Continuing our conversation from last week, let’s talk about some of the less common spots a supply chain team can fit into an org chart. Last week we looked at having the supply chain leader report to the CEO, CFO, COO, CRO, and CAO. This week, let’s look at the Chief Lean/Optimization/Continuous Improvement Officer (CLO), Chief Information Officer (CIO), General Counsel (GC), Chief Human Resources/People Officer (CHRO), Chief Marketing Officer (CMO), and the option of splitting the supply chain team up under multiple pillars.
Chief Lean/Optimization/Continuous Improvement Officer (CLO)
This is not one of the standard C-suite roles, but I reported to this role as a supply chain leader for many years and so am including it. I will abbreviate it “CLO” to distinguish the Chief Lean Officer from the COO.
Advantages
Under the CLO is where to put the supply chain team if the company needs to fix broken processes or has a large and bloated team. Typically, the main point of the CLO’s organization is to streamline, optimize, and improve processes and training. If the supply chain team has grown too large, internal and external stakeholders find processes bureaucratic and cumbersome, and the internal budget is too high, this is a good place to be. This can also be a good place if the supply chain team is undergoing a transformation and needs strong change management support through that process.
Disadvantages
The CLO’s organization often has an interesting reputation in a business. If done correctly, the Lean/Continuous Improvement team improves everything it touches and leaves behind a more people-focused organization. Instead, the Lean/Continuous Improvement team often has a reputation for cost-cutting and leaving wreckage in its wake. Yet the team has the support of the CEO and puts up good numbers, so it is allowed to continue on. In those kinds of organizations, the supply chain team can get caught up in that bad reputation and have its headcount reduced to the point where it no longer functions.
Considerations
The supply chain leader reporting to the CLO needs to have a continuous improvement mindset and probably a fairly strong background in Lean or SixSigma. To be fully successful, they also need to understand the human factor of Lean and have the commitment from their leaders to not cut too far. It’s very important that the supply chain team doesn’t simply become an enforcement force in an organization without consideration for building relationships and non-monetary value.
Chief Information Officer (CIO)
The potential for putting a supply chain team under the CIO is somewhat obvious, but is also rare. I haven’t seen this one personally, but can see the advantages in certain corner cases.
Advantages
Reporting to the CIO is a great place for the supply chain team that is undergoing a digital transformation or implementing many integrations to the Enterprise Resource Planning (ERP) system. Reporting through the CIO means the supply chain team is surrounded by experts in implementing software correctly, and the union of supply chain and IT expertise can be a powerful one. If a major digital transformation is needed in a supply chain or procurement team, this can be an oddly good place to land for a while. IT software spend is also notoriously maverick spend, so having the supply chain team report to the CIO can help bring runaway IT spend in line with procurement policy and reduce software costs dramatically by getting the supply chain involved.
Disadvantages
The CIO is not likely to understand supply chain well, and the IT team might be resentful of efforts by the supply chain team to “hone in” on their software-purchasing territory. Putting the supply chain under the CIO has huge opportunities for rifts between personnel who are very dissimilar, especially in an organization where the supply chain is mostly focused on direct or material spend. If not handled well politically, this configuration will open a gap between supply chain and all other departments, as the operations team starts to feel that the supply chain is too distant and the IT team starts to feel that the supply chain is too close.
Considerations
Putting the supply chain team under the CIO is likely a temporary measure to get a team through the implementation of a new ERP system or get integrations set up into all other systems. Consider making this organizational change for a set period of time or a set project, with an expected endpoint by which the supply chain will no longer report up through the CIO. Hire someone into the role with strong project management skills so they can lead the transformation like a project for the duration.
General Counsel (GC)
The GC sometimes takes on a “Chief Risk Officer” role as well as their legal priorities, and so a supply chain reporting to the GC will have a strong focus on risk.
Advantages
If risk management is a priority for the supply chain team, reporting to the GC is a great place to be. This is where contracts will get done, wrap agreements will get shored up, and supply chain resilience sees support. Attorneys are also trained to negotiate, so bringing in the executive leader for backup on a large negotiation can be extremely valuable. If putting contracts in place or improving them are current supply chain priorities, consider this slightly unorthodox location for the supply chain team in the org chart.
Disadvantages
With increased risk comes great reward. One of the truths of the procurement world is that the party who takes on more risk also takes on a greater financial benefit. If the supply chain is reporting to the GC, they may not even be able to see some cost savings opportunities or other value. Or, the supply chain leader will see and push those opportunities only to have their C-Suite leader shut down their efforts.
Considerations
A supply chain leader reporting to a GC needs to be the kind of person who can speak fluently with an attorney. This doesn’t mean they must be an attorney themselves, but a very technical or analytical supply chain leader who hasn’t negotiated many contracts directly may struggle to communicate with a GC.
