How should you lead your procurement team during a crisis? Here’s what you need to do
“The ultimate measure of a leader is not where they stand in moments of comfort, but where they stand at times of challenge and controversy.” Martin Luther King Jr.
Martin Luther King Jr. was certainly onto something when he said that leaders are tested not in not the good times, but in the challenging times – and everyone can agree, we’re certainly experiencing the latter right now. All of us – literally every single one of us across every continent of the world – are experiencing our own unique stresses and pressures, and our leadership ability may not be our focus. But likewise, now is also the time when our teams need us most.
So how do we lead amidst so much uncertainty? We talked to Justine Figo, People and Culture author, and Naomi Lloyd, Director Procurement and External Manufacturing Partnerships Asia Pacific at Campbell Arnotts, to get an insight into how to lead your procurement team during a crisis.
With the coronavirus situation changing weekly, if not daily, helping your team understand what’s expected of them, as well as manage the expectations of executive leadership, can be a challenge. But according to Justine and Naomi, what your team really needs from you at this time is a realistic challenge, and more clarity.
Justine believes that leaders need to have the courage to challenge their team to be productive – but at the same time, understand that there might be significant barriers at the moment:
‘Right now, it’s about taking stock of what is going on for everyone at the moment, and saying: “What is the best possible challenging standard I can set for myself and for my team?”
‘Of course, you need to understand that people will be disrupted, but still have the courage to give them purpose, with compassion.’
Naomi believes while realistic challenges are important, what’s more important is that you realign your priorities with your team – and communicate your expectations clearly, with much more granular direction:
Want to hear more of Naomi and Justine’s great advice? Join our exclusive Supply Chain Crisis: Covid-19 group. We’ve gathered together the world’s foremost experts on all things supply chain, risk, business and people, and we’ll be presenting their insights and daily industry-relevant news over an 8-week content series via the group. You’ll also have the support of thousands of your procurement peers, world-wide. We’re stronger together. Join us now.
Though it may seem like a daunting task initially, writing a solid supply management plan for your organisation will really set you up for success.
This is the second part in a series. Read the first on ‘Writing a Brief for the Procurement of Goods and Services’ here.
Supply management is one of the key components of a successful business regardless of its niche or service portfolio. Once you find a suitable supplier or B2B partner with the items or services you need to remain operational at peak capacity, you will want to ensure that a supply management plan is in effect.
However, drafting such a document takes effort and
panache for small details due to legalities and mutual obligations that will
require careful listing and formatting. According to Finances Online, 57 per cent of companies
believe that adequate supply management gives them a competitive edge that
enables further business development. 62 per cent report limited visibility in
terms of being informed about their supply chain status at any given moment.
This creates an incentive for companies to create a
supply management plan which can easily be retrofitted for different
applications and allow them to stay informed about their inventory at all
times. Let’s take a look at how you can benefit from supply management plan
writing and the steps necessary for its successful drafting and approval by all
Basics and Benefits of Supply Management Plans
It’s worth noting what supply management
planning is all about before we jump into writing guidelines and plan outlining. Supply
Management Planning is a forward-thinking process that involves coordination
aimed at optimising the delivery of goods or services from a supplier to a
Its main focus is to balance the supply and demand
through inventory planning, production scheduling, and delivery organisation.
Writing a supply management plan for your business’ needs will allow you to
streamline product delivery and quicken the general turnaround time of your
contracts due to the standardisation of written documentation.
Relying on writing tools such as Grammarly (a dedicated proofreading tool), Studicus (a professional outsourcing
platform), Evernote (a cloud-based text editing
service), as well as Grab My Essay (a document writing platform) will
help you get the documents shipped to clients and contractors with impeccable
speed and quality. While these documents are not special and show up quite
frequently in companies that rely on shipping or ordering of goods and
services, their standardisation will bring about several benefits to your business, including the following:
Better stakeholder cooperation and networking
Improved supply management efficiency
Lowered risk of delays and bottlenecks
Increased profit margin and ROI
Supply Management Plan Writing Guidelines
Supply Management Plan Overview
The first thing worth noting is that a supply
management plan isn’t bound by length or complexity – it all depends on your
contract’s requirements. Supply management plans are typically assigned for a
fixed duration of time, be it several weeks or years in advance, thus allowing
two parties to manage the supply line between them. In that regard, the first
page of your plan should focus on an introductory segment that will outline the
supply management document in its entirety.
Elements such as the name of your recipient (company
name, representative name, address, etc.) as well as products or services
outline (product category, number of items, estimated value, etc.) should find
their way into the plan overview. This will allow the reader to quickly scan the
document and become acquainted with your requirements without going through
several pages of the supply management plan.
Supply Procurement Policies Outline
Every organisation, be it focused on physical goods or
cloud-based services, features certain procurement policies. It is pivotal for
your business’ reputation and longevity of your contracts to outline any
special requests or policies you have in advance for the sake of transparency.
In this segment, it’s good to include information
pertaining to your storage capacities, safety regulations and procurement
facilities you have access to. This will ensure that your recipient is aware of
the environment in which their goods will be stored and to better prepare their
shipments in case of special climate or infrastructure requirements on your
Detail the Quality Assurance Systems
No matter how good your relation with a certain
supplier may be, you should still rely on objective QA systems when it comes to
supply risk management. The plan you write and
send out as a procurement document should include a breakdown of your QA
systems, as well as any regulations it covers based on health and safety hazard
This is especially important when shipping medical
equipment, chemical compounds and other hazardous materials that can cause
severe human danger if mismanaged or stored inadequately. Most importantly,
outline your specific guidelines in case of procurement contamination or
product failure on the shipment’s arrival into your facilities to cover all
List International/State Laws
Chances are that you will
sometimes work with international suppliers
and companies that don’t share your governmental or legal jurisdiction.
