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DOS And DON’Ts For Supply Chain Pros Right Now

DOs and DON’Ts specifically for supply chain professionals that you should consider during coronavirus


There has never been a moment in time since the second world war, that there has been so much global awareness and need for resilient and dynamic supply chains, and the qualified professionals to manage them; in a single strategic battle toward a common enemy. The COVID-19 outbreak was initially concerning to firms with established supply chains embedded throughout China, but it’s clear now, that it’s effects are going to be far more reaching on a global scale, and felt throughout the months and year(s) ahead.

In my job, I have the privilege of constantly speaking with dedicated supply chain professionals globally. From the woman director controlling over a half a billion dollars worth of global spend in the fast-moving consumer goods industry in the ‘big city,” to the little guy ordering replenishment stock for a small chain of regional tire repair shops in Piqua, Ohio. Lately, they’ve been asking the same question: “What are we going to do?”

So whether you are quarantined and idle at home, or your employer is an essential service and you’re confined to toiling behind a desk at work, here are some DOs and DON’Ts specifically for supply chain professionals that you should consider – NOW.

DOs

Identify how your firm’s production capability and equipment can be retooled to produce hand sanitizers, gloves, gowns, face masks or shields, medical supplies or other vital equipment. There is still a need, and will be for quite some time.  Who knows, by doing so, you’ll not only be helping front line workers and healthcare providers, you could also get your firm re-classified as an essential service, kick starting idle production lines, and help your fellow employees get called back to work and earning a steady income again.

Identify where in the supply chain your firm may have spare capacity, to assist in National/Regional relief efforts. It’s not only physical commodities that are in need, it could also be transportation, distribution, or even warehousing related space or activities to move vital supplies and equipment around.

Review your entire supply chain – top to bottom, to evaluate where problems are arising and you’re vulnerable, opportunities which may be presenting themselves, and develop a status report and comprehensive supply chain action plan for management. 

Revisit your disaster contingency plan and develop a new one, specifically including virus and pandemic related situations. (This wasn’t our first, and certainly won’t be the last pandemic.)

Review your firm’s supply chain exposure and resiliency to recover from natural disasters and pandemics, and the preventative measures that you can design and implement now, to cope with swings in stock availability, transportation, and security issues and evaluate potential recovery times. 

Review all your existing contracts for force majeure (unforeseeable circumstances) clauses; and determine which of your suppliers may be in a position to try to enforce them – leaving you vulnerable to disruption and stock outs. Develop solutions.

Check to see if your firm has insurance protection covering any losses, should your supplier(s) not be able to fulfil their contractual obligations.

Reassess your current supply chains in China, India, and other global hot spots. Consider other possible regional opportunities for the future (such as Vietnam, Bangladesh, etc.), as contingencies, as these countries have been working to improve working and business environments recently.

Increase your level of communications and collaboration with overseas suppliers to understand not only their challenges, but monitor ongoing labour, discriminatory wage practices and health and safety regulations as well. These have led to manufacturing, transportation, and other related strikes and protests. Keep in mind that political protests that disrupted business recently were not limited to strictly Hong Kong and China, but also happened in Latin America, Middle East, Brazil, India and Mexico as well. 

(Yes, do a deeper dive and move toward becoming a ‘Geopolitical Specialist’ when analyzing regional risk in your global supply chain.)

Ask all vendors about their plans on dealing with demands and changing capacity, and how swings may impact their stock availability, quality, increased production and delivery times, and their labor force.

Sharpen the saw.  Take the time to invest in yourself and consider taking online courses in the Supply Chain field, offered by your favourite professional association.  They can help with strategies and possible solutions to supply disruptions during challenging times. Perhaps use the time to finally finish your study toward the Supply Chain Management Professional (SCMP) accreditation?  

Catch up on your supply chain reading with issues of your favourite trade magazine.   Why reinvent the wheel, when you can learn practical information from the titans of industry themselves; who are guiding their firms and making a difference in the supply chain community. 

DON’Ts

Don’t wait to step up or be asked for your supply chain expertise, your firm’s production abilities and it’s logistical capacity and how they can be used to keep critical supplies and support services open to front line workers and healthcare providers struggling in your communities.

Don’t take a ‘wait and see’ attitude and hope that another major disruption to your supply chain doesn’t occur again in the future… it will. Learn from today, plan and prepare for tomorrow.

