Why supply chain professionals make great CEOs

To become CEO, according to a recent Business Insider article, the move to an operational role is a common segue for many CFOs seeking the top spot. That’s not a coincidence: many companies seek out their CEOs from roles that are operational, such as supply chain management. A famous example, of course, is Tim Cook, CEO of Apple, who was COO before becoming CEO. He is not the only one. Alan George Lafley, CEO of Procter & Gamble, took a commission with the U.S. Navy as a supply officer first, and Mary T. Barra, CEO of General Motors, is known for her strong operations and supply chain management background.

Why is supply chain expertise so valuable for future CEOs? Below I’ve listed the five most important reasons behind the rise of supply chain CEOs.

1. Supply chain excellence makes companies successful

The supply chain is the funnel through which consumers and businesses get what they need – at the right place and the right time. With the rise of the e-commerce and the experience economy, this supply chain becomes key. Therefore, voices saying companies need a chief supply chain officer (CSCO) should not come as a surprise: supply chain management excellence is critical for the success of a company.

Some of the best-known consumer companies are really supply chain driven: in 2015, Gartner moved Apple and P&G into the new ‘masters’ category of the supply chain ranking for those companies that have consistently had top five composite scores for at least seven out of the last 10 years. It shows that supply chain excellence is part of the company DNA.

These and other companies help prove the point that performance, results and shareholder value depend heavily on understanding the interaction of money, markets and materials. Vodafone, Konecranes and Bristol Myers have shown that centralising sourcing in the supply chain can yield 5% savings in the first year. Microsoft, Axis Communications and Johnson Controls have demonstrated that well-coordinated work between supply chain and engineering during new product launches makes money.

2. Conversely, supply chain disruption can break a company

In today’s lean and highly demanding world, ensuring business continuity is also key. The importance of proper risk management in the supply chain becomes evident when natural disasters like the eruption of a volcano in Iceland, the tsunami in Japan and flooding in Thailand stop the production of vehicles or the supply of computer hard discs. In addition, companies are exposed to significant compliance risks, for example in respect to the Dodd-Frank Act, which requires the disclosure of whether products contain conflict minerals such as tin, tungsten, and tantalum – financing violence – from the Democratic Republic of the Congo, or regular changes to the Restriction of Hazardous Substances (RoHS).

3. The supply chain profession trumps other disciplines

In light of the many opportunities and risks, shareholders and leadership understand the utmost importance of supply chain excellence. In today’s world, the supply chain is central to business models and represents the ultimate source of competitive advantage.

Therefore, it is important that schools, universities and institutions pick up the trend and share the news – design programmes and training to equip job owners and job seekers with the necessary skills. Academia, together with government and media should blow all trumpets and companies have the responsibility to raise the profile and communicate the attractiveness of the profession; some might wish to reconsider the offer to employees – in particular to women. According to a German study, 37% of Human Resources departments put employer attractiveness at the top of their agenda.

4. Supply chain is, despite it reputation, a cool career

What can be more enriching and exciting than jetting around the globe to source materials, parts and products in China and Australia, or supervise the installation of the new delivery or sorting equipment at the sites in Singapore or London?

Supply chain operators are tasked with applying the newest technologies to find answers to increasingly demanding customers and complex challenges in the widest variety of fields: the challenge may be delivering urgently required equipment by drone to the studios of Hollywood or Bollywood or fixing the logistics control center in the sometimes highly automated mines of South Africa or Brazil. Many opportunities lurk in the space of the flow of goods, information and cash.

5. The war on talent is worsening

Many sectors compete for the limited human capital available on the market. In the Ernst & Young report It’s Time to Think Differently About Procurement we can read that 48% of Chief Procurement Officers (CPOs) see the biggest challenge as talent constraints. The shortage is exacerbated by the growing role of technology. From data scientists to drivers, demand is high for talent and labour within the supply chain ecosystem, i.e. the community of all participants involved – from logistics companies to manufacturers.

While toy maker Mattel Inc. says there is a limited pool of people with the right supply chain skills, Germany alone will be short of 150,000 truck drivers within 10 years, according to a study published in 2012. And according to a study by the American Trucking Associations, the “trucking industry will need to hire 890,000 drivers in the next decade to replace retirees and meet rising demand”. Both the West and the East are under pressure: the shortage of talent is happening across the globe.

With the gradual introduction of self-driving trucks the driver shortage might go away. Whether the developments in artificial intelligence will help to close the gap in the boardroom remains to be seen.

Author: Wolfgang Lehmacher, Head of Supply Chain and Transport Industries, World Economic Forum

Image: Gazprom Neft First Deputy CEO Vadim Yakovlev is silhouetted during an interview with Reuters in Moscow, Russia, August 17, 2015. REUTERS/Maxim Shemetov