Ever Given – Supply Chain Disruption in the Suez Canal
Supply Chain Resilience and Risk
Post Brexit Supply Chains UK-EU
Value, Customers and Service
Complexity and Disruption
7 V’s Explained
400 Hours of Content
New episodes every week.
What can you do in twenty minutes?
Tower Hill to Sloane Square, Ealing to Oxford Circus, Harpenden to Kings Cross, Leeds to Huddersfield, Salford to Manchester (sometimes), Liverpool to Hooton, Berkely to San Francisco, Melrose to Boston, Johannesburg to Pretoria, Reichstag to Berlin Zoo, Westmead to Sydney, Chicago Central to Southside, New York to Brooklyn. Use your journey time wisely. In the time it takes you to commute you could listen to Chain Reaction on your favourite podcast platform. Try it today it’s free, informative and you might learn something you did not know about.
We like to spot trends and we like to make lists. So here is my list of ten supply chain trends creating supply chain advantage for 2021.
Develop Resilient Supply Chains
All supply chains have to learn how to cope with disruption. During the pandemic supply chain professionals have learned what it means to have resilient supply chains more than ever. First, we had shortages of personal protective equipment (PPE) for front line workers in health and emergency services. Supply chains were stretched already because of the pandemic closing plants and lowering manufacturing capacity around the globe as the number of Covid 19 infections increased. Demand exceeded supply in nearly every category of PPE and for specialist equipment needed to fight infections and save lives such as ventilators for this deadliest of respiratory viruses.
Many supply chain professionals had plans in place to increase resilliance within their own supply chains prior to the pandemic and had taken steps to become more agile in response to threats posed from the external environment. The last eighteen months or more has seen that interest in resilience take it up the list to number one for most supply chain strategies. One of the first policy initiatives introduced by the Biden Administration in the USA was to set resilience as the number one goal to ensure that US citizens would continue to be protected from disruptions to their normal lives as much as possible. One outcome from this policy has been to set up a ‘Supply Chain Disruption Task Force’ to examine mismatches between supply and demand.
Global supply chains have faced many disruptions threatening their functionality. During the last decade alone these disruptions have included natural disasters related to volcanic eruption and ash clouds; tsunamis destroying vital communities and infrastructure; forest fires due to climate change and crop failures. Human activity has also impacted supply chains in the form of increasing industrialization and the impact on the planet. For example, deforestation in the Amazon rainforest and elsewhere with the growth of intensive farming, meat production, palm oil and other products to meet the growing global demand. River and sea polution with much plastic waste deposits and chemicals destroying the natural ecosystems. Then there are many large container ships discharging their boxes or sinking on their journeys to bring goods to destination ports along with oil and chemical discharges such as the nitric acid and oil from the Xpress Pearl off the coast of Sri Lanka destroying the sea life and beach communities. We also had the Evergreen Ship blocking Suez and many other casualties of normal distribution being held up for ransom payments off the coast of Africa. As bridges, roads, railways, airports and vital infrastructures are destroyed either by natural disasters or wars this too adds to pressures on Global Supply Chains. The need for supply chain professionals to employ strategies to minimize the impact of disruption is paramount. Resilience to bounce back from any disaster is a necessary requirement for the smooth operation of supply chains. It is for this reason I have placed this as my number one priority in the trends identified for 2021.
Digital Transformation of Supply Chains
Digital transformation in supply chains is a process that continues it is not an event that happens like some people appear to think. We know that most ‘Big Bang’ type projects in IT turn out to be disastrous but we also know that not to change technology when needed is equally bad. There is a need to improve technology and its application to supply chain activities to improve the customer experience and to make the networks efficient. Digital transformation has the potential to improve supply chain visibility and transparency at a stroke of a key.
Digital transformation is necessary to improve every aspect of the supply chain and the customer experience. In other words the end to end supply chain needs to be digital. So from sourcing and procurement through to end of life recycling. Digital everything helps synchronization, efficiency, effectiveness in meeting customer demand, it helps visibility and transparency throughout the chain, it adds value for all partners in the chain and it makes all processes easier to manage. It facilitates omnichannel activities and it helps stay in control.
