The fallout from the pandemic exposed deep-rooted issues and a worrying lack of visibility, but these practical insights will help in case of future crises
1. Don’t focus on cost alone
The countless stock delays and shortages over the past 18 months caused by a lack of preparedness and agility for the coronavirus-induced disruption have, for the first time in decades, called into question the running of lean supply chains designed to boost efficiencies and profits. They have laid bare a fragile and complex system that “has ultimately morphed into an investment plan focused on quick fixes and last-minute saves”, according to Patrick Van Hull, industry thought leader at Kinaxis, a global supply chain management company.
Malcolm Harrison, group chief executive of the Chartered Institute of Procurement and Supply, agrees that many had seemingly dialled-up risk in the hunt for greater financial rewards. “Ensuring resilience and achieving value have always been the overarching objectives for procurement and supply professionals,” he says. “Focusing on cost alone is a risky strategy for any organisation. We’ve had decades of strong, lean and sometimes single-sourced supply chains working so efficiently that we hardly noticed them.”
The pandemic, he says, has encouraged supply chain managers to renew their focus on multi-supply strategies, local sourcing and best value in the supply chain, including working with competitors.
2. Invest in technology
Dirk Holbach, chief supply chain officer of laundry and home care at Henkel, says it was a tremendous advantage that his organisation was already far along its digital transformation journey before the pandemic. “The real-time visibility along our supply chain, which is a result of deploying Industry 4.0 technologies, allowed us to focus on the right challenges and to make the best decisions,” he says.
Van Hull points out that companies invested in digital transformation pre-pandemic were financially outperforming industry averages and surged further ahead of rivals over the past 18 months. “These types of results present a significant opportunity for supply chains, which historically have struggled with translating operational capabilities and digital transformation into financial success,” he says.
3. Develop supplier relationships
While investment in technology is vital to increase supply chain resilience, old-fashioned human-to-human talking to solve problems is just as important when disruption inevitably strikes. Developing and nurturing supplier relationships accumulates mutual trust that can be cashed in when required, whether that buys favourable prices, shorter lead times or extra stock.
And, as the idiom suggests, a problem shared is a problem halved. “Embrace collaborative supply chain risk management,” urges Dr Alireza Shokri, associate professor in operations and supply chain management at Northumbria University. “Invest time in a collaborative culture, build trust and use these relationships to strengthen prevention and mitigation strategies.”
Shelley Harris, commercial director of IPP, which pools and provides pallets and boxes across Europe, agrees. “Our partner relationships are key, helping us to face new challenges as well as to work as efficiently and productively as possible,” she says.
The strength of its supplier relationships has allowed IPP to continue to fulfil its customer deliveries, despite the challenges the wider industry is facing, notably driver shortages. “We’re stronger because of long-standing relationships – we’ve seen a minimal impact on our operation and resulting service to our customers,” she says.
4. Improve transparency
The number-one way to manage disruption, according to Harrison, is a deep understanding of your supply chain and a focus on transparency. While this requires the right technology, as businesses have had to operate more efficiently in the digital space with more automation, it starts with understanding the different tiers of the supply chain.
“Transparency across all tiers of the supply chain is a challenge,” he acknowledges, “but that visibility contributes to value in that it [helps to] remove fraud and corrupt practices and [helps businesses] look for signs of modern slavery among their suppliers.”
Harrison stresses it is important to understand the robustness of different suppliers – and their suppliers. Transparency allows a business to identify potential problems, for example if a component is sourced from a single country or location and to track shipments.
This chimes with Van Hull’s thoughts. “Increased transparency is highly desirable for supply chains to sense disruptions as they are happening and respond immediately,” he says. “That is even more useful when it can be tied to financial outcomes, such as reduced inventory and cash buffers, improved capacity utilisation and lower cost resolution of demand-supply mismatches.”
5. Get the training right
Holbach believes training is imperative to maximise the potential of technology solutions. Empowering local teams and using their expert knowledge will strengthen the supply chain. They will flag potential issues early, giving the network a better idea of where to go for help with routing or stock if required.
“We’ve had to react with agility during the pandemic and that was only possible by trusting our teams worldwide,” says Holbach. “It created the freedom to act fast, find the best solutions and keep our customers and consumers supplied with essential products.”
He believes a progressive approach to training starts from the top of an organisation. “As leaders, you should never stop learning,” he says. “To prepare for the unknown, you have to have the right mindset when confronted with new and difficult situations.”
Harrison echoes this insight, saying that supply chain professionals need to be equipped with the right skills and commercial judgement, which can only be achieved through training and development. This means being up to date, qualified, informed and skilled.
“What this pandemic has shown is that you need to invest in both technology and people to ensure supply chains are resilient, then we will manage better through the next global shock,” he says.
This article was first published in Raconteur’s Supply Chain Resilience report in September 2021