Moving supply chain leaders to the C-suite

In this episode of McKinsey Talks Operations, we sit down with the authors of From Source to Sold: Stories of Leadership in Supply Chain (Grammar Factory Publishing, October 2022). Join the conversation as they take us on a journey through the intricacies of supply chain leadership and the inspiring stories of some of the most successful operations and supply chain business leaders.

Host Daphne Luchtenberg is joined by Knut Alicke, a partner in McKinsey’s Operations Practice, and Radu Palamariu, managing director of Asia–Pacific and Europe for Alcott Global. Their conversation has been edited for clarity.

Knut Alicke: We need to make sure that we now, all of us, tell the story of supply chain in an easy, simple, and clear way. And with this, basically improve also the performance of the supply chains around the world.

Daphne Luchtenberg: That was Knut Alicke talking about supply chain leadership—the topic for discussion on today’s episode of McKinsey Talks Operations, a podcast where the world’s C-suite leaders and McKinsey experts cut through the noise and uncover a new operational reality.

I’m your host, Daphne Luchtenberg, and I’m pleased to welcome back to McKinsey Talks Operations Knut Alicke, a partner in McKinsey’s Stuttgart office and one of the very first guests on this podcast series when we kicked it off. Welcome back, Knut.

Knut Alicke: Hi, Daphne. Very happy to be here.

Daphne Luchtenberg: Joining us is Radu Palamariu. He is the managing director of Asia–Pacific and Europe for Alcott Global.

Radu Palamariu: Hi, Daphne.

Daphne Luchtenberg: Radu and Knut, you’ve collaborated for a number of years, and now you’ve joined forces to coauthor this book—From Source to Sold: Stories of Leadership in Supply Chain. Congratulations on getting it done. It’s great to see the momentum and excitement building for the book. It is a good read, and I love the stories it tells. And it’s really easy to dip in and out of. So, may I ask you, what made you both want to create this now?

Knut Alicke: Thanks a lot, Daphne. Why did we make this book now? If we go back, it’s probably one and a half or two years where Radu and I talked about all the disruptions we had back then and still have, to be very, very clear. Both of us felt that supply chain is super important, and we also felt that there were not a lot of leaders or board members with a supply chain background. The idea was to change that.

And then we looked into the Fortune 200 companies and found that only 11 percent of the CEOs have a supply chain background, with Tim Cook from Apple clearly being one of the most prominent. We asked ourselves, why is that? Is it because supply chain leaders are such nerdy characters that they cannot lead a company? Is it other reasons? So, why don’t we find board members, chief supply chain officers, people with a background in supply chain who made it to the board and conduct interviews with them to understand their story? And with this, we can distill what stands out for them and what makes them different.

It was a super-interesting journey. We learned a lot. We had super contributors. We were very proud to release the book in October last year. We get great feedback not only from people reading it but we also do a lot of keynotes where people say, “This is great stuff and this is a very good read, very good insights,” and it really helps them to improve.

Daphne Luchtenberg: I’m not surprised. I think what’s so helpful is the pragmatic examples that each of your interviewees brings. Radu, there’s always been this idea that supply chains only get attention when something goes wrong. And certainly, in the past few years, that has been the case. But can leaders, supply chain leaders, shift this narrative despite the fact that we’re still really having to navigate quite a lot of turbulence?

Radu Palamariu: It’s probably not only the past few years but maybe [much longer]. But in general, let’s just think pragmatically about you and me waiting for the courier to deliver our package. If they do it on time, at best we say thank you, but we don’t really think there’s something particularly extraordinary that they’ve done. If they don’t do it, if there’s a delay of one, two, or three days, we get upset. So that’s the analogy of what most of us, most companies, and most supply chain executives have had to face. When and if it goes well, great: it’s in the background; nobody cares. When and if it goes wrong, then the supply chain executives get called into board meetings. And that has specifically happened a lot in the past two years.

Most of us are not working in supply chain; most of our families have nothing to do with supply chain. I don’t think they’ve even thought about the Suez Canal or anything to do with shipping up until that ship got stuck there. Then, all of a sudden, it came to everybody’s awareness. To me, it’s a blessing in disguise. Supply chain came at the forefront of most discussions, most CEO reports, and so on. I would say that it gave even more prominence to the chief supply chain officers [CSCO], chief operations officers. They have a seat at the table.

