Six Things a CEO Should Know About Their Supply Chain

In this episode of Rozmowy Logistyków, Piotr Skobało and Adam Sobolewski discuss what every CEO should know about their supply chain when stepping into a new role in an organization. They cover where to start the conversation about logistics, and what to focus on first so as not to get lost in the details.

STRATEGIC ALIGNMENT: WHAT WE SELL DEFINES HOW WE DELIVER

The starting point is understanding that supply chain strategy has to follow from sales strategy, not the other way around. Selling premium products requires a different chain than selling cheap products with express service — cost, speed, and certainty of availability are three variables, of which realistically at most two can be optimized at once. A CEO should communicate to logistics what outcome needs to be achieved, not assume "everything is possible" without setting priorities.

FORWARD-LOOKING PLANNING: CHANGE NEEDS TIME

Deploying an IT system usually takes several months to over a year at greater complexity; building a new logistics center takes 6-12 months, and even longer for heavily automated facilities. A key question to ask the head of logistics: is our supply chain being built ahead of what we plan to be doing a year to eighteen months from now? The analogy: putting off a logistics investment is like putting off pulling a screw out of your leg — the longer you wait, the more painful and costly the procedure becomes.

ROI UNDER A YEAR IS A "NO-BRAINER," LONGER HORIZONS NEED ANALYSIS

Projects with a payback period under a year don't need a long debate — they should simply be executed. At a one-to-three-year horizon, deeper scrutiny of sales assumptions is needed (one changed parameter can shorten payback from 2.5 years to 1.5). Investments with a 5-10 year horizon (advanced automation) shouldn't be feared — the more mature the enterprise, the easier it is to run such analyses.

COMPETENCIES THAT GO BEYOND THE PURE FUNCTION

Today's logistics leader has to understand the basics of IT systems and finance in order to independently justify efficiency-improving projects — that's not something "the CFO will do for them." A key question for the CEO: do I have a partner in logistics who comes to me with proposals, instead of just executing orders? The more complex and dynamically growing the organization, the more the head of logistics has to be a leader, not just an administrator — including assertiveness toward their own board (an example scenario: a logistics leader responsible for the S&OP process has to be able to say "I'm stopping production" when warehouses are overflowing, despite pressure for lower unit cost).

A SHARED UNDERSTANDING OF METRICS ACROSS DEPARTMENTS

A key organizational mistake: different teams (sales, finance, logistics) understanding the same metric (e.g. "product availability") differently. A real example: controlling asked why the best-selling product from last month showed as "out of stock" the following month — because logistics was only held accountable for the availability of active products, not ones being phased out, and no one had explained that distinction to the rest of the organization. Supply chain metrics should also be directly tied to the company's strategic goals: margin improvement links to inventory turns, market-share growth to service level and customer experience, expansion to analysis of entering new markets and launching new products.

QUALITY MANAGEMENT AS A RECURRING PROCESS, NOT A REACTION TO A FIRE

A key distinction: having the right metrics is one thing, and regularly working on them (a daily, weekly, or monthly review cycle, matched to sales dynamics) is another. A CEO should meet with the head of logistics on a recurring basis, not just at moments of crisis — and the head of logistics should proactively inform the board about the state of their area, instead of waiting to be asked only once something breaks.