The Role Of Culture In Efficient Supply Chain Operations

6/17/2014

In the more than 20 years that I have been serving large global clients, I have seen a sea change in the way supply-chain operations have been viewed, and in the benefits they bring to companies that can master them. From a focus on “logistics” in the 1990s, marked primarily by the movements of large finished or partially-finished goods from country to country, organizations moved into the 2000s by investing in technology that offered the ability to track movement and streamline transport options to gain cost advantages. Now, we are seeing a continued evolution of the global supply chain. Modern supply chains not only move goods, they distribute services; they don’t just understand data, they enable workflow; and they don’t just connect parts of a process, they bring people together.

As the modern supply chain evolves, however, most organizations still look to technology to solve their intractable and complex problems. They invest millions in the latest versions of CRM and tracking technology, they equip their vehicle fleets with RFID, and they locate production facilities inside their largest end-user customers, all in hopes of optimizing distance and turnaround time while also reducing error rates, rework and excess inventory. The reality is, though, that many inefficiencies remain, and much can be attributed to an insufficient focus on the culture of the people involved in the supply-chain operations. According to a McKinsey & Co. survey on collaboration*, over 80 percent of executives surveyed indicated that collaboration was a “crucial” skill for supply-chain efficiency, while only 25 percent of them felt that they were “effective at sharing information.” Indeed, understanding culture can make an impact.  However, we need to focus broadly on culture – not just national or country culture, with its routine misunderstandings around language and “do’s and don’ts,” but the more complex aspects of culture, such as how people make decisions, how they interpret intructions and deadlines, and how they resolve conflict. 

Here at TMC/Berlitz, our Cultural Orientations Indicator (COI) cultural preference model helps us understand the variety of ways different cultures might approach the types of “people” challenges mentioned above.  For example:

An understanding of how different cultures view authority (through a hierarchicy or equality lens) can help establish the most efficient protocols for making decisions and distributing responsibility. People in a culture that has a hierarchical preference might assign specific decisions to different levels in the organization, expecting feedback and input to move in a predictable, differentiated way. Those in an egalitarian culture would prefer a consensus- or committee-based method of making decisions. Both approaches have benefits and challenges that need to be assessed.
Emphasis on an awareness of time preferences can help create clarity around deadlines, work cycles and completion targets. Those in a fixed-time culture might focus on speed at the expense of a redundant quality process, while those in a fluid-time culture see the value in the ability to slow down a process in order to spend more time analyzing an issue. One approach is faster but a bit riskier, the other approach is slower but may identify critical process issues that can be improved for longer-term efficiencies.

Cultures operate on many dimensions and often with contradictory and complex behaviors that make all human interactions unpredictable and challenging. At the same time, by focusing on aligning cultures in global supply chains, organizations can gain competitive advantage through harnessing the diversity of cultures present in their workforces to improve speed and reduce inefficiencies.

*The McKinsey Quarterly, “Competitive Advantage from Better Interactions,”  2006, Number 2.

David Lange