ASCAL Institute

The Top 5 Supply Chain Concerns of Business Leaders – 2017

Driven by the increasing expectations and sophistication of customers, and enabled through new technologies, businesses are increasingly turning to their supply chain as a significant game changer in positioning a new competitive advantage and profit margin driver.

Supply Chain Executives are now key players in boardrooms, contributing large portions of the overall corporate strategy. In this environment of business transformation and the rise of the Supply Chain, what are the biggest Supply Chain concerns that keep our Business Leaders awake at night?

A review of recent industry surveys shows five common themes.

  1. Financial Performance (cost control)

There is unlikely to be a single Supply Chain or Logistics Manager that is not challenged on a regular basis to reduce operating costs, or to identify new value-adds to increase gross margins. From an operating costs perspective, most will look to their biggest expenses to generate their biggest gains. For example:

  • Working Capital. Significant reduction can be achieved through applying lean inventory management principles, increasing inventory velocity along the chain, and a more strategic procurement approach. Dr Muddassir Ahmed provides an excellent and concise overview of effective inventory reduction in his article.
  • Occupancy Costs. Reducing inventory reduces the need for space, but warehouses can also benefit from improved racking and internal solutions by exploiting a denser use of cubic space rather than square metre space. Use of 3PL’s who are able to consolidate storage for multiple clients will also generate optimum use of space and a win/win for all parties.
  • Manpower. Many organisations generate cost reductions through improvement in productivity, using tactics such as continuous training and development and/or incentive packages for their employees. New technologies are also a significant way to improve productivity.
  1. Customer Service

The best approach to addressing customer service is to first obtain a deep understanding of the customer’s expectations. Only when a customer’s true expectations are understood can an organisation take steps to ensure those expectations are consistently met, and hopefully exceeded.

Understanding a customer’s expectation is not necessarily an easy thing to achieve. For example, consumers will consistently tell surveys that they are willing to pay more for sustainably produced green products, but when they come to choose the product on the shelf, their good intentions quickly evaporate.

Understanding who your target customer is, understanding their expectations and then aligning your service delivery to them is a core customer service principle.

  1. Risk Management

Unmanaged risk in an organisation can lead to its complete collapse, as Takata recently found out.

There is an infinite number of risks, so keeping the management of Supply Chain Risk as pragmatic as possible is best done through a systematic methodology. Risk needs to be assessed as the precise probability of specific eventualities (positive or negative) multiplied by the impact of that eventuality.

As the nature of risk is both moving and subjective at any point in time, it is best to approach the Supply Chain Risk Management program with a suitable team sourced internally from within the organisation supplemented by the knowledge and perspectives of an external expert.

Author’s note: this is a very brief and high-level explanation of Supply Chain Risk Management. It is a complex and serious subject that demands deep and proactive involvement from the organisation and I will be publishing an article focusing on Supply Chain Risk Management in more detail in the coming weeks, so keep a look out for it.

  1. Visibility

The modern supply chain is now subject to the demands of the modern consumer, be it the individual ordering a pizza online, all the way through to multinational conglomerates shipping thousands of tons of goods around the globe. What they all share is a common desire to know exactly where their products are along the supply chain, what is its status, how long will it take, what is its condition.

Modern technologies such as mobile devices and IoT now facilitate a much more consistently visible supply chain. People and organisations want to know the status of products along the chain so they can anticipate and plan ahead.

But visibility is also important for monitoring other supply chain features, such as quality assurance by tracking temperature of sensitive food and pharmaceutical cargoes in real time along the entire length of their supply chains to ensure integrity of the product.

  1. Future-Proofing

Future-proofing generally seeks to anticipate future shifts in the operating landscape, and either mitigate against the negative possibilities or prepare to leverage the emerging opportunities.

Just some of the issues that Supply Chain executives need to consider are:

  • Technology: emerging technologies can be exploited or they can represent a form of threat. Examples include mobile connectivity and IoT; autonomous guided vehicles; drones; renewable energy and energy storage; machine learning; 3D printing; e-textiles.
  • Capacity, Agility and Flexibility|: capacity to accommodate growth; agile enough to shift with changing trends; flexible enough to scale up or down as required.
  • Sustainability: impact on the environment, local community and social wellbeing; being financially sustainable enough to meet future obligations.
  • Regulations: keeping abreast of regulatory changes in the operating jurisdictions or differing regulations across its multiple geographies; future changes to regulations, such as implementation of VAT or controls over materials and labour.
  • The Global Marketplace and Competitors: the likelihood and impact of marketplace events such as mergers and acquisitions in the industry sector.
  • The New Consumer – Behaviour and Tastes: shifting profile of customer base, such as the increasingly affluent global middle class or the aging population.
  • The Rise and Rise of e-Commerce: e-commerce is predicted to grow at double digit percentage figures in the coming years, stripping market share from bricks and mortar retailers.
  • Dynamics of the availability and cost of Energy, Space, Skills, Raw Materials, Resources: the availability and cost of many resources are expected to change in many ways, and forward-thinking organisations are already looking at alternatives to sourcing, use of alternative fuels, zero waste, automation, and synthetic ingredients.
  • Changing Economics: shifting economics of the globe, as cross border trade increasingly becomes seamless and economies such as China and Russia grow and open up to external trade.

The issues discussed above are likely to be familiar to the reader, being by definition, a selection of our commonly shared concerns. In most cases, they also represent opportunities.

By sharing knowledge and expertise within the supply chain community, collectively we can continue to address the challenges as opportunities, by creating innovative and beneficial solutions for the whole global supply chain system.