Sustainable Supply Chains
Sustainability has moved up everyone’s agenda during recent years. Sustainability permeates every aspect of the supply chain from the sourcing of products from sustainable sources through to the transport choices made for fulfillment of orders. The circular economy is a mantra, a movement and a sensible choice to make. It is difficult to ignore sustainability for even the most hardened denier of the need to be sustainable in everything we do. If we want to preserve the planet there is a need for everyone to make choices that achieve that goal.
The Circular Sustainable Supply Chain
There is a need to transform from the make and dispose consumer society that developed during the past century to a more responsible approach of preserving the Earth’s resources for future generations. We all have our part to play. Designing out waste and making choices that eliminate or reduce the impact of pollution are essential. In my conceptualization of the ‘Circular Sustainable Supply Chain’ There are four layers and they are interrelated. At a micro-economic level the firms at the centre make independent choices of how to: source, extract, harvest, procure and apply resources for their production systems. At this point the choices they make will effect every other part of the system. There is clearly a role for government here to regulate the system to ensure resources are preserved for future generations and to eliminate and control the impact of polution across the system. The second layer contains the various processes moving resources through production, distribution and consumption. The third layer shows the end to end cycles within the supply chain system from procurement through to regeneration. The outer layer displays the money flows along with the information system necessary to create transparency in the supply chain. With digital systems it is much easier than it ever was to keep track of movements within the total supply system with sensors, RFID, barcoding and mobile apps. Each part is connected to the whole system. This provides opportunities to achieve supply chain advantage that could only be imagined by previous generations of supply chain professionals.
Visibility and Transparency
Visibility means that supply chains are no longer opaque and we can know with a degree of certainty what there is and where it is located in the supply chain. As already indicated digital technologies have improved this aspect of the supply chain in recent times. Many will recall times when it was difficult to track and trace goods moving through supply chains. Indeed it was sometimes difficult to find things in a single warehouse prior to the use of barcodes, radio frequency identity tags (RFID) and QR codes.
A distinction is often made between supply chain visibility which is the ability to know where everything is at a point in time within the system and transparency which focuses attention on who you will share the information with. This latter meaning is important when it comes to which organizations have been granted access to the data. My preference is for open visibility it benefits all in the long run. There are many stakeholders in supply chain systems that need to be considered. Some stakeholders will have legal and ethical claims to data held by organizations and this trend will continue to rise in importance. So devote some mind space to it now to future proof your supply chains. We already see retail consumers wanting information about where their food comes from, how it is produced, stored and distributed in addition to the contents of the pack.
Risk Reduction Strategies
There are a number of risk reduction strategies employed in the supply chain. Managing inventories is one area where large amounts of value are tied up in working capital. It is always essential to develop strategies that minimize risk in this area. This is one reason that Just-in-Time (JiT) inventory management systems were introduced. Lowering inventories lowers the financial risk from damaging events such as fire, or from theft, deterioration in storeage, scrap, waste, redundant items and obsolescence. Strategies that postpone production until nearer the time that goods are required by customers also reduces this risk, hence JiT systems. This has to be balanced against stock-outs and shortages that might occur from any of the risk reduction strategies employed.
Speed at which goods move through supply chains has always improved performance. Faster supply lead times satisfy customers and reduce the risks involved not only in holding inventories longer than necessary but in speeding up the production to payment cash cycle. This means cash flows are improved which benefits all supply chain partners.
Agility and flexibility are two elements to improve supply chain risk profiles. This assumes that the supply chain is agile to respond to changes in demand and flexibility is the ability to move resources and production capabilities to do it. Agility enables effective supply chain responses to changing conditions however they arise.
The reason I put lean alongside risk reduction is because it is the classic risk reducing strategy. If you are able to operate a lean system it means that you are not overcommitting resources to any single category. Lower running costs and increased profitability are the usual outcome of adopting lean strategies so long as you still have the capabilities to deliver the customer promise. Lean eliminates seven types of waste identified by Ohno in the Toyota Manufacturing System. Womack and Jones talked about letting the customer pull value through the system encouraging organizations to be lean. Put differently, the customer aint going to pay for bloated production systems. It relies on having good demand information to allow the system to flow freely from production to customer.