Don’t lessen your due diligence when sourcing urgently needed supplies -via new or potentially alternative sources of supply away from China, Asia, or other parts of the globe experiencing problems.  Beware that counterfeit markets thrive in times of crisis; and quality and social responsibility risks should also be considered in addition to simply cost and immediate availability. Now is the time to increase efforts to protect your firm and supply chain; not lessen or weaken it with quick or cheaper sounding alternatives.

Don’t forget the potential to accidentally involve your firm in forced and/or child labor, poor working conditions, other human rights abuses or environmental concerns; when pre-qualifying any new and potential vendors. Practice responsible and ethical sourcing.

Don’t immediately threaten legal action against suppliers (local or distant) caught in a bad situation and who attempt to enforce the force majeure clauses within their contracts. Work with them to determine a reasonable course of action instead.  Right now cooler heads should prevail and honest transparency about their situation and capabilities, shared with you – as partners and lenders, is of paramount importance, if you’re going to get through the storm.

Don’t participate in the hoarding, resale, or profiteering from food, cleaning and medical goods, protective equipment and other essential items which could be redirected and used in the production of medical supplies for front line workers in your community.  Whether personally or on behalf of your employer – it’s just not right.

Don’t wait for authorities to enact and enforce new sweeping regulations controlling the supply chain.  Lend your knowledge and expertise and see how you and your firm might participate in regional supply chain coordination units, to ensure the public’s safety and the continuance of a strong and resilient supply chain of much needed food and medical goods and services. 

This article was originally published on LinkedIn on 29 March 2020 by Tim Moore , Canadian Supply Chain Recruiter. It has been republished here with permission.

Want to keep up with the latest coronavirus and supply chain news? 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 in a 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.

Coronavirus: What You Missed

Last week’s critical covid-19 news

New technologies gaining traction in the fight against Covid-19

If our supply chains are at war with the coronavirus, then technology is our ammunition … and it’s working. Right now, we’ve got every reason to be excited about the future of technology and how it can help us better mitigate risks. Some technologies are proving particularly useful, including AI and automation, reports EPS, as well as a suite of other digital technologies.

Toilet paper, renewables and restaurant supply chains still broken

By mid-February (which feels like aeons ago), Fortune had already declared that 94% of the world’s supply chains had been disrupted. Now, we believe that number would be closer to 100%. But there’s a number of supply chains that continue to make the news for the issues they’re having, including restaurant supply chains, renewables, and perhaps unsurprisingly, toilet paper.

Can China still be trusted as the world’s factory?

With some countries already planning their transition back to ‘normal,’ whatever that might mean for the future, many supply chain professionals are wondering, is now the time to start asking ourselves the big questions? Many say it is, and something that’s come up often is whether or not we can continue to trust China as our key manufacturer. 

It’s a contentious question, and many people have heated views on it. Read all the  compelling reasons why Kobus Van Der Wath, CEO of Axis Group, Beijing, believes China’s dominance will continue unabated in our latest expose, Can China Still Be Trusted as the World’s Factory?

Coronavirus vaccine trials start mid-May

In the best possible news Easter could bring, The New York Times is reporting that Norvavax, a Maryland-based biotech company, will start human trials of a coronavirus vaccine mid-May. It’s one of two dozen companies that have announced promising vaccine programs. The solution to end this pandemic might be closer than we think.

Want to keep up with the latest coronavirus and supply chain news? 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 in a 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.

5 Reasons Why Santa is the Ultimate Procurement Professional

Think you’re at the peak of the procurement and supply chain profession? Think again – Santa is the ultimate procurement professional (festively speaking…).

santa
Photo by Ylanite Koppens from Pexels

We’re fast approaching the end of 2019. It’s a time to reflect on the past year and consider what we have all achieved. We can look at all our successes, the lessons we have learned and everything that we will do in 2020. Perhaps there’s even a plan for how to take the next big step to that coveted leadership role in the profession.

But at this time of year, we all need to remember that our efforts pale in comparison to one individual. As we start thinking about the office party season, holidays and general festivities, this individual is only just revving up into top gear. Their whole year is driving towards this moment, but they are as prepared as they ever are.

And, while displaying all the skills we seek as a top procurement professional, they’ll deliver on all the wishes and promises that have been made. We are, of course, talking about…Santa. Father Christmas. Pére Noël. Svaty Mikolas. Kris Kringle.

Of course, there are other brilliant procurement professionals out there. But, at least in a festive setting, there’s none like Santa Claus for getting the job done. Here are my 5 reasons why:

1. Santa always has the right specification

Working tirelessly with his external (children, parents) and internal (elves, Mrs. Claus) stakeholders, he makes sure the specification is right. It can’t be a coincidence that children get exactly what they ask for, year after year. It all comes down to knowing your customers and then passing on the full specification to your manufacturing department/elves.