When that happens, you should ensure that international and state laws
pertaining to your industry are listed on the supply management plan with
follow up links or documents.
If you work with suppliers which don’t speak your
language, you can refer to platforms such as Is Accurate, which is a translation review website, in order to
ensure that your writing is understandable due to its importance. It’s also
good practice to requisition legal documents and shipping approvals from the
supplier for your own border and customs checks and their timely processing.
Outline your Supply Selection
You should follow up on your initial product or
service procurement outline from the opening segment of the supply management
plan with a detailed breakdown of your requisition. One of the easiest ways to
do so is to create a simple table with clearly outlined product categories,
product names, procurement numbers, as well as any special requests you may
have, such as limited-time-only procurements.
This will allow your supplier to process the order
quickly and to clearly understand which items you will require for the duration
of your contract. Make sure to include a quick contact information line in this
section to allow for follow-ups in case of unclear requirements or a lack of
products on your supplier’s side.
Detail the Distribution Timeline
Lastly, supply management plans should come with a
detailed breakdown of the distribution timeline pertaining to the previously
outlined order. Do you require the items to be shipped to numerous different
retail fronts across the country – if so, in what order and quantity? Will you
handle a part or the entirety of the shipping procedure and only require the
supplier to prepare your items for pickup?
Do you require any safety or manpower assistance with
handling the supply going forward or do you have sufficient capacities to do
both? These items should be added to the distribution section alongside a
rudimentary contract timeline that will allow the supplier to quickly scan
through their obligations toward your business.
Not as Daunting as it Seems
Writing a supply management plan for your company may seem like a daunting task at first. However, it is a pivotal step toward creating a reliable and professional supply management network.
Find ways to implement the above-discussed supply management plan guidelines in your own business practice and contractual obligations. Their inclusion in your supply documentation will help your business’ ongoing growth and stability on the market going forward.
We explore six ways that can guarantee you that dream head of supply chain management job…
Firstly, take time to find out what the job is really about. At its simplest level in manufacturing, for example, it means leading the sourcing and procurement of direct and indirect materials from suppliers, production, warehousing, transport and the distribution to the customer and/or end consumer.
A simple supply chain
Secondly, jobs may not even have similar titles: it could be Executive Vice President of Global Supply Chain, Supply Chain Director or just Head of Supply Chain. The job content differs widely across industries so no two jobs at this level are the same. There is no one definitive job description.
Whatever the title, the Head of Supply Chain is responsible for integrating and optimising all the processes that are involved in every stage of getting a product or service to a customer. If your desired role is in an industry such as agriculture, healthcare, or I.T and telecommunications, there are other considerations including security, waste, safety, managing returns and many other different risks.
In reality, it has become much more complex. It may rather look like this.
Let’s look at the 6 ways that can get you that dream job.
There is no substitute for experience
Prospective or current supply chain managers that aspire to reach the top job in supply chain should acquire in-depth working experience in at least one of the functional areas within supply chain. Heads of Supply Chain, in the list of the top 25 leading global supply chains as identified by Gartner in 2019, have all got extensive and relevant work experience, usually in their industry sector.
In fast-moving-consumer-goods (FMCG), global leaders also need expertise in distribution technologies, emerging markets and sustainability. For example, Sandra MacQuillan, the Executive Vice President, Integrated Supply Chain at Mondelez International, has “a wealth of international expertise in sustainable supply chain and technology strategy, with vast experience in packaged goods at global companies where she has built world-class supply chain capabilities,” according to the CEO.
Get an educational qualification
The competition for the top jobs is tough, without a recognised qualification it is almost impossible to get hired. An exception may be where the candidate has a spectacular skill in a tight niche where there are no other suitable applicants, but this is rare.
The most common route into supply chain management is to take a foundation business, finance or engineering degree, and then an advanced diploma or certification in an area such as logistics or procurement within supply chain management.
Demonstrate the required technical skills
As a leader, it may not be necessary to be an
expert on all the technical skills that exist in your teams, but some level of proficiency
in most of these will provide you with a certain level of respect.
Knowledge of the raw materials, manufacturing processes and distribution methods in your business
An understanding of business and management principles and strategic planning
Well-developed analytical skills and attention to detail
Knowledge of economic and accounting principles, ERP/MRP systems, forecasting, and budgeting
Show your ability to lead others and drive change
Building relationships and influencing others
are fundamental to the role.
Change management is ultimately about people
and your capability to guide them in a particular direction. Some of the elements that lead to success in
leading a team are:
An open and participative style when collaborating with influential stakeholders and their teams
Well-developed verbal and written communication skills and the sense to know when and how to use which channel
Ability to work in a fast-paced dynamic environment while keeping calm under pressure
Solving problems based on available information
Dealing with ambiguity while providing positive outcomes and minimising risks.
A leader will spend a fair portion of their time on employee competency development, building capacity and understanding what people need to perform well.
Keep up with the program!
Because the role is essentially process driven you should be comfortable when implementing new technological solutions. Digital technologies are inserting themselves all over the supply chain from data analytics and e-sourcing through to automated picking and drone deliveries.
The implementation of digital solutions is redefining supply chain operations at leading companies such as BASF, Cisco, Intel, Johnson & Johnson, BMW and many others. As Head of Supply Chain you may not need to be head geek, but you will need to understand the basics of the various applications of each type of technology and be alert to trends.