Chief Human Resources/People Officer (CHRO)
Before you scoff at the possibility of putting the supply chain under HR, know that I have seen it once. The human factor comes into these decisions, and in this case the company needed to have two departments under a specific individual based on their experience and title, so procurement was chosen as “department number two.”
Advantages
This one is tricky for me because I didn’t see many advantages to having the supply chain team report to the CHRO. If the HR department is a particularly good one or is good at recruiting, this may be a good place for the supply chain if they are building or rebuilding the team. Exponential growth can be hard to manage, and if the key consideration is getting the right people into the organization, HR should be a particularly skilled internal partner. Many HR departments are also the home of Diversity, Equity and Inclusion programs, so having the CHRO lead supply chain can lead to an improved supplier diversity program.
Disadvantages
Many HR departments fall into a compliance role and have to fight to stay out of that aspect of HR. This is similar in procurement or supply chain, where enforcing policy compliance becomes a larger part of the role than it should. With both departments under one leader, this compliance approach will reverberate and build, and can lead to excess bureaucracy for the rest of the organization.
Considerations
To get along well with the CHRO, the supply chain leader may need to be a “people person”. Consider goals carefully when putting an existing supply chain leader under the CHRO or when hiring a new supply chain leader with the CHRO as the hiring manager.
Chief Marketing Officer (CMO)
While I haven’t ever seen a supply chain report up through the CMO, it is another possible place for them in the organization.
Advantages
In a company that is very outward-facing, putting the supply chain under the CMO helps them more clearly understand the voice of the customer, and also snugs the supply chain team up to the “company message.” If you have a supply chain team that seems to have gone a bit rogue or has turned inward so far on itself that it can’t seem to see the forest for the trees (by being too focused on policy compliance or fighting with internal customers on everything), the CMO can be a good place to land.
Disadvantages
As with other reporting chains on this list, the CMO is not likely to have a strong background in supply chain and probably is not focused on cost savings. Similar to the CIO, reporting through the CMO might be better as a “reset” position and a temporary landing place for the supply chain team. Reporting to the CMO could help add customer service training to the leader and team who need it before being ready to report directly to the CEO.
Considerations
Be ready for the supply chain team to want to compete/negotiate marketing contracts and decide ahead of time how much involvement the supply chain or procurement team should have in those bids and contracts. Marketing teams tend to be very protective of “their” marketing agencies and partners, and having the supply chain team report to the CMO will blur the line of who holds the relationship. Decide ahead of time who will manage marketing spend, knowing that if the CMO does let the supply chain handle that spend there are probably significant savings available for the organization.
Multiple C-Suite Leaders
When I say having multiple C-suite leaders over a supply chain team, I mean when the complete supply chain has pieces reporting to different C-suite leaders. The most common example is having a Chief Procurement Officer reporting to the CEO, but the warehouse and/or logistics teams report up through the COO. While this may seem OK at first blush, it does open up some issues.
Advantages
It is common to have warehouses report to operations teams so they can be closer to the teams they serve directly. This does help the warehouses function like an operations team, with a strong sense of urgency for requests and close ties to the factory floor or front lines. Usually having the warehouses report to operations also keeps their metrics focused on achieving the same goals as the operations team and working in lockstep. Meanwhile, the procurement team is focusing on getting things bid, cutting purchase orders, and saving the company money.
Disadvantages
The disadvantage of a fractured supply chain team is that you don’t have a supply chain team. You have a procurement and/or purchasing team, a logistics team, and a warehouse team. None of them have the same goals, targets, or focus, and they may even be working against one another. The warehouse team may have a goal to keep excess safety stock on the shelf so they never run out of something. The procurement team might have a goal to reduce inventory so the business has enough cash flow to run smoothly. Without a common leader to set the priority, these two opposing goals cause immense friction in the organization and ultimately can break the entire supply chain.
Considerations
Supply chains are complex. Putting the entire supply chain under one leader might result in a very large organization, depending on the industry. That leader must be a good leader, who understands the supply chain well enough to run it (or ask the right questions), and can hold the entire team accountable for getting the right thing to the right customer at the right price, time, and quality level. Ultimately the supply chain is accountable for purchasing and delivering a product from the first demand signal to the moment it is delivered to its final use point (whether with the internal team or external customer). That means working through late shipments, unpaid supplier invoices, and risk management all along the way.
You can either choose a reporting structure that strengthens your weaknesses or really leans into your strengths. Unlike most other departments, the supply chain team doesn’t have a natural “home”, which leads to both opportunities and pitfalls. After outlining the opportunities and pitfalls of each reporting structure, where does your supply chain belong?
Chief Executive Officer (CEO)/President
Chief Financial Officer (CFO)
Chief Operating Officer (COO)
Chief Revenue Officer (CRO)
Chief Administrative Officer (CAO)
Chief Lean/Optimization/Continuous Improvement Officer (CLO)
Chief Information Officer (CIO)
General Counsel (GC)
Chief Human Resources/People Officer (CHRO)
Chief Marketing Officer (CMO)
Multiple Pillars