Purpose-Driven Supply Chains Deliver Business Value

More than ever before, the world understands the impact that supply chain successes, or failures, can have on an organization and its products. An unfortunate weather event or unforeseen logistics glitch can translate into long-lasting consequences, as can controversy over the use of conflict materials or ethically dubious labor practices. Consequently, companies need to be aware of how an organization delivers on its brand—and the supply chain has become an increasingly critical element of that brand delivery strategy.

This awareness of a brand’s reflection up and down the supply chain requires a strategic shift from thinking of a supply chain as a cost center to an integral part of how a company is shown to deliver upon its purpose, with the recognition that its stated purpose needs to speak to all stakeholders. Enter a purpose-driven approach to deliver on both the promise of the supply chain and the overall organization.

Creating a broader purpose

For the electronics industry, this appeal to a higher purpose is not new. We've addressed it in many ways already, not least of which was the "first do no harm" philosophy reflected in the shift to lead-free solder. That was a big deal and played a prelude to the use of recycled materials, non-conflict materials, low carbon footprint, and sustainable engineering, with an emphasis on low-power design.

Making the shift to purpose takes this further. It is more deliberate and demands a broader understanding of a variety of business assumptions. For example, increasingly, stakeholders are being broadly defined to include not just shareholders but also customers, suppliers/distributors, employees, and the local community. Supply-chain chief executives need to get out in front of this trend as soon as possible.

Some Gartner research came across my desk recently that points to the importance of the supply chain in the drive for stakeholder benefits and the need for long-term profitability. It’s a real balancing act that requires getting buy-in from all the stakeholders around a well-understood and clearly communicated purpose. That’s a challenge that, once met, can be foundational to the success of a company’s business model; it builds deep connections with everyone involved and translates into growth and revenue success (Figure 1).

Figure 1: Bringing all the stakeholders around a well-understood and clearly communicated purpose is difficult, yet critical for long-term success. (Image source: Gartner)

Expanding the focus to all stakeholders takes effort, but it is an effort that pays off in unexpected and broad-reaching ways. Done right, employees are inspired and are more productive. Customers identify with the values of the organization and are more loyal. Supplier relationships are more creative and fruitful. We are talking about finally cashing in on the supply chain ideals that we’ve been talking about for decades—and the benefits will translate into organizations making better and longer-lived products, and consequently more revenue.

The shift to purpose requires that supply-chain considerations be baked into the entire value chain and throughout the design and manufacturing process. Owen Barnard, head of Strategy and Innovation at Ericsson Networks Supply, put it well when he said, “It’s partly about how products are designed, but also what components and suppliers are used. We are in a unique position to give insights to Research and Development (R&D), which supports product design and is embedded through the stage-gate process.”

Fortunately, supply chain pros are well-versed and connected to these constituencies. A survey of 573 supply chain practitioners earlier this year^[1] found that 85 percent believed that the primary priority of enterprise purpose is to connect the customer through product offerings while providing a positive societal and environmentalimpact. Meanwhile, investor return (traditionally the primary success metric) came in second in popularity, at 61percent.

Figure 2: Electronics manufacturers have a deeper and broader purpose than simply putting products or services into the hands of customers. The conversation has to extend beyond what the organization does, into how it does it—and that’s where the supply chain can make a difference. (Image source: Gartner)

As part of its research, Gartner identified five actions that chief supply chain officers (CSCOs) should take to create a purpose-driven supply chain:

1: Demonstrate commitment at the top. This is basic wisdom for any corporate initiative but is the lifeblood of a purpose-driven approach. To build authenticity and employee trust, the overall supply chain strategy should be focused on purpose. Otherwise, it’s just rhetoric—and no one will be on board. Perhaps the biggest challenge, according to Sarah Watt, senior director analyst with the Gartner Supply Chain practice, is creating processes and metrics that align with purpose.

2: Engage with portfolio management. Supply chains must get engaged in the earliest stages of planning, and the earlier the better. Decisions made at the design phase, and even during new product conception, will dictate a variety of supply chain factors, including where a product is built, what components are sourced, and more. To deliver on purpose, supply chain pros need to be involved from the beginning. For example, a product that promises to be environmentally friendly or “green” will require supply chain traceability and careful sourcing to deliver on that promise.

“CSCOs and their teams should play a more active role in product development and portfolio management. For example, the supply chain organization is uniquely equipped to review the product pipeline for unintended consequences or advise on raw materials selection,” Watt said.

3: Choose partners with purpose. By understanding what’s coming down the pike through earlier involvement, supply chain pros can think strategically about sourcing and build relationships proactively with the ideal suppliers. Purpose-driven organizations need partners that align with the same values and goals. By building collaborative partnerships across the ecosystem, the supply chain can amplify the positive values of the organization and encourage innovation, the creation of new products, and the cultivation of shared values. Currently, many supply chain leaders neglect this piece of the puzzle and don’t leverage partnerships to enable purpose, the Gartner survey found.

4: Get employees engaged. All the research I’ve seen suggests that many talented individuals consider the supply chain a steppingstone in their career rather than a career in itself. Engagement in purpose can not only get good business results but help build a stellar supply-chain organization. CSCOs can only get buy-in on purpose when their employees feel included and heard. Clear communication of purpose makes all the difference.

“Building a purpose-driven culture means providing employees with autonomy, decision-making principles, and opportunities to ask questions and contribute. This can be through innovation days, town hall meetings, open door policies, and one-on-ones. Internships and interviews must also be designed in a way that communicates the supply chain purpose to external and future candidates,” Watt said.

As an added bonus, supply chains that have a clear purpose that people can get behind are more likely to attract and retain the best talent. In today’s hiring marketplace, that’s a huge boon.

5: Be accountable. Without strong metrics that are truly monitored, there’s no way to know what success looks like. Unfortunately, this is where most supply chain organizations stumble: they fail to measure much more than cost, savings, and lead time. Purpose without accountability will be experienced by stakeholders as window-dressing.

End-users of electronics products, as well as shareholders, are more aware than ever of the impact of their purchases, and so are bringing a wealth of considerations to their buying decisions. Giving these buyers satisfactory answers to their questions and concerns will become a critical factor to building the customer loyalty needed to create a sustainable business. For employees, the ability to connect day-to-day tasks with overarching company goals and purposes that tie into broader societal and environmental purposes will strengthen performance and job satisfaction.

In this evolving world, the supply chain will be the critical juncture that will bring all these stakeholders together behind a particular brand, product, and company. Without purpose and a supply chain that is laser-focused on that purpose, companies will likely stumble and ultimately fall.

^[1] Gartner, https://www.gartner.com/en/newsroom/press-releases/2021-08-18-gartner-identifies-five-actions-to-become-a-purpose-driven-supply-chain