Have a global view with a local focus
The head of supply chain often has global responsibilities that entail maintaining supplier relationships across continents and cultures. Understanding these complexities is essential in supply chain planning and its execution.
It is becoming increasingly important for supply chain leaders to have had global business exposure, either from working in virtual teams or preferably having completed international assignments.
David Cutter, as President, Global Supply & Procurement, for Diageo, a major supplier of alcohol beverages, is responsible for a world-class supply chain delivering their brands to over 180 markets around the world from over 100 production facilities located in some 30+ countries.
Leading firms are looking for those people with process-driven experience, often in similar size companies, attained from outside their home country.
There is no one accepted preferred career path or basket of skills that you need to become the head of a supply chain. However, you will need to be able to apply modern methodologies and solutions to a wide range of responsibilities across the entire supply chain.
If suppliers are treated as part of the team, rather than punching bags, it can actually help to accelerate procurement’s ability to add value.
When you are hiring employees, do you focus just on the salary negotiations? With the only goal being to get the lowest cost talent? No, because we know the value we are going to receive from that individual is through many years of ideas, quality work and the leadership they provide to others.
The price negotiation is a point in time, while the relationship is the multiplier.
The same holds true with suppliers.
As you look across our supply base, procurement has a range of suppliers from “high potential” to “needs improvement”. As we do with top performing teams, procurement has the opportunity to cultivate high potential suppliers through exposure, stretch assignments, and trust.
There is also an opportunity to manage up or out the “needs improvement” suppliers by developing their capabilities and giving them the opportunity to improve. Through this approach, procurement now has the ability to discuss with their new-found talent how to creatively reduce total cost of ownership, to solve problems, and to provide innovative solutions.
When trusted are offered development opportunities, suppliers will go above and beyond for the customer. They assign their best people on the account. They look for ways to improve the relationship, reduce costs, and proactively call out risks. And, in times of short supply, will serve their preferred customer of choice first.
Through one change in perspective, one change in a relationship, procurement achieves lower TCO, lower risk, more innovation, and a reliable supply chain – this is the key to delivering value.
The Next Big Idea in Procurement
Procurement is on the brink of significant change, as are many more areas of our lives. There will be many big ideas that brilliant procurement professionals implement into their organisations to support the advancements in technology, the new expectations of talent, and techniques to add value well beyond cost. These are exciting times to lead, inspire, and create within procurement.
Each year a small group of influential procurement thought leaders gather in Chicago for the Procurious Big Ideas Summit. Participants are inspired and take back many big ideas for their personal growth as well for their organisations.
While technology advancements often receive a lot of focus, perhaps the biggest shift within procurement is the expectation to move beyond cost to becoming value providers. Procurement is being challenged to find new ways to reduce risk, increase sustainability, to help solve complex business problems, to increase revenue, to generate new innovations, to become an internal consultant to their stakeholders to obtain the best out of every investment.
This expectation is becoming more pronounced and will allow procurement to analyse how they measure success, the skills their talent need, and even what technology they might need to deploy.
Those organisations who make this change exceptionally well will also realise that their suppliers offer a limitless capability to accelerate procurements’ ability to add value. When suppliers are treated as an extension of the supply chain, as part of the team, the relationship with suppliers also moves beyond cost. In fact, one could argue that becoming a customer of choice to suppliers is the key to unleashing value, reducing risk, increasing innovation, and achieving agility within the supply chain.
Leading the Supply Base
An idea is just an idea until it is implemented, so how do procurement organisations get started with this change? Below are some low investment ways to start this journey.
Toss out outdated segmentations – Start looking at the supply base like one would talent. Understand high potential suppliers, remain in role, and need improvement suppliers. This does not need to be complicated nor does this need to be scientific. Without putting much effort into this, the top performers and the lowest performers could be listed. Start there.
Offer development programmes – As one would with their internal talent, offer programmes that will help suppliers operate with excellence. These programmes can even be supplier funded, but it shows suppliers that procurement cares about their success. It develops a relationship where it is understood that procurement is only as good as their suppliers. When suppliers perform at their best, procurement, suppliers, and the communities around them all benefit.
Think differently about procurement’s role – When procurement starts thinking about their role as a hiring manager to suppliers, it creates a change within every interaction. Set the expectation that a procurement manager’s role is to lead their team of suppliers to success. This will have downstream impacts around measurements and skills needed but starting here will start the cultural change needed for success.
Procurement is on the move. These are indeed exciting times to renew the spirit of what procurement is all about. Let’s not be overwhelmed and paralysed by the amount of opportunity. The best thing to do now is to start. Start taking the small steps that will create big change and the next big ideas.
As the Big Ideas Summit Chicago facilitator, Amanda Prochaska will be harnessing the biggest and brightest ideas presented. You don’t need to be “in the room where it happens” – you can register as a digital delegate and get up-skilled and uplifted from the comfort of your own desk. Register now by clicking here.
Traditionally, when organisations have discussed supply chain visibility, the focus has very much been on the downstream. Why? Because common thinking is that the customer is king. And, as downstream visibility focuses on the customer, it is the first, and sometimes only, priority.
This has in turn given credence to the biggest myth about supply chain visibility, which is that downstream visibility is more important than upstream visibility. It’s high time this myth was busted, because this belief has a very narrow focus, and is not truly reflective of modern supply chain thinking. The truth is that upstream visibility is just as important as downstream visibility. Why? Because a lack of upstream visibility is just as likely to impact your customer.