2. His Logistics operation is second to none

The global population is currently 7.7 billion people. Of this, an estimated 1.9 billion are children. Let’s assume then that the average household contains 4 people – this means Santa will visit 1.9 billion homes.

If there are 2 presents per child, this is a whopping 3.8 billion presents, delivered at a rate of 158.3 million per hour, 2.6 million present per minute. All of this with a team of 9 reindeer and one sleigh. Without the best logistics division and the latest technology, there’s no way all the presents are delivered to the correct child!

3. Belief, Influence, Leadership

Santa wields influence that most procurement leaders can only dream of. A following of magical, semi-magical and mortal people and creatures all follow him willingly. They work for the entire year to prepare for one day, then start again for the following year almost immediately.

Forming part of this leadership is belief. As we all know well (or at least we should) Santa’s sleigh and reindeer don’t fly without the belief in him and the Christmas spirit. And given he’s not missing deliveries to your house, it’s safe to assume this belief is still going strong!

4. Santa can always get the right price

Short of being some form of crazy, benevolent trillionaire (with superlative investments), Santa needs to be a dynamite negotiator or run the best RFQs. How else could he source all the toys or raw materials without bankrupting himself each year?

And like the best procurement professional, he doesn’t pass any cost increases on to his customers but works out the best deals to keep costs down so his end customers (the parents, of course!) don’t have to foot the bill.

5. He’s got the Nice-Naughty List on blockchain

How else do you create a fully traceable, immutable record of who has been naughty and nice in any given year? Santa needs to be able to trust the information he has on all behaviours, without the possibility that it has been compromised. Plus, it’s also handy for making sure that all the sourcing he does is ethical and sustainable…

So, if you have ambitions for a higher office in 2020, you’d do worse than looking at Santa as a good example to follow. And if all else fails, at least you’ll have a sunnier outlook on life! Ho, ho, ho!

How to Explain Procurement Using a Christmas Turkey

Still struggling to explain procurement to your friends and relatives? This festive season, why not put it in easily understandable terms – using your Christmas turkey?

Christmas turkey
Photo by Engin Akyurt from Pexels

“So, er … Cindy – what is it you actually do?” 

It’s the holiday season, which means that at some point you’re likely to find yourself making small talk at a social event with someone who is showing polite interest in what you do for a living.

The trouble is, the word “procurement” is quite often met with a blank look. I know that I certainly had no idea what the term meant the first time it was mentioned, and even today I’m still discovering that there’s way more to procurement than the word suggests.

So, how should you answer someone who presses you on what procurement actually is?

Don’t be boring

Let’s have a look at some of the common definitions of procurement that come up with a basic Google search.

From Wikipedia (a quote from MIT press):

“Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process.”

Sorry, I think I nodded off in the middle of reading that! Apart from being wordy and dull, the real problem with this definition is that it talks about process rather than outcomes. Nobody cares about tenders or competitive bidding processes. They’d rather hear about outcomes such as money saved, the eradication of modern slavery, and environmental benefits.

In its whitepaper on this very topic, CIPSA canvassed its members to come up with this definition:

“Procurement is the business management function that ensures identification, sourcing, access and management of the external resources that an organisation needs or may need to fulfil its strategic objectives.”

Accurate, but soporific. What’s needed is a definition that explains procurement in a way any layperson would understand.

Don’t make it just about buying

Usually, my advice would be to keep your definition as simple as possible. But oversimplifying procurement inevitably ends up with procurement being described as “buying” or “purchasing” only.

I once witnessed a CPO dad telling his six-year-old daughter: “I do the shopping for my organization; I’m the one pushing the giant shopping trolley.” It’s a great image, but procurement does so much more than sourcing products and services.

Without trying to cram everything a procurement professional does into your answer (the other person will roll their eyes and walk away), try to capture some of the activities procurement does beyond sourcing: identifying cost savings, building relationships, managing risk, driving innovation and sustainability.

Procurement and the Christmas turkey

Let’s assume you’re sitting around the table at Christmas lunch when your partner’s elderly and inquisitive great-aunt asks you what procurement is. While you take a few seconds to consider your answer, your gaze rests on the magnificent turkey in front of you.

Why not use the turkey to help illustrate what procurement does? Let’s give it a try:

“Well, Aunt Edna, take this turkey as an example. Someone here had to go to the shops and buy that turkey – that’s simple enough. But imagine if you worked for a company that wanted to buy 100,000 turkeys.

