Supply chain is the planning, acquisition, receipt, and management of goods and services from external suppliers for the purposes of creating goods and services for a company’s customers. Supply chain processes cover a broad range of functions, which are typically performed by multiple business units across an enterprise. For many utilities, there are significant gaps between senior executives’ views on the importance of supply chain and their perceptions of the performance of their supply chain organizations, including customer relationship management, procurement/supplier management, logistics/fulfillment. Why does this disconnect between importance and performance exist? The reason lies in the supply chain organization’s inability to move beyond its “transactional origins” to align with its key stakeholders and provide higher value services.

In order to create a successful supply chain organization, the supply chain operations must incorporate seven key principles:

1. Strategically Aligned – Support the overall business strategy, fit the corporate culture, and facilitate establishing supply chain as a center of operational excellence
2. Well-Governed and Executive-led – Provide the appropriate level of senior management governance and oversight
3. Clear Accountabilities and Customer-Facing – Create single points of accountability for key process areas, specify clear decision rights and information exchange responsibilities, and ensure accountability for high value added service delivery to internal customers
4. Efficient but Connected – Incorporate the benefits of centralization (e.g. aggregation of spend), while fostering teamwork and partnerships with line operational managers (e.g. category teams)
5. Cost-Effective – Balance the cost of supply chain operations with value expectations and differentiate strategic opportunities with significant value from transactional activities
6. Focused on Performance – Incorporate supplier and customer relationship management and business intelligence analysis to improve key supplier performance, focus on customer/stakeholder needs/satisfaction, and create a continuous process improvement mindset
7. Designed to the Work – Be based on business needs, not existing personnel