Supply Chain Visibility – Upstream vs. Downstream
Before we get any further, let’s make sure to clarify some basic definitions.
Downstream visibility is a clear understanding of exactly how your products are moving down to your customer. Basically, it covers all the processes and actions that are involved in getting your finished product from your warehouse into the hands of the end user.
Upstream visibility, on the other hand, is a clear understanding of exactly how all the parts required to make your product are moving down through to your organisation. From a supply chain perspective, this covers all the processes and actions involved in getting what you need to create the finished product.
You might also occasionally hear the term “midstream visibility” to refer to what’s happening in production. From a supply chain perspective, these processes are often amalgamated into the category of downstream visibility.
Together, upstream visibility and downstream visibility combine to create end-to-end supply chain visibility.
Too Much Downstream Focus?
Let’s say, for example, that your company manufactures cameras. You need to make sure that you have full visibility of what’s happening when a camera is moving from your warehouse to your customer. Right from final testing right through to delivery to the store.
There are several processes that are available to organisations in order to track and improve downstream visibility. Depending on the complexity of the product in question, this can range from optimization of transportation and warehouse logistics and unifying ERP systems, to creating digital twins of their production, and more.
If your organisation is already looking at these kinds of projects, well done. But if downstream visibility is your only focus, you’re only doing half the job.
Without upstream visibility, you run the risk of not getting the parts you need to build your product. How are you going to get your cameras into the hands of your customers if you can’t build them in the first place? This is why upstream visibility is just as crucial as downstream visibility.
Upstream – Just around the Riverbend
So how do you get upstream visibility? A supply chain risk management programme is a crucial first step. If you’re not monitoring your suppliers (not to mention your supply paths, your own sites and your second and third tier suppliers too) for events that are going to impact them, then you have virtually no upstream visibility.
Here’s where you should start:
• In procurement: Your procurement department owns the relationship with suppliers. The department needs to have access to data allowing for all the necessary insight into any type of risk affecting your supply chain, both upstream and downstream.
• In your supplier sub-tiers: According to the Business Continuity Institute, most supply chain disruptions occur below tier one, where visibility can be even harder. You need visibility into not just your tier-one suppliers, but of all your sub-tiers. This is where good tier-one supplier relationships are key.
• With your major logistics hubs: What major logistics hubs are your supplies and your products going through? Do any of these areas represent bottlenecks? And are you aware of events there that might impact your supply paths? If not, you’re not going to be able to effectively mitigate threats.
• Your own warehouses and distribution centres: You need to monitor your own sites as much as you need to monitor your suppliers. Creating good communication lines and relationships with internal stakeholders is going to help here. The people on the ground will know best if issues are on the horizon, and then you can collectively work to implement actions and processes to prevent, or at least mitigate, them.
The supply chain visibility conversation is an important one to have in any organisation that has a supply chain. But if you’re focused on just downstream visibility, you’re missing half of the equation. And this could ultimately be the difference between success and failure.
Myth = Busted!
Find out more about upstream and downstream visibility, as well as Supply Chain Risk Management software, with Big Ideas Summit sponsor, riskmethods, here.
Supply chain professionals are no doubt an important link in any supply chain but it is but one link in the end-to-end process.
Working in any supply chain management role can be all-consuming as well as challenging -but we can’t work in a vacuum. Supply chain professionals are no doubt an important link in any supply chain but it is but one link in the end-to-end process.
In the simplest type of supply chains, items and services are sourced from suppliers and converted into products and delivered to the customer or end-user. During this process, both products and information move forward through the chain. In the same way, products and related information move back up the chain.
If only it were that
Any supply chain involves interactions
between people, entities, information, and physical resources that combine,
hopefully harmoniously, to sustain a company’s competitiveness. It also has an objective to reduce overall
costs and speed up the production and distribution cycle. As supply chain professionals know very well, if a supplier is
unable to supply on time, and within the stipulated budget, business is bound
to suffer losses and gain a negative reputation.
Q. What is the main goal of an efficient supply
A. To get the customers what they want, when
they want it, at least cost.
If a company fails to focus fully on the consumer or end-user its ability to surviveis severely at risk.
How to improve your supply chain
Sourcing is an early activity in the supply chain but demand planning
comes first. By sharing projected requirements with your suppliers you can
assist them to manage their own sourcing process and their inventory. Any
forecasts that you supply them may not be cast in stone but they help to take
the guesswork out of your order process. Your Tier 2 suppliers, i.e. your supplier’s
suppliers, are the ones that provide the items and services needed to fulfil
your orders. What products do they
supply, what are their costs and what are their lead times?
The automotive industry is
particularly good at this. Modern
vehicles are made up of more than 30 000 component parts. Most leading vehicle
manufacturers have a close grip on their Tier 2 suppliers: the parts suppliers
for engines and equipment and computer software and hardware needed to make
Technology in the supply chain
The use, speed, and capabilities of technology are defining the
trends in modern supply chains. The cost
of these technologies is starting to decrease making automation more affordable
for mid-size companies.
Demanding and techno-savvy
customers are effectively re-shaping supply chains in the e-commerce
world. Customers expect to receive their
order within a day or two whether it’s food, fashion or new bed linen. They can choose not only what to buy, but who
to buy it from and how to buy it.
E-commerce is creating new
challenges throughout the supply chain from demand planning through procurement
to warehousing, distribution and logistics.
Whether a customer is shopping in-store,
on their laptop or mobile device, they expect their experience to remain the
same, wherever they are in the world. Retail
companies that can adapt their supply chain operations to the new era of e-commerce
will have the best chance of success.