It would be procurement’s job to first of all understand exactly what type of turkeys the company needs. Then we’d look around for suppliers who can not only reliably fulfill an order this large, but do it on time, with every turkey meeting quality expectations. Procurement would negotiate with that turkey supplier to get the best-possible price by seeking a bulk purchase discount.

But it’s not just about reliability, quality and price – it’s also about sustainability and social outcomes. Is there a supplier who breeds turkeys in a more sustainable way than others?

Are the turkeys cruelty-free and free-range?

Are the human workers paid fairly, and do they work in safe conditions?

Can we spend our turkey budget with a minority-owned supplier, or one that focuses on positive social outcomes such as hiring workers with disabilities?

What else can that supplier do for us? Is there some sort of innovation they can come up with (such as cheaper or more sustainable packaging) that would be beneficial for both my company and the supplier?

So you see, Edna … (oh, she’s fallen asleep).”

Further reading

Looking for more inspiration to help you explain procurement to others? Check out these other resources:

UNA is a Group Purchasing Organisation that generates cost savings for members across a wide range of products and services (including Christmas turkeys).

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!

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

Supply Chain Pros: Could AI Save Your Day Job?

Supply chain leaders know AI is a game-changer, a technology that will allow them to optimise their supply chain for competitive advantage. But just how much will it impact your profession?

Shutterstock

Today, business leaders are looking to their supply chains to create differentiation and they recognise that data is a key driver. Having said that, only a small fraction of supply chain data is effectively used, and most companies are virtually blind to data that is unstructured – for instance, from social, weather and IoT sources. With limited visibility it’s difficult to optimize supply chain operations, leaving the business exposed to unnecessary disruptions, delays and risks, as well as increased costs. In fact, 87 per cent of Chief Supply Chain Officers say it is extremely difficult to predict and manage disruptions.

Supply chain leaders know AI is a game-changer, a technology that will allow them to optimise their supply chain for competitive advantage. They understand and have relied on descriptive analytics – using massive volumes of data within the enterprise to understand better what has happened in the past and what is happening today. They’re now ready to explore how to use AI to see beyond the four walls of their business; understand how potential disruptions in the environment could impact the supply chain; and act quickly to seize opportunities or mitigate risk.

A new era of AI in the supply chain

Already, AI capabilities in IBM Watson Supply Chain Solutions are moving from descriptive analytics to predictive insights. We’re helping clients look ahead of supply chain events and see likely delays, demand spikes, supply changes and stockouts with new capabilities, such as anomaly detection in supply chain processes and leveraging conversational analytics for response management. Going even further, we are showing clients the power of prescriptive analytics, where Watson evaluates several dynamic parameters associated with a supply chain scenario and in near real time suggests the best actions and can even automatically create supply chain playbooks.

But this is not the end of the journey. We are also creating a plan where Watson adapts on its own, learning what matters to you and developing the capability to show you where to focus your attention to mitigate disruptions and take advantage of opportunities.

Here are some new capabilities available today (and some that are still to come!) :

  • Expanding data sources for Watson – IBM Supply Chain Insights allows us to add new data sources specific to each client’s challenges in as little as five weeks, accelerating the content that Watson draws from to gain intelligence, from basic ontology and supply chain terminology to weather and now many more external data sources. 
  • Anomaly detection – This new capability in IBM Business Transaction Intelligence for Supply Chain Business Network tracks supply chain transactions, spots anomalies and provides early warning signals so you can discover potential problems and take corrective action sooner. 
  • Optimising order and response management – IBM Order Management software uses AI to select the best location to fulfill an order, adjust availability promises and safety stock levels, and empower customer service reps to make more informed decisions and answer questions with greater accuracy and speed.
  • What’s next for AI – In the future, Watson Supply Chain capabilities will include predicting supply chain cycle times, to new frontiers where Watson adapts to your supply chain and users and learns about trends, issues, actions and behaviors to make recommendations. 

Could AI save your day job?

On 30th April I’ll be taking part in a new Procurious webinar: “How AI Saved My Day Job – Confessions from a Supply Chain Pro.” We’ll be exploring the real-life applications of AI in workplaces today and the problems it can solve for supply chain professionals.

How AI Saved My Day Job – Confessions from a Supply Chain Pro will go-live on 30th April 2019. Sign up here (it’s free) to join the Supply Chain Pros group on Procurious and gain access to this webinar.