Tag Archives: supply chain management

6 Sure-Fire Ways To Become A Head Of Supply Chain

We explore six ways that can guarantee you that dream head of supply chain management job…

head of supply chain
By fizkes/ Shutterstock

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. 

Want to get your wheels turning towards a supply chain career one could only dream of? Then don’t miss our upcoming Career Boot Camp with IBM – a free 5-part podcast series with some of the very best of the best. Check it out here: https://www.procurious.com/career-boot-camp-2019

Suppliers: Partners not Punching Bags

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.

Photo by i yunmai on Unsplash

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.

The Biggest Myth about Supply Chain Visibility

supply chain visibility
Photo by pascal allegre on Unsplash

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.

Want to get your wheels turning towards a supply chain career one could only dream of? Then don’t miss our upcoming Career Boot Camp with IBM – a free 5-part podcast series with some of the very best of the best. Check it out here: https://www.procurious.com/career-boot-camp-2019

Where Does Your Supply Chain Begin and End?

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.

By releon8211/ Shutterstock

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 easy. 

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 chain?

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 them run.

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. Complex supply 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.    

The SCOR Model

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. 

Want to get your wheels turning towards a supply chain career one could only dream of? Then don’t miss our upcoming Career Boot Camp with IBM – a free 5-part podcast series with some of the very best of the best. Check it out here: https://www.procurious.com/career-boot-camp-2019

3 Success Factors In Building An Agile Supply Chain

Adaptability and agility in the supply chain are crucial in responding to fluctuations in demand and shorter product cycles.

By Nadezhda V. Kulagina/ Shutterstock

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. 
  • Flexibility.  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.   

The manufacturing sector  

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.  

Lean and 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.

Technology companies need to react quickly

 Communications 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

Leaders 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.

Making 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. How do you make supply chain your organisation’s competitive advantage?

By ShutterStockStudio/ Shutterstock

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.

Technology

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 demand.

Documentation and administration

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 plans. 

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.

Sustainability

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.  

Conclusion

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 – Are You as Protected as You Think?

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?

By Sergey Novikov/ Shutterstock

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 finances and 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 process.

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 responsibilities;
  • Estimated project volumes – based on historical usage data where applicable, otherwise linked to the specification requirements;
  • 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 overstretching themselves.

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!

Transparency In Supply Chains And Blockchain: What Is The Most Common Trap?

Becoming aware of blockchain’s weak spots is an important first step towards taking full advantage of what the technology really has to offer.


By Billion Photos / Shutterstock

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.

Becoming 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 proposition

There are many potential and valuable use cases for blockchain, especially in Procurement and Supply Chain Mgmt.  

“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)

The most valuable characteristic of blockchain is that it serves as a backbone for “convergence”:

  • For better insights and actionable intelligence: Blockchain is the missing link in Big Data initiatives and the convergence of the Internet of Things (IoT), Artificial Intelligence (AI), and blockchain represents a breakthrough.
  • 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.

Blockchain’s 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.

At first 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.

A typical 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 hands.”  

This 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.

The solution?

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.

However, 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.

For this 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.

Also, from 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 Things (VIoT).

In 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.

World’s Deadliest Supply Routes: Ice Road Trucking

Are you responsible for sending your people into danger? In a new Procurious blog series, The World’s Deadliest Supply Chains, we investigate the most high-risk supply chains out there…


By James Gabbert / Shutterstock

The intrepid truckers on the temporary ice roads spanning hundreds of kilometres of frozen lakes in Canada and Alaska keep their hands on the door handle for good reason: should the ice crack, they have a split second to leap from the vehicle before it falls into the icy, watery abyss.

For a decade, viewers of the History Channel were given a first-hand view of what motivates these drivers and the perils they face, which include not just a frigid sinkhole but avalanches, whiteouts and hypothermia, even earthquakes and volcanic activity.

Set in Canada’s Northern Territories and Alaska, Ice Road Truckers lasted 11 series between 2007 and 2017.

The truckers’ mission was to supply remote gold and diamond mines and entire small towns with goods in the winter months, when road access is only possible because the lakes have frozen over.

Items included anything from fresh food to mining equipment that would be tricky to transport even on well-laid bitumen.

Featuring nicknames such as “Chains”, “Bear Swensen”, “Polar Bear” and “Hammer Down”, the rough-hewn drivers were often depicted in mishaps such as when they ran off the road or got bogged.

In one episode, viewer favourite Lisa Kelly – one of three female drivers – leaps from her truck amid ominous cracking sounds and a disconcerting build-up of water under her rig’s 18 wheels.

As is the norm for ‘reality’ programs, the series was criticised for overdramatising and promoting reckless behaviour among the truckers – one of them, for example, exclaims “yee-haw!” after driving too fast over a rough patch of road.

The opening sequence showing a truck sinking through the ice was staged at a Hollywood studio in sunny California, using sugar and shaved ice. However, the set-up was based on a real accident at Mackenzie Crossing in Alberta, with the driver apparently not recognising a warning sign that the road was suitable for light loads only.

Some viewers were less than impressed with the skills of the Ice Road Truckers cast. “Who the heck tries to pull out another truck using a chain that has slack in it and then drops the gas [accelerates] and takes off?” asked one heavy-haul driver.

Ventures West Transportation president Glenn Bauer reckons the televised truckers come across as a “bunch of cowboys” (the Alberta-based company hauls fuel to some of the Canadian diamond mines featured early in the series).

He says the only incident he knows about involved road-building equipment falling though the ice. “In reality, it’s very, very controlled,” he told truckingnews.com.