Global supply chains
Global supply chains are becoming very fragmented and dispersed and so require lots of resources and technologies to function well. Complexsupply chains such as those in aerospace, hi-tech, chemicals and pharmaceuticals are becoming more difficult to design and manage. According to Gartner, some of the most efficient global supply chains are in fast-moving-consumer-goods (FMCG) companies such as Unilever, Nestle, Nike and Inditex (Zara). These companies have close relationships with their suppliers, even owning some of them, which is contributing to their successes.
Johnson & Johnson is a
confirmed leader in the healthcare industry due to its on-going focus on its
supply chain capabilities such as end-to-end visibility. The company prides itself on being a
customer-centric organization. It is an
early adopter of new technologies such as 3D printing which it is using to
enhance its manufacturing and distributions operations and unlock new
opportunities. Its global team has
played a large part in streamlining the sourcing processes for both ingredients
and packaging. They realized that
their supply chain was not as nimble and agile as it could be, and they weren’t
leveraging their global scale in sourcing enough.
The professional association for supply chain management and the leading provider of research and education (APICS) provides a supply chain operations reference model (SCOR) on which you can assess your current abilities. It identifies steps in four measures: process, performance, practices and people.
APICS proposes that to improve your supply chain you need to:
Analyse your supply chain business processes and their dependencies with the SCOR framework in mind
Document and design your supply chain strategy, processes, and architectures to increase the speed of system implementations
Design internal business processes while taking organizational learning goals into consideration
Simulate the process to identify bottlenecks, gaps and process enhancements to improve supply chain performance
Underlying any successful supply chain is a strong organizational structure, up-to-date technology and strong leadership. An organisation’s supply chain is a significant source of competitive advantage and business leaders are embracing it as a strategic capability.
Adaptability and agility in the supply chain are crucial in responding to fluctuations in demand and shorter product cycles.
Today’s global marketplace is volatile and fast-moving. Adaptability and agility in the supply chain are crucial in responding to fluctuations in demand and shorter product cycles. Agility within this unpredictable market requires that your supply chain is responsive and can deal with any sudden variations. According to most experts, there are three main success factors in effective and agile supply chains: your supplier relationships, your people, and the effective use of the supporting technology.
The FMCG sector
Organisations involved in the fast-moving consumer goods sector (FMCG) need to be able to adapt to unanticipated external shifts in customer demand. Any company that has a constant stream of new, innovative products and services, and is selling direct to the consumer (B2C) in the e-commerce world, needs to be doubly flexible.
Fast fashion poses real challenges. If you
launch 10 000 new designs per year and you have more than 1 700
suppliers across 50 countries, you need to be both agile and quick. Inditex, one of the largest fashion retailers
in the world and the holding company of the Zara
brand,does this successfully.
What contributes to its success is:
Market sensitivity. Teams of retail and commercial specialists
plan their products based on sales data collected on the fashion trends of
target customers around the world.
Postponement of production. Less than half their garments are sourced as
finished products from low-cost producers. At least half are manufactured at
short notice, mostly in Europe, depending on demand.
Manufacturing activities including labour intensive finishing operations
are accomplished by a network of 300 specially trained subcontractors.
Zara has gained
accolades for its ability to swiftly implement decisions and deliver new
clothes to stores faster than its competitors.
It has a supply chain that is
not only agile and flexible but
incorporates many lean characteristics into
its processes, especially when overseeing the operations of its
subcontractors. In a lean approach, anything
in the process that doesn’t add value for customers is eliminated. Lean
supply chain management is essentially about lowering the cost base and
reducing waste as much as possible.
In the manufacturing sector, being agile
means that your supply chain must be responsive enough to deal with late
deliveries and non-compliant suppliers.
The need to move raw materials, components and finished products across
borders and over longer distances adds complexity. This has resulted in longer planning time and
increased levels of inventory. Improving
speed in logistics and minimising disruptions are important to gain competitive
advantage and to reduce costs.
agile supply chain solutions are often offered as an either-or option but many
large global companies such as Unilever and Kimberly Clark are now embracing
both approaches in their diverse operations. Having a hybrid supply chain strategy by using lean and agile
approaches in combination is becoming commonplace.
companies need to react quickly
and information technology company Nokiacommitted to achieving agility in its supply chain when it decided to move
its manufacturing away from its home base in Finland. The company aims to refocus lower-value activities closer to
component sources, thereby increasing supply chain responsiveness and
streamlined logistics. “We are aligning our manufacturing strategy to
increase competitiveness,” said Nokia spokesperson Mona Kokkonen. “We
need to optimize our manufacturing operations so we can collaborate more
closely with suppliers and be more responsive to customers’ needs.”
An I.T. systems company such as Cisco hasa highly diverse and extensive supply
chain that spans the globe. Cisco has increased its agility, resilience and
ability to scale by implementing new business models, a single ERP instance,
standardization and automation throughout its supply chain.
The three success factors in building an agile supply chain
1.Focus on effective supplier contracts
If a key supplier fails it is necessary to have an alternative plan to avoid delivery crises and disappointing customers. In this situation, and especially if there is a sole-supply agreement, contingency plans must be put in place. Multiple supplier relationships for the same goods or services are sometimes necessary to reduce risk, but this comes at a cost.
2. Build an agile team
The most effective people are those who are alert to external changes and market trends that may affect the business. They need to have a sense of urgency as well as being flexible. Exchanging information with suppliers, listening to customers and being aware of impending disruptions are all activities that, when acted upon, will set you ahead of the competition.