To your point with shifting the narrative, or maybe not shifting but consciously dictating the narrative of supply chain, that is up to them. And that is, I would say, with great power comes great responsibility, as they say in Spider-Man. That is their role. So, they need to change and shift the narrative of supply chain from perhaps only putting out fires or dealing with problems or dealing with issues to a narrative that on top of that—because there are always going to be issues, and I think that will never go away—supply chain actually is a competitive advantage and it should be a competitive advantage of companies. So, it’s the role of the CEO, the CSCO—and hopefully the intent and the ultimate goal of this book that Knut and I wrote—to give people examples of how they can shape these narratives inside their companies, how 26 C-level executives did it in their own respective industries, which are quite diverse. We’ve taken people from all over the world, all over industries. And talked about how they could do it, too, in a manner that the board and the CEO would certainly see supply chain as a competitive and essential function.

Daphne Luchtenberg: I love that. What I noticed is one of your interviewees was talking about the fact that supply chain is now going through a renaissance period. How do you see that playing out, Knut?

Knut Alicke: As Radu said, we see the importance of supply chain. Looking to before the pandemic, and then the first lockdowns, we read articles about how supply chains were not working—I would say it was the contrary. Supply chains did work to the extent possible. What happened was that we had a supply crisis that we had not seen since the ’70s. So, that meant that demand was high.

You look into the demand because countries like the US flooded their people with money. So, they started to buy, they started to renovate their houses, and China could deliver. That meant that demand was skyrocketing and the supply chains tried their very best to deliver and they were just overloaded. So, that is something that’s at stake, right? Hey, we cannot get our Christmas presents. But on the other hand, none of us starved. The food supply chain worked. Essential supply chain worked. All of that worked.

With this, we indeed see a renaissance. But if you think about the topic itself, it’s not that it’s 100 years old. You could always say, “Hey, logistics is super old because armies basically started logistics,” the physical flow part of supply chain. But all of these planning topics, working together, collaboration, digital ads: that is a pretty new topic. So, it’s getting there, and what we saw in the past three years was clearly a massive acceleration. Everyone talks about it. I like what Radu said, that we have a seat at the table, right? We have a seat at the table, at the board, and now we need to make sure that we keep it.

We proved that supply chain is helping them to be more competitive, that we have the right prewarning system, so to speak. We have the right processes. We have the right IT systems to back this up to make sure that we continue to innovate and, with this, help to increase the resilience of the company. We need to tell the story that in this disruption, we still were able to deliver nine out of ten deliveries on time. Supply chain people would normally always focus on, “Oh, this one I delivered was not on time,” but they would forget that 90 percent was fine. For the remaining 10 percent, we also find a solution.

Daphne Luchtenberg: Really good. Also, you and Radu call out one of the key success levers, which is to move away from thinking about one silo and really challenging what I think we’re calling “siloization.” You also talk about supply chain experts getting stuck in their world sometimes—and that the success of real supply chain leaders, getting a seat at the board table, the executive management table, and being able to have that wider narrative is about looking across the silos and shaking hands. Is that right, Radu? What are you seeing people do successfully?

Radu Palamariu: In my view, the big shift that needs to happen—and I hope will happen, and it is my strong belief that it will eventually happen in the larger supply chain and operations community—is a mindset shift where they have to own the great work that they’re doing. I would say that is a shift that is happening already. I’m very happy that we have even 11 percent of people who have transitioned to CEO from supply chain and operations. I think we should have and we will have more, but I just wanted to emphasize how important mindsets—and our own mindset as supply chain professionals—are in this respect. And it’s the same principle as if they’re not inviting you to the table, bring your own chair and sit at the table.

Daphne Luchtenberg: There’s a piece there which is about giving yourself permission to look at the bigger picture. Perhaps, if you are an expert and you’re really looking at finding the answer to the very specific question, you might feel that you don’t have time to have a look at the bigger picture and sketch where the function that you are performing is actually having impact. I was listening to one of our senior partners talk about the importance of a new muscle, which is the geopolitical muscle. That must play specifically to the supply chain practice, right, Knut?

