strategy, while 63% said the CEO is curious and aware of supply chain issues. We consider this to be very good news and evidence that the supply chain is now seen as a core part of a company’s strategy and a competitive edge in itself. As recently as a few years ago, this was not often the case.
77%
said that their board of directors is aligned with their strategy, while 63% said the CEO is curious and aware of supply chain issues.
The Board of Directors is aligned with the supply chain strategy I have articulated
The CEO is curious and actively learning about the changes and issues facing our supply chain
46%
23%
40%
20%
The Rise of Asian Supply Chain Organizations
Asian companies like Alibaba, Taobao, Xiaomi, and Huawei are emerging as some of the most digitally advanced supply organizations. This coincides with our survey findings, which revealed that Asian organizations are more likely to cite the supply chain as the most important asset compared to other regions. A full 82% of respondents in Asia said their companies considered it the most important strategic asset in their company—perhaps because so much of the actual supply chain is located in this region—compared with 40% of European respondents and 47% of those in the Americas. Possible reasons for this difference range from industry focus to culture to a coordination of resources in the region.
The supply chain is our organization’s most important strategic asset.
Americas
Asia
Europe
38%
32%
22%
75%
11%
0%
30%
WATCH: Li & Fung Chief Operating Officer Wilson Wei-Zhong Zhu discusses working closely with the top executive team during difficult times.
CSCOs cannot do their jobs without the support of their CEO and their fellow business unit heads. It is terrific that so many executives now appreciate supply chain as a strategic rather than a technical element of the business—and the COVID-19 crisis certainly underscored that—but there is still a long way to go.
Li & Fung Chief Operating Officer Wilson Wei-Zhong Zhu discusses working closely with the top executive team during difficult times.
Armed with the data collected from our survey as well as interviews with top supply chain officers, we at Egon Zehnder have put together a plan for supply chain leaders that we hope will address their main challenges and opportunities. Please see below—we would love your feedback.
Our Take: How Today’s CSCO Can Succeed
Click the sections below to explore
Put Culture First
Expect the Unexpected
Build A Collaborative Organization
Fight the Talent Gap with Potential
Invest in Executive Development
It may seem costly, but in the long term it won’t be: Any company that wants to attract and retain top supply chain talent must give its people the professional support and development they need to grow. This could be anything from international assignments to internal or external management programs to even doing a stint outside of the supply chain function altogether.
At a time when talent is scarce, companies must be creative in looking beyond the “normal” hiring pool. Our research shows that companies that focus on what we call "potential"—defined by curiosity, engagement, determination and insight—rather than just simply competencies will end up with more successful leaders. Assessing potential also opens organizations to a more diverse set of candidates—which, in turn, leads to more creative thinking and better results.
Build a Collaborative Organization
In this new world, it is not enough to be a technical CSCO. Successful supply chain executives must create an environment in which they can work closely with not only their own team but also other businesses and units inside and outside the company. Not everyone will have every strength; effective teams are able to fill the gaps—and must hire or develop collaborative talent when those gaps emerge.
As we have learned so many times this year, the one certainty in the supply chain space is that it is uncertain. The pace and frequency of sudden change is accelerating. Learning to expect shocks and sudden shifts and responding with agile thinking must become second nature for any CSCO. It is important for CSCOs to balance a steady state organization with one that has alternative plans in place for when the unexpected occurs. Precision remains critical—but so does the ability to learn, react, and respond. The more efficient and flexible the supply chain, the less vulnerable it is to unanticipated changes.
Our survey makes clear that CSCOs are concerned about building cultures that embrace change and innovation. CSCOs must think not just about hiring individuals, but also putting together effective teams. They should study best-in-class cultures and conduct in-depth internal or external assessments of individuals and teams. They also must look beyond the supply chain function to see how, for example, innovation is handled in other parts of the company or externally, and they must ensure that their plan fits within the company’s overall strategy.
About Egon Zehnder
Egon Zehnder is the world's leadership consulting firm, sharing one goal: to transform people, organizations, and the world through great leadership. We know what great leaders can do and are passionate about delivering the best leadership solutions for our clients. As One Firm, our more than 500 consultants in 68 offices across 40 countries bring our individual strengths to form one powerful and collaborative team.
We partner closely with public and private corporations, family-owned enterprises, and non-profit and government agencies to provide Board advisory services, CEO search and succession, executive search, executive assessment, leadership development, and organizational transformation.
Learn More >
Contact Us
For more information about Egon Zehnder’s Supply Chain work, please contact:
Tom Reynolds
Phone: Email:
+1 404 836 2929 tom.reynolds@egonzehnder.com
YaoSong Chen
+1 202 774 1360 yaosong.chen@egonzehnder.com
Le Ly
+1 972 728 5929 le.ly@egonzehnder.com
Siva Chen
+86 21 2401 8218 siva.chen@egonzehnder.com
Benjamin Lüpschen
+49 211 13 99977 benjamin.luepschen@egonzehnder.com
Production
Content Lead: Jennifer Reingold
Digital Project Leads: Luke Sherwin, Kelsey McGillis, Markus Schuler
Project Managers: Blair Beuttas, Ainsleigh Monaghan
Communication Strategy: Stacy Drumtra
Agencies: Ceros, Shed Collective