3. Apply the right technology
in agile supply chains connect their supply chain partners on a shared
technology platform, often cloud-based, so that they all have access to the
same data in the same timeframe. Procter and Gamble (P&G) and Wal-Mart
both speed up decision-making by analysing data on order status, inventory, shipments, documents, and payments. The resulting information provides insights
into future demand and facilitates forecasting.
Supply chain agility delivers results when a company can quickly detect changes, opportunities and threats in the external environment AND act on this information speedily. This responsiveness depends on the ease of accessibility of usable real-time data and the electronic means by which to share it.
Competition is fierce so organisations need to be alert and responsive to turbulent changes in the external environment. As industrial and retail supply chains become more complex agility will become a real factor in a company’s survival. The use of appropriate technology will be a key success factor but only with the active involvement and support of both employees and suppliers.
If you’d like to read additional related content or get involved with thought provoking discussions check out the Supply Chain Pros group – a one stop shop for all your supply chain needs.
In order to succeed, a business must be able to deliver more value to customers than its competitors. How do you make supply chain your organisation’s competitive advantage?
In order to succeed, a business must be able to deliver more value to customers than its competitors. It is becoming more difficult to find, develop and sustain these opportunities in the rapidly evolving business landscape. The free movement of people across borders, developments in technology and real-time communications add complexity to global supply chain management. World trade is highly competitive, constantly changing and volatile.
As a result, supply chains today need to become more strategic.
They are multi-layered, integrated manufacturing and distribution systems that,
to work efficiently, need to be optimised on a continuous basis.
Automation of manufacturing using robotics
and self-driving equipment in factories is now commonplace. Software solutions and telematics improve
information sharing, processing, and analysis of data which is converted into
usable information to inform policy and operational decisions. However, it’s important to ensure that technology investments are
based upon business needs – and not just the newest tech available.
Areas of competitive advantage
Many global businesses now compete on the basis of their supply
chain capabilities rather than only on their product lines. Leaders with efficient supply chains such as Wal-Mart,
Proctor and Gamble, Tata Motors, and Unilever focus on rationalizing each activity
in their supply chains. They constantly monitor costs, demand patterns, lead
limes and administrative processes to achieve competitive advantage while
applying relevant technologies.
Cost of goods sold (COGS)
Reducing the cost of goods sold can be
achieved through a more focused approach to procurement including price
negotiation and strategic sourcing.
Inventory, distribution and freight costs are specific target areas where
the potential to save can be found.
Walmart runs a retail compliance program that defines when, how and
where their supplier must deliver. This helps the company reduce its costs by adjusting
its storage and distribution needs in line with customer demand. This means lower prices for the customer.
Freight costs can be managed down by outsourcing
delivery logistics where there are potential economies of scale. Telematics is used extensively by
third-party-logistics providers (3PLs) to provide visibility into the movement
of goods, both in the warehouse and in transit, and ensure their safety.
Shorter lead times
There are many delays experienced in supply chains. Some of these are because of slow processing
of orders due to cash flow challenges, batching of orders, organizing shipping
and freight and slow communication processes.
One of the main methods by which a business can drive increased
value is by decreasing these lead times. Both business- and consumer-facing
companies are experiencing increased demand for faster shipments. Speedy
deliveries can have a significant impact on sales. Amazon Prime customers will
often pay more for guaranteed next day delivery.
Flexible demand management
Technology now provides us with forecasts of future customer demand using artificial intelligence tools.Predictive analytics are extremely useful in determining the optimum seasonal stockholdings and allows us to prepare suppliers for increases in demand.
A flexible supply chain can
quickly adjust to fluctuations in supply and demand keeping inventory down when
interest is buying is low but being agile enough to respond to spikes in
Streamlined and slick
documentation and administrative processes in the supply chain are a great
competitive advantage. Reducing re-work
and duplication, increasing visibility and smoothing communication channels are
real advantages. Supply contracts and
service level agreements are often neglected areas that create hold-ups and
expensive errors. Some progressive
organizations are using blockchain technology for maximum visibility and security.
Insource or outsource?
The decision of whether to outsource manufacturing and/or services
depends on in-house capabilities. Ideally, areas where competency or capacity are
lacking are prime candidates for outsourcing.
Some larger organizations have the capital and resources to manufacture
their own products, others will typically outsource their manufacturing to
white-label providers. Building
internal warehousing, logistics and distribution facilities is a major
undertaking and capital intensive. Successful outsourcing contracts in this
category have robust service level agreements and detailed contingency
Supplier relationship management (SRM)
SRM is a huge topic and ranges from simple tasks such as paying
suppliers on time to developing long-term collaborative partnerships with
suppliers for mutual benefit and to promote innovation. Leading companies in SRM such as Nestle,
Toyota and Coca-Cola treat key suppliers like collaborators to get them
integrated and prepared to take extra steps to ensure quality and speed.
A sustainable supply chain makes long term business sense. Consumer awareness of environmental and
social issues is growing around the world. IKEA is one of many companies that
work with suppliers on a variety of challenges, from energy efficiency to
sourcing materials responsibly. Ignoring
this trend may create reputational damage that takes years to restore.
Effectively making use of rapidly advancing technology could be the key to leveraging your supply chain to get ahead of the competition. Difficulties in supply chain management occur due to evolving complexities and interdependencies. Companies that work on achieving continuous improvement through consistently and persistently working on strengthening linkages will drive competitive advantage.
