Mind the Gaps: Exploring How Value‐Creation Perceptions Across the Internal Triad Influence Identity and Impact

• Author: Remko Van Hoek,Carlos Mena,John Gattorna
• DOI: http://doi.org/10.1111/jbl.12035
• Date: 01 March 2014
• Published date: 01 March 2014

Mind the Gaps: Exploring How Value-Creation Perceptions Across

the Internal Triad Influence Identity and Impact

Remko Van Hoek

1

, Carlos Mena

1

, and John Gattorna

2

1

Cranfield University

2

Gattorna Alignment Pty Ltd

New value-creation opportunities mean the future of supply chain management (SCM) is bright. Growing C-suite sponsorship for supply

chain contributions to enterprise value creation is a positive factor for the future of the discipline. However, rising C-suite requests mean

that supply chain professionals must manage an internal triad of relationships: horizontally with peer functions and vertically with C-level exec-

utives. How well supply chain professionals manage this triad will determine SCM’s future role in strategic initiatives. We use procurement to

exemplify the opportunities and challenges that confront a maturing supply chain discipline. Focus studies conducted with procurement manag-

ers and peer functional managers combined with C-suite interviews reveal: (1) great opportunities for cementing SCM’s value-creation role; and

(2) existing gaps hinder identity construction and professional contribution.

Keywords: internal alignment; procurement

INTRODUCTION

Supply chain management (SCM) is “the value-creation engine

of the modern organization”(Fawcett and Waller 2013, 183).

CEOs have increasingly recognized this and are demanding more

of supply chain professionals. For example, Paul Polman, CEO

of Unilever, has launched a campaign to improve sustainability

across the entire supply chain, from field consumption to dis-

posal, introducing about 50 measurable goals throughout the sup-

ply chain, with a marked contribution expected from Unilever

procurement (Ignatious 2012). Similarly, P&G’s CEO has for

years emphasized the need for procurement to work with suppli-

ers to accelerate time to market and benefit from innovative con-

tributions of suppliers to grow the business. As a result, a recent

survey by McKinsey indicates that CEO’s are getting hands on

with supply chain strategy (Gyorey et al. 2010).

The newfound notoriety is welcome; however, if supply chain

professionals do not deliver to C-suite expectations, they could

become victims of their own success. Sustained visibility and sup-

port requires that supply chain managers understand how SCM is

perceived by others throughout the organization. They must then

articulate SCM’s value proposition—and repeatedly deliver to

promise. These are critical steps to creating a recognized SCM

brand, which is vital to engendering peer-function support. Without

such widespread cross-functional support, supply chain initiatives

are likely to under deliver. Only by working well with other mem-

bers of the organization can supply chain deliver unparalleled value.

Yet, as diverse functions view value creation differently,

achieving consensus on value-added roles and responsibilities is

often difficult. All supply chain functions face a difficult branding

challenge. We focus on procurement to exemplify how perception

gaps complicate the branding process. For instance, procurement

is often seen as a “one-trick pony”—charged with reducing the

costs of purchased goods and services. Although the view that

purchasing can be leveraged to lower costs places procurement at

a strategic nexus, it also limits procurement’s opportunities to

extend beyond the cost mandate. Peer-function managers do not

always perceive purchasing’s extended value-creation capability.

The invitation to the C-suite creates triadic tension—across C-

suite, procurement, and peer functions—regarding procurement’s

value-added role (Fawcett and Waller 2011). The invitation may

set procurement up for overcommitting to the C-suite and under-

achieving in the business? Procurement’s future (like that of

SCM) requires that perception gaps in the internal triad be closed

to enable the highest levels of value creation.

CINDERELLA IN THE C-SUITE—IMPERATIVES OF

THE MOVE FROM DYAD TO TRIAD

Supply chain alignment refers to a state of congruence or fit among

supply chain strategy, structures, and processes (Gattorna 1998,

2010; Fawcett et al. 2007; Wong et al. 2012). This must take place

among different members of a supply chain. However, internal

alignment—from customer facing through to supplier facing func-

tions—is key to delivering customer value (see Fawcett and Mag-

nan 2001; J€

uttner et al. 2006; Van Hoek et al. 2008). Failure to

achieve such alignment has a detrimental impact on performance,

diminishing a firm’s ability to be viewed as a valued supply chain

partner (Tamas 2000; Baier et al. 2008).

Now that SCM functions like procurement are viewed as stra-

tegic players, another critical dimension of internal alignment is

emerging. We refer to vertical coordination up and down hierar-

chical levels of an organization, from the C-suite priorities to the

buyer. As Wong et al. (2012) assert, “there is a need to achieve

shareholder alignment so that functional strategies and business

processes used to deliver them are compatible with business

strategy and shareholder expectations, such as revenue growth,

working capital efficiency, operating cost reduction and fixed

capital efficiency”(p. 419). The connections between strategic

vertical alignment and horizontal (i.e., peer-to-peer) alignment

remain murky, threatening value creation (Wong et al. 2012).

Corresponding author:

Remko Van Hoek, School of Management, Cranfield University,

Cranfield, Bedford, England MK43 0AL; E-mail: vanhoekr@

hotmail.com

Journal of Business Logistics, 2014, 35(1): 44–51

© Council of Supply Chain Management Professionals