OVERCOMING THE OBSTACLES

So what gets in the way of planning across the supply chain in this manner?
The first major issue is the existing organization and its traditional cultural
imperatives. Reporting lines into the old functional organization get in the way
of pan-supply-chain thinking. Putting together a change team, with a group
target that cuts across all existing reporting lines, requires careful selling to the
existing management, to achieve alignment toward execution. At Zeneca, at no
time during the exercise did that present any problem at all. Everyone was kept
fully aware of what we were doing and what the team�s objectives were, and
this was sufficient to free up the operation.
The second issue is that most of the information in the level 1 business is
held by function. There is no supply chain information collected together to give
an overview of what is happening to this whole piece of the business. Supply
chain maps help to overcome this, presenting information in an organized way
that people can readily understand, challenge, and work with. The initial reaction
to a supply chain map is often disbelief. Never having seen a picture of
an entire supply chain laid out like this, there is often a reluctance to accept
that there is that much inventory and the lead times are as long as the map
indicates!
Often, the first stage of the process of improvement is to go back into all
the numbers represented on the map and confirm that they really are accurate.
The more they are poked, the more robust the numbers prove to be � and so
we move from disbelief to acceptance! The more there is acceptance, the greater
the alignment behind the necessary process changes and business transformation
will be.
Moving Source from level 1 to level 2 is a similar exercise in pan-supply-chain
thinking. Again, the key is to run the Source process for the good of the whole
chain, not just the local performance of the purchasing department or a particular
business unit. Level 1 sourcing is characterized by such issues as a tactical
focus on price, fragmented spending, a decentralized procurement organization,
lack of knowledge for spend categorization, and minimal authority within the
procurement organization.
With a pan-supply-chain view, Source can begin to manage commodities
across the enterprise, unlocking economies of scale. This is often coupled with
a rationalization of the supplier base, so that more time can be devoted to
negotiations with individual suppliers, already beginning to look beyond level
2, to level 3 collaboration. The characteristics now change toward a focus on
total cost, the organization becoming a hybrid decentralized/centralized model,
an increasing knowledge of spend categorization throughout the organization,
and a move toward achieving some level of authority within the procurement
organization.
Boeing, following its acquisition of Rockwell and McDonnell Douglas,

formed a shared services group to manage $3.5 billion of nonproduction purchases.
A global e-procurement system to establish compliance was a feature
of this effort. Airbus is another example from the world of aerospace. Airbus
was created from a consortium of companies from four European countries. In
2004, it produced and delivered more commercial aircraft than any other company,
including Boeing. It is currently developing the world�s largest passenger
aircraft, the A380, due in service in 2006. In order to maintain its current
competitor advantage, it targeted a significant reduction in the total cost of
production. Key to achieving this intention is the effectiveness with which it
manages its suppliers. The Airbus Sup@irworld program and a single supplier
database and set of interfaces are a key part of this effort. In particular, Airbus