If you’d like to read additional related content or get involved with thought provoking discussions check out the Supply Chain Pros group – a one stop shop for all your supply chain needs.
Supplier failure and collapse on a massive scale – it’ll never happen to you, right? How do you really think you’re doing to help protect your organisation from the fallout?
London, July 2017. Despite an “encouraging start to the year”, the warnings are coming thick and fast on Carillion. By November 2017, the company has issued its third profit warning in five months and things are looking bleak. And in mid-January 2018, despite the deferral of two financial covenants, the company collapses into liquidation.
In the days that follow, the
investigations and enquiries begin. How did a company so integral to so many high
value and high profile UK Government projects get into such trouble? Where and
how did billions of pounds worth of contracts become over £1.5 billion worth of debt?
And, perhaps most importantly of
all, how did numerous civil servants, Government contract specialists and
expert financial consultants not see it coming?
2018 – The Year of Demises
The demise of a construction giant
will go on to leave an enormous hole for the UK Government to fill in order to
continue providing key services across the country such as school
meals and hospital and prison cleaning, and ensuring that the 19,500 employees
delivering public services are able to be paid.
The final cost to the UK taxpayer
is estimated to be more than £148 million, but the knock-on effects will be felt for some time to
come. Late last year it was reported that there had been a 20 per cent rise in insolvencies in the
construction industry as sub-contractors and small businesses struggled
following Carillion’s collapse.
But 2018 wasn’t finished there. Fast-forward
a little more than ten months and the unthinkable happened again. Twice. First,
one of Carillion’s key competitors, Interserve, issued a warning on the state of its
increasing debt predictions to between £625 million and £675 million in 2018.
Then just before Christmas, Healthcare Environmental Services (HES), a key provider in the
disposal of medical and clinical waste, closed its doors with the loss of
nearly 200 jobs and leaving the NHS and Local Authorities scrambling to ensure
that services could be delivered by another organisation.
Where did it go wrong?
If your procurement department was
anything like mine, then all three situations dominated conversations for weeks
after these public announcements. Beyond the usual, “well, I’m glad that wasn’t
us”, and the frantic checking to understand exposure, questions were starting
to be asked.
Give a procurement professional
long enough and they’ll be able to pick through the wreckage of a broken
contract and understand roughly where things went wrong. And frequently, lines
are drawn back to the contract or contracts put in place and the overall
management of this.
But in these cases, and
particularly in the case of Carillion, there was a general disbelief that
something like this could have been allowed to happen. After all, how was the
overall performance of the supplier missed? And just why, even though it was
clear that there were serious financial difficulties, was Carillion awarded more contracts to help bolster its financial position?
Like me, maybe you thought, “I’d
like to have seen the procurement process for that one.” Or maybe you wouldn’t…
And probably just as likely, even
though you tell yourself that it would never happen on one of your contracts,
you go back to check. You know, just to be 100 per cent sure that all your
checks and balances are in place.
Checks and Balances
What has subsequently been reported is that Carillion, in conjunction
with its appointed internal auditor Deloitte, had been, “”unable or unwilling”
to identify failings in financial controls, or “too readily ignored them””.
This is where there may be some explanation or sympathy for the procurement
In the public sector, as in the
private sector, procurement will work in tandem with other departments in its
organisation to ensure the robustness of the contract and the suitability of
the supplier. As part of public tendering exercises, there are a two stages in
which this can happen for Economic and Financial standing assessment.
The first comes as part of the
European Single Procurement Document (ESPD). Buyers will outline the minimum
financial requirements for the contract, usually linked to contract value,
complexity, volume and length, as part of their Contract Notice and ESPD. This
can be, for example, a positive outcome for pre-tax profits for the previous 3
years, and/or certain outcomes linked to financial accounting ratios.
Suppliers will confirm that they
comply with this and at this stage may provide evidence for this. This is
backed up by the second stage for financial checks, the Request for
Documentation (RfD). The RfD allows for this evidence to be requested by
procurement of successful suppliers as a final check before contract award.
These checks then provide the comfort that the supplier has a firm financial
footing to undertake the contract.
The key issue here, and in the
case of Carillion, is that the assessments are only as good as the information
that is filed and provided.
Procurement’s Role and Remit
As with many of the challenges in
the public sector, we’re left asking the question of what is procurement’s role
and remit in this situation. There needs to be an understanding that
procurement can only do so much. However, what they do have the responsibility
to do needs to be done correctly.
In the Carillion example,
procurement may asked all the right questions, but if the evidence provided
isn’t accurate, it still wouldn’t have made any difference. Procurement can put
in the ground work up front, before they even get to the stage of requesting
responses to ESPDs and the like.
When looking at your next
contracts, make sure that you have the following:
An accurate specification – this
will fully outline the scope of requirements and the supplier’s
Estimated project volumes – based
on historical usage data where applicable, otherwise linked to the
Market analysis – who are the
suppliers that are likely to bid for this work? What is the overall market
spend like with the top suppliers?; and
Understanding of current contracts
– which suppliers have won the most business from you recently? Is anyone
looking like they may have capacity issues?
Working with key stakeholders
across the organisation is critical. Not only will this improve the accuracy of
the data that is issued with the contract, but it will also mean that there’s
an overall understanding of who is actually best placed to cope with the new
package of work. Particularly if one supplier seems like they are
Then it’s back to a footing of
openness and honesty with suppliers so that any potential issues with financial
performance are flagged up well ahead of time. Build that relationship with
your suppliers and you may help to head off a situation where it’s your
contract on the front page of the newspaper next time.
