Interview with an SCM Industry Leader

AN INTERVIEW WITH ED MAHLER

Ed Mahler has over 30 years experience in implementing, supporting and running supply chain systems. At DuPont his assignments included stints in manufacturing, IT, and Corporate Plans. An early proponent of exploiting emerging IT technology, he established a task force at DuPont to implement and utilize expert systems technology. For the last 10 years, Ed has been recognized as a thought leader in supply chain management and has advised numerous corporate clients on how to set up and manage world-class supply chains.

In the January 2004 issue of SCCinsight, Ed Mahler introduced the four dimensions of supply chain value: Functionality, Adaptability, Integration and Leverage. In this interview, he elaborates on the importance of understanding these sources of value for continued supply chain improvement.

SCC: Youve said that the four dimensions of value provide a framework that companies can use to build understanding and improve IT choices. Mahler: Yes, absolutely. I think its very important for the various constituencies within a company to understand that there is a natural tension among them. As an example, business unit leaders need Functionality and Adaptability to be able to respond to their marketplaces while corporate staff management, on the other hand, places a high importance on Integration and Leverage to reduce costs and insure reliability. SCC: Surely, both have legitimate claims. Mahler: Yes, and thats the point. Internal bickering is counterproductive and all would be better off if that energy would be used to find the correct balance. The four factors account for 100% of the value, but you cant get all of the value from just one or two factors there must be a mix of the four. Frequently, well-intentioned persons with differing beliefs of the value mix cannot have a constructive dialog. The exact emphasis on each of these dimensions will be different for each company and businesses within the company and may, in fact, change over time as business conditions and objectives change. SCC: So the "four dimension" is a framework for discussion? Mahler: Actually, its a tool to enable understanding, facilitate constructive dialog, and guide strategic IT sourcing decisions. I believe people inherently understand that there are tradeoffs to be made and have a preconception (different due to their own experience and current assignment) of which dimensions to favor. This framework allows objective consensus building and organizational alignment for an IT sourcing strategy, be it best of breed for some functions and highly leveraged for others.

SCC: How do you make the tradeoffs, then? Mahler: Thats the essence of organizational alignment. Theres no universal right answer, and no answer will be all one way or the other. Theres always a combination of factors that will be most advantageous overall for the health of the organization. Its finding the right mix the right tradeoff among these four factors that spells success. If a company is in a stable market, with stable products (long lifecycles) and processes, efficiency will be of utmost importance, and the mix will favor Leverage at the expense of Adaptability. Functionality and Integration are always important, but in this case less so than Leverage. Another company in fast moving markets with short product cycles will be driven more toward Adaptability and Functionality and less toward Leverage. The four dimensions framework helps companies see these relationships and hopefully better understand whats good for the company as a whole. SCC: Has this viewpoint helped companies arrive at better position vis--vis technology decisions? Mahler: Oh, yes. And its interesting to see how viewpoints can change. A business user, for example, might be the companys strongest advocate for Adaptability, then move into a corporate management position and suddenly switch sides and start pushing for more Integration and Leverage. The model explains the change in perspective.

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