Knut Alicke: Yes, definitely. What we clearly need is transparency. And we not only need to understand what’s going on in a plan, what’s going on with the supplier, and what’s going on with our customer but also clearly need to understand all of these macro tensions and all of these geopolitical problems that are going on. Why is that important? Because the supply chain leader, by definition, is looking end to end, from customer to supplier. If there is tension that will affect either our customers or our suppliers or something in between, we want to make sure that we are agile and we are delivering to the promise. So, we need to make sure that we understand that. What we do with this understanding is—also very important—that we then take different scenarios and model those scenarios: What would happen if? With this, we paint the future and look into different scenarios, and with this, we prepare for the future.

Now the question is, how do we get there? How do we get all of these understandings? That was very interesting from a lot of our contributors. I would say they are all eager to learn. They’re all eager to listen and to have discussions in conferences. They are all very active on LinkedIn. They built their own opinion, and they get a lot of input. They then define what that means for our supply chain. So, this continuous learning is very, very important to also have, to your example, an understanding of geopolitical tensions and what it means for our supply chains.

Daphne Luchtenberg: Radu, this comes back to your original example, which is learning from each other and sharing best practices. What advice would you give to people who are just getting on the executive ladder and who have been working in supply chain in terms of broadening their horizons? What should be some of the things that they think about?

Radu Palamariu: Probably the most impactful pattern that I have seen across both the leaders that we’ve interviewed in the book as well as in general—because our day-to-day business is executive search when we interview all these senior executives—is that they have one or several mentors who have had a fast-track impact on their career. So I would say, ask actively and find mentors who have walked the path that you want to reach. They’re already perhaps at the destination and they can teach you how to get there faster. So, whatever that might be. If you want to become CEO, find somebody who has done it. If you want to become CSCO, if you want to become the best expert in procurement, there are always going to be mentors who you can leverage to fast-track your path to success.

Now, a very important and interesting angle to mentorship is what is called “reverse mentorship.” There are at least two contributors in the book who talk about taking advice from a very young professional. There was one particular contributor who is a CEO of an electronics company, and he was sharing with us how he took advice on social media, selling electronics on Instagram, and on social channels from a social-media influencer who is 30 years younger than him. Reverse mentoring is also an incredibly important piece that the best leaders, both in the book as well as in general, apply greatly. It’s not just people who have walked the path—and also in terms of age—but it’s also the younger generation from whom we can learn a lot. I would say the number-one hack—and it is a completely legal hack—to upgrade and fast-track a career is to get the right mentors. Whether it is reverse mentoring, whether it is in senior positions, whatever it might be, get the right mentors in place.

Daphne Luchtenberg: Great advice. Thanks, Radu. Let’s talk a little bit about climbing the ladder. A lot of the people you both spoke with took a quite circuitous route to supply chain and then from supply chain into wider leadership. How do you think that impacts experience and advancements? How helpful has it been for those folks that they actually didn’t go directly into supply chain, but they had a wider experience?

Knut Alicke: There is a very diverse development path in the book. I would say none of the contributors really started studying supply chain, maybe also because it’s a relatively new topic. But then they all enjoyed it, loved it, and found their role. What you learn with leading different functions is the diversity of a company. You clearly learn the importance of customer centricity, and you learn that you need to communicate the narrative that we have in our chain model, which is, honestly, the most important element. If you combine this with the holistic approach of a supply chain leader, that clearly sets you apart from a lot of other functions that only grew up in their own turf. With this, you just understand much better how things work.

Daphne Luchtenberg: Radu, would you add to that?

Radu Palamariu: One, supply chain is a term. It only came up, for the first time, in 1983. So, it’s a fairly new domain. None of the people in the book started with the supply chain background, actually, because there was no bachelor’s degree in supply chain, and not much formal education in supply chain 20, 30 years ago. But the common thread, to add to what Knut said, in the elements, the chain model, are the five clear elements of what makes a great leader in supply chain. Perhaps on top of that, or to unite on the fundamental level—and this came up in a few of the sharings in the book—is that most of them focused all their time on their careers, not on the next shiny promotion, the next shiny title, the next shiny salary, house, perks. They focused on value. What is the biggest value that I can bring to the organization that I’m part of? That was the driving force. I mean, don’t get me wrong, salary is important, but it’s not the most important thing. And there’s a subtle but huge distinction when you focus your career on where can I bring the most value?