I’d love to hear your thoughts on this article and the series of
articles on the challenges facing public sector procurement in 2019. Leave your
comments below, or get in touch directly, I’m always happy to chat!
Becoming aware of blockchain’s weak spots is an important first step towards taking full advantage of what the technology really has to offer.
Is Blockchain coming of age in 2019?
Judging by the first half of 2019, it seems that the blockchain hype is finally deflating and there is an overall consensus that it will not save the world (at least not this year…). The growing trend towards pragmatism, which is now beginning to temper people’s expectations, is the best thing that could happen to blockchain. . . A more down-to-earth approach is welcome because, like any technology, blockchain is not perfect, nor the solution to all problems. It is important to be realistic about its potential and limitations.
In particular, blockchain has limitations that threaten to jeopardise many recent high-profile initiatives to increase traceability and visibility in the supply chain. Despite seeming like the ideal technology to address growing concerns about these aspects, most (if not all) blockchain implementations have an Achilles’ heel: the initial digitisation of data to bridge between the physical and the digital world.
aware of these weak spots is an important first step towards taking full
advantage of what blockchain really has to offer. Blockchain’s real value
“If you talk to supply chain experts, their three primary areas of pain are visibility, process optimisation, and demand management. Blockchain provides a system of trusted records that addresses all three.” Brigid McDermott, vice president, Blockchain Business Development & Ecosystem, at IBM (source Blockchain and Supply Chain Finance: the missing link!, Finextra)
valuable characteristic of blockchain is that it serves as a backbone for
From an integration perspective: Blockchain-based supply
chains allow three different supply chains (physical/informational/financial)
to converge into a single digital one.
“Blockchain has the potential to converge the two main
ecosystems involved in trade finance — the financial ecosystem, which includes
banks and suppliers, and the supply chain ecosystem. At the same time, the
technology can provide a unified platform for multiple stakeholders,
potentially avoiding difficulties that slow down operations” Béatrice Collot, Head of Global Trade and Receivable Finance
at HSBC quoted in Blockchain’s Main Strengths Are Transparency and
Instantaneity on Cointelegraph
While these features will certainly contribute to improved supply chain transparency, there is still a critical challenge that needs to be addressed: the digitisation of data at the beginning of the process. This crucial step constitutes a fundamental weakness of many current digital supply chains.
Achilles’ Heel: Mind the Gap!
Traceability and transparency along the supply chain, from raw materials to final products, is a growing concern for organisations. New regulations from governments & institutions, customer expectations, and company’s self-interest in issues like sustainability, incident management, and efficiency, have created the need for an infrastructure to track, trace, and store data in the supply chain.
glance, blockchain may seems like the ideal solution. It creates a permanent
record of all transactions at all levels of the supply chain, guaranteeing full
traceability and establishing trust. So, many companies started to provide
blockchain-based means of collecting information in their supply chain with the
goal of making it accessible to customers as irrefutable proof about the origin
of products and components.
story goes like this: “Thanks to our application, you can take a picture of the
QR-code on your product and view the entire supply chain of all
components/elements that contributed to the final product you have in your
sounds great in theory, but there is an important caveat:
“At the interface between
the offline world and its digital representation, the usefulness of the
technology still critically depends on trusted intermediaries to effectively
bridge the “last mile” between a digital record and a physical individual,
business, device, or event. […] And if humans […] manipulate the data when it
is entered, in a system where records are believed ex-post as having integrity,
this can have serious negative consequences.” What
Blockchain Can’t Do, Harvard Business Review
The use of blockchain technology gives people a false sense of security because it relies on cryptography and various mechanisms to ensure that information stored on it can be trusted (identity, immutable record, etc.). But, as illustrated above, the digitization step when the information is recorded (a block added) is not protected by this same “guarantee.”. So, it is not because blockchain technology supports and enables a better transparency that it should be blindly trusted by customers or by procurement or supply chain pros.
It is undeniable that blockchain is a form of digital trust. Much of the hype surrounding it has been driven by a broader trend in society: the erosion of trust in people and institutions. Blockchain is playing a major role in shifting that trust to technology and software. This explains, in part, why compliance and transparency are the use cases that are priorities for procurement and supply chain pros.
it is important to remember that blockchain’s reputation as “trustworthy” can
be misleading, especially in the case of supply chain transparency. Manual
operations are still part of the initial process of digitizing the data.
Therefore, trusting data stored in the blockchain also means trusting that
initial step that relies on human activities.
reason, building trust in business partners will continue to be a vital part of
the procurement function’s role in the future. Introducing digital initiatives
will not entirely remove the human element of the job, and Procurement
practitioners will need to continue working on establishing trust and nurturing
it with suppliers and stakeholders.
a technology perspective, there are already
initiatives to close the gap between physical and digital as much as
possible. Interestingly, they focus on physical objects (crypto-hardware) and
not just on software. These objects are the child of RFID, connected devices,
and blockchain, with the intent to create a convergence between the Internet of
Things and the Internet of Value (blockchain) to create the Value Internet of
addition to the human and technological answers that will both contribute to
creating a truly integrated supply chain (physical + informational +
financial), a third component will remain essential: critical thinking.
Trust and verify!
But wait, the blockchain action doesn’t stop here! Join us on October 15 with blockchain experts Shari Diaz, Innovation Strategy and Operations Program Director, IBM Watson Supply Chain and Professor Olinga Ta’eed, Director of the Centre for Citizenship, Enterprise and Governance in this webinar brought to you by IBM and Procurious. Click here to register for Blockchain: Supply Chain’s 21st Century Truthsayer.