Three silos in your supply chain and what to do about them

Broken customer service. Bad employee morale. Inefficiency preventing innovation. We’ve all experienced the destructive effects of silos within corporations, whether as an employee or a customer. Silos happen when departments either can’t or won’t easily share information with other departments. As a result, departmental priorities supplant your company’s long-term goals. Information is the lifeblood of the modern enterprise; silos cut off the circulation.

And they don’t just happen within the confines of the enterprise. Globalisation, new business models, outsourced manufacturing, acquisitions and partnerships, just-in-time manufacturing, and even joint product development with suppliers have blurred the boundaries between “us” and “them.” For most companies, mission-critical dependencies on suppliers are essential to competing successfully. Supply chains are so vital to business success that even Apple, for example, treats information about its supply chain operations as one of its most valuable trade secrets.

Given the increasingly strategic role that supply chains play within your business, silos put you at great risk. For example, it’s harder to share demand forecasts and communicate demand changes to suppliers. You could bridge the gap by scheduling on-site meetings every two weeks and spending several hours going through changes, but that’s costly, inefficient, and ineffective at handling last-minute changes. Imagine, for instance, if your company makes two sizes of new tablets, and you find that only your smaller models are selling well. Would you want your suppliers spending two weeks manufacturing the larger, slower-selling models? Or would you want them to adjust production right away, as soon as you learn about demand trends, so that you ship in-demand products to retailers and avoid losing customers due to stock-outs?

Impaired communication between suppliers and your business – and even between other suppliers where there are dependencies – leads to poor supply visibility, slow or stalled innovation, weak collaboration, and increased risk of unexpected events (such as missed delivery deadlines).

Clearing out supply chain silos

So how can you ensure information flows freely through your supply chain? It depends which kind of silo is clogging up the system. Here are three types of silos that could be driving wedges in your internal and external supply chain processes – and what to do about it.

#1: The psychological silo

People are afraid of the unknown, which makes them afraid to experiment, collaborate, and let go of control. They could fail, look foolish, and in some work environments, potentially lose their jobs. But these fears also hinder innovation within supply chains – and innovation is vital to keeping your business competitive and your customers happy.

To break down this silo, give people a clear vision of what you want to achieve, and let them have at it. Encourage people to think outside the box, try new things, and collaborate with others in the supply chain. Equally important, give them permission to test things out on a small scale to see if their ideas work, fail early and without consequence, and learn and try again.

And finally, reward people for getting outside their departmental “comfort zone” so they actively engage other departments. Because the fact is, supply chain innovation today typically involves the extended supply chain. This means working with IT, product lifecycle management, product design, manufacturing and other departments – and even with suppliers.  

#2: The organisational silo

Despite new technologies that centralise data and integrate processes across departments, there’s still a strong tendency within people to focus on their own area and lose sight of the big picture. This is particularly true within many larger corporations where department heads are more worried about the performance of their department than adding value to the company (often because of department focused payment incentives based on performance).

Sharing information may even be viewed as risky in this kind of work environment. In supply chain operations, purchasing teams need to understand that the opposite is true. Full visibility into supplier relationships, for example, reduces the risk that you’re leaving savings on the table. Say you’re a commodity manager for beverages – which is a smaller line of business for your company than foods. An organisational silo is in place, so you don’t think about teaming up with the food purchasing group to look for suppliers in common. If you remove that silo, you might realise that both the beverage and food teams are working with some of the same suppliers. You can negotiate together on the entire amount of business being offered to those suppliers. As a result, both teams perform better individually in terms of savings. And your company as a whole? It gains speed in ramping up its smaller beverage business, and gives procurement recognition for playing a huge part in that success.

So it’s not just savings at stake. Addressing organisational silos elevates the strategic status of the procurement organisation. The best way to break down organisational silos in your supply chain is to incentivise and structure cross-departmental information sharing and collaboration. For example, reward managers for contributing to overall business performance (for example, by sharing valuable data with departments that need it). Establish a job shadowing program, schedule informal networking events over lunch, offer social sabbaticals and fellowships where people can join another department for six months to learn how it works. They’ll bring back insights to help you work more closely and effectively with other areas of the business.

#3: The informational silo

Psychological and organisational silos may occur when there’s a lack of desire – individuals don’t want to collaborate; teams don’t understand the benefits of collaborating. Informational silos are different because they have more to do with a lack of data. You may want to provide transparency and work together toward common goals, but it’s just too complicated. No one is working from the same version of the truth.

Technology is the best answer to informational silos. If your technology is connected, then your information, processes, and people will be connected, too. You’ll have an up-to-date overview of all spend and supplier performance for each contract engaged in across the enterprise. The first step is to assess what your informational silos are costing you, then make the case for investing in a solution that can give you in-the-moment access to a synchronised view of what’s happening in your supply chain right now.  Replace multiple, fragmented systems with a single business network and supply chain collaboration solution. You can then standardize master data management, update all connected systems automatically, and collaborate with millions of suppliers, live.

Key takeaway

Psychological, organisational, and informational silos may have different root causes. But fixing one can often lead to improvement in the others. If you reduce the fear of collaboration, you may end up becoming a driving force for technological transformation. Or if you start with tackling the data problem, you may finally be able to put incentives and processes in place for organisational collaboration.  Regardless of where you start, keep your eye on the end game: collaboration drives success – in your career, and for your company.

Ceylan Thomson writes about direct materials procurement and supply chain collaboration for SAP Ariba. For more in-depth information on how to connect people, processes, and information in our supply chain, download “Collaborating with Direct Materials Suppliers Across Your Global Extended Supply Chain.”

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