One of the contributors was sharing with us that she was running a multibillion-dollar organization with thousands of people. And then she transitioned into a strategic role, reporting to the board, but it was a team of four people. The value that she brought through those projects propelled her to become a board member herself. What is the role and the next step that makes and adds the most value to the organization that tends to be the most impactful and helps, ultimately, in the long run your career growth the most?

Daphne Luchtenberg: Love that. I wanted to pile on there in terms of the teams. Managing a supply chain has become an increasingly complex proposition. You need a wide-ranging team, perhaps also a diverse team. What did you learn in your conversations with these executives about how they’re putting their teams together and what are winning formulas, Knut?

Knut Alicke: We made sure that the contributors were from diverse backgrounds. We cover the world, all regions. We cover men, women. We have different ethnicities. And what we clearly see, if you look through the contributors, is that there are women, but there are still more men around. So, look for diversity because it always helps. And it’s very important to watch out for a very diverse group of people for success because you can always learn from different cultures, from different backgrounds, and this only helps you to improve and helps you to manage your supply chain better.

Daphne Luchtenberg: Absolutely. I want to make sure that we hit on all the key things and learnings that you drew from this work. Let me wrap up with a final question. Knut, Radu, when you first started out, you talked about what you set out to do. Was there anything or a number of things that ultimately ended up surprising you?

Radu Palamariu: We both hoped, Knut and I, that the book would be successful, but we didn’t know for sure and it also depends on the definition of success. But we’ve had a lot of people that have bought it, that have given us feedback on it. We’ve had universities, we’ve had professors that are sharing it, the contributors themselves. So, I think perhaps a very positive surprise is the extremely good reception of the book by people who read it, and that’s probably made the journey and all the effort and all the work that we’ve done completely worthwhile. I think it makes us very fulfilled, because it’s a sign that it is useful. Also the timing was very good. It’s at a time where the supply chain has been or is at the most prominent it has ever been historically.

I’ll give a specific example of, again, something that made me extremely happy. There was one reader of the book who I asked, “What was your key takeaway?” And she said, “Well, look, I started my career as a food scientist and I ended up in supply chain by mistake, like most people. And I never realized, Radu, that I had a limiting belief around the fact that because I don’t have a formal education in supply chain, there’s only so far that I can go.” And she continued, “But by reading the book, I realized that none of the contributors actually had a supply chain formal education. And there’s actually nothing stopping me from becoming a chief supply chain officer or chief operations officer, or whatever I might decide to become, because it’s not about the education. It’s completely not.” So, that to me was such a brilliant example. Sometimes we don’t know what we don’t know and we also have these limiting beliefs that we don’t realize.

Daphne Luchtenberg: It is a continuous learning journey, right? The learning doesn’t stop when you leave university. Knut, you’ve been watching the supply chain practice, function, and role in the organization change, grow, and mature. What’s next?

Knut Alicke: What’s next is to keep the seat at the table, keep the seat at the board, and make sure you continue to innovate. All the soft facts are super, super important. Everyone in supply chain has a technical background. They all love their numbers and algorithms and three-letter acronyms. But this soft part—this is something that I see also, over the past 30 years that I have been in supply chain—is getting more and more important. And now, I feel with lockdowns and all these disruptions, supply chains accelerated so much that we need to keep the pace. We need to make sure that we now, all of us, tell the story of supply chain in an easy, simple, and clear way. And with this, basically improve also the performance of supply chains around the world.

Daphne Luchtenberg: Beautifully said. Thanks, Knut. We won’t have time to go deep into the chain model, but what I would say to our listeners is get yourself a copy of the book. It explains very beautifully, clearly, sharply the chain model and the approach to success. Also, there are just some great stories to read. Knut and Radu, thank you so much for joining us. I’m looking forward to the book growing and really reaching lots of readers around the world.

Radu Palamariu: My pleasure to have been here.

Knut Alicke: Thank you very much for having us.

Daphne Luchtenberg: Thank you for listening to McKinsey Talks Operations. Follow the show and stay here for more great operations insights coming up right now. Thank you all for your time today. You’ve been listening to McKinsey Talks Operations with me, Daphne Luchtenberg. If you like what you’ve heard, subscribe to our show on Apple Podcast, Spotify, or wherever you listen. We’ll be back with a brand-new episode in a couple of weeks.