Despite the series’ bent towards entertainment, there’s little doubt that navigating a 70 tonne load over hundreds of kilometres of icy wilderness is inherently dangerous and there have been some fatalities over the years.

Fatalities are rare, though. As a guide, the 27 truckers in the Ice Road Truckers series all lived to tell their war stories, save for Montanan Darrell Ward who died in 2002 aged 52 – in a light plane accident. He was, ironically, on his way to film the pilot for a documentary-style show involving the recovery of plane wrecks.)

One reason for the low fatality rate is that, as with inherently risky aviation, operators are required to follow strict safety protocols.

For instance, trucks travel in convoy (although not too close together) with the most experienced drivers leading, and trucks are limited to speeds as low as 10 kmh. In parts where slush is forming, drivers are advised not to stop altogether lest they get stuck.

The ice roads are not random trails, but can be engineering wonders. One example is the Tibbitt to Contwoyto Winter Road, which spans 595 kilometres from north of Yellowknife into the neighbouring territory of Nanavut.

The width of an eight-lane highway, the road takes 140 workers to build each year and can support 70 tonne, eight-axle articulated trucks.

The famed Dalton Highway in Alaska – spanning 414 miles from Fairbanks to the oilfields of Prudhoe Bay – was the subject of an innovative repair job that itself presented a huge logistics feat.

The massive task involved underlaying 80 kilometres of a vulnerable section of the highway with 1.2 million metres of polystyrene foam strips, to keep the permafrost frosty and to raise the road above flood level.

Apart from a crazy streak, the only formal prerequisites to become an ice-road trucker are completing high school and possessing a heavy commercial truck licence. The truck companies provide the training – not that there is any real substitute for experience.

With no pit stops along the way, the truckers need to be proficient drivers as well as proficient mechanics.

The lure of the lucre is a key motivation, although pay levels vary markedly. Typical remuneration for a season varies between $US20,000 and $US80,000, but harder working truckers can earn up to $US250,000.

The pay levels depend on the distances driven, the type of cargo and the hazard levels.

Despite high competition for relatively few jobs, driver turnover reportedly is very high, with many not returning after their first trip after realising how dangerous the game can be.

A paradox of the ice-trucking game is that while the frigid conditions make for treacherous conditions, warmer-than-expected weather is even worse because the highways are more prone to crack and develop slushy parts.

In the next few years, climate change, rather than ice blizzards and crevasses, may defeat the hardened people of the ice roads.

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 need

Is AI The New Electricity?

For supply chain professionals, the drive to use AI is there. But how do organisations get to the point when AI-enabled supply chain management is the norm?

By kung_tom/ Shutterstock


“Electricity changed how the world operated. It upended transportation, manufacturing, agriculture, health care. AI is poised to have a similar impact. Artificial Intelligence already powers many of our interactions today. When you ask Siri for directions, peruse Netflix’s recommendations, or get a fraud alert from your bank, these interactions are led by computer systems using large amounts of data to predict your needs.”

Andrew Ng – Stanford University – March 2018

According to the results of our latest survey, Procurement 2030, supply chain pros are well aware of how impactful AI could be for their profession. Indeed, 92 per cent of professionals believe the profession will transform by 2030 as a direct result of new technological innovations. And 51 per cent predict that, with the help of AI, supply chain professionals will become an agile group of strategic advisors.

The intention to utilise technology is there. But how do organisations get to the point when AI-enabled supply chain management is the norm?

Getting started, and knowing where to start, is tough going – as with anything new and unknown. We know that many supply chain pros are concerned that implementing AI into their supply chains is a complex step. In fact, our survey takers ranked it as the technology they feared most difficult to adopt. But are their fears unfounded?

We want procurement pros to be pushing the limits on Industry 4.0, and the first to adopt new technologies.

And so, in our latest webinar – How AI Saved My Day Job: Confessions from a Supply Chain Pro we’ll be demonstrating that AI is the real deal by giving you the insider information, the low-down, on what it is delivering right now for supply chain teams.

Webinar speakers

We’ll be speaking with supply chain professionals who are already implementing AI in their organisations and have discovered that AI does provide a demonstrable bottom-line impact across all supply chains structures. Speakers include:

  • Rob Allan – Program Director, Supply Chain Insights Offering Management – IBM
  • Tania Seary Founder – Procurious
  • Connie Rekau – EDI Manager – The Master Lock Company
  • Nickolas Bonivento – EDI Manager – Anheuser-Busch InBev

When is the How AI Saved My Day Job webinar?

The webinar takes place on 15th May 10am ET / 3pm BST. Sign up or log in via the form above and we’ll be in touch ahead of the event to provide details on how to join the webinar live.

How do I listen to the How AI Saved My Day Job webinar?

Simply sign up here and you’ll be re-directed to the Supply Chain Pros group where you can access heaps of related content. You will also join the webinar mailing list, so we can provide you with details on how to access the webinar before it goes live.

Help! I can’t make it to the live-stream of the How AI Saved My Day Job webinar?

No problem! If you can’t make the live-stream you can catch up whenever it suits you. We’ll be making it available on Procurious soon after the event (and will be sure to send you a link) so you can listen at your leisure!

Do I have to be a member of Procurious to access the How AI Saved My Day Job webinar?

Yes. To access the webinar you’ll need to sign up to Procurious. You’ll be joining a community of 30,000 like-minded procurement and supply chain peers and gain access to all Procurious’ free resources. You’ll be joining a community of 30,000 like-minded procurement and supply chain peers and gain access to all Procurious’ free resources.

Could AI revolutionise your supply chain and save your day job – allowing you to make better decisions, more efficiently and in a more repeatable way over time? Let’s find out!