The reason it is identified as a trend for 2021 is because many organizations are financially stressed by the pandemic and it is an important means of conserving resources. If you can lower risks and save money tied up in working capital that may be applied elsewhere it is worth doing. Seeking ways to lower risk must be a priority in uncertain times.
Managing Layered Complexity
Supply chains are seldom as simple as they might at first appear they are often complicated and many are complex. In the most complex supply chains there is a need to think about the layers of complexity and how they can best be managed. If you take an example of one relatively simple chain and compare it with one that is more complex in your own organization you will begin to untangle the complexities. One way to think about this is to examine political, legal frameworks that your supply chain has to negotiate to be functional. On top of which you might add ethical, environmental and societal influences that add to the complexities of managing the supply chain. Balance this with any technical issues in that chain too. For example, If you are producing, distributing and moving hazardous materials by ship or by road you will be aware of the regulatory frameworks and specific legal requirements but you may also have to consider environmental protest groups, social movements and the broader political climate to organize your business effectively. There may also be ethical considerations and technical handling layers of complexity. This is what is meant by layers of complexity and it is something that is rising up the agenda right now. Building capabilities to manage layers of complexity is something that many supply chains need to creat advantage in their market-place. It is closely linked to risk, resilience and agility.
Demand Sensing Technologies
A further justification if any were needed to argue that digital transformation is necessary in the supply chain is the move from traditional forecasts to predict demand using time series data to almost real-time data using different mathematical projection techniques. This improves forecasting as it does not rely on historical data alone to create time series forecasts which could be vey outdated given rapidly changing conditions in demand, product availabilities, changes to product lines, ranges and other developments. The closer we move to real-time data the more accurate forecast. Short time-frames are needed to produce good forecasts. A three month (90 days) forecast will be more accurate than a six month (180 days) forecast. The further we move away from real time data gathered to make the prediction lowers the probability of an accurate forecast.
Compare the accuracy of forecasting weather for the week ahead and the longer term six monthly forecast. Ask yourself the question which is likely to be most accurate?
Contactless Commerce
Contactless commerce has emerged as one of the most effective ways to do business during the pandemic. It has always been a part of business but it is now much more so. The digital tools to conduct contactless commerce are in place and people have had rapid learning curves during the crash course enforced by Covid19. This is a trend that will continue to gain as people seek to minimize other effects such as climate change impacts of doing conventional commerce. It will remain a part of the repertoire of doing business and managing global supply chains.
Cyber Threats
In the past year we have witnessed the increasing threats from cyber criminals attacking companies to disrupt supply chains. There have been a number of Distributed Denial of Service (DDoS) attacks. These threats often demand ransom payments, destroy or steal assets. The threats are existential in nature. They are one reason that the US President wants US Supply Chains to become more resilient. In recent weeks we have seen the impact of such disruption inflicted on the Colonial Oil Pipeline in the US. The FBI tracked the incident to a group called ‘Darkside’ to recover the $5 million ransom paid. As more business moves to web-based services it is a risk that is increasing. Supply chain strategies need to be in place to deal with it.
Intermodal Logistics
It began with the box; standard containers (20 and 40 feet in length). Today we expect all goods to be shipped in standard containers apart from bulk liquids, aggregates and commodities. Intermodal logistics allows businesses to plan and control each stage of the journey from origin to destination. Choose carriers for each stage with the best price and a separate contract that gives flexibility for each stage. It provides possibilities to lower cost, to choose transport services that lower the carbon footprints for each stage of a journey. It requires a little more hands on than multimodal logistics where there is a single Bill of Lading for all stages of a journey. In the latter responsibility for carriers, transport choices and routing selection are passed over to the multimodal logistics handling agent. In conclusion intermodal logistics allows choices for each stage by ship, rail and truck, provides better security, is faster, gives more control over cost along with routing which in turn lower the impact on a firm’s carbon footprint. This is the reason intermodal logistics is in my top ten strategies for 2021.
TONY HINES BLOG 