End to End Supply Chain Analytics

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End to end analytics is a term that describes a means of integrating data sources from different supply chain activities and process cycles to understand supply chain performance with the intention of developing improvement strategies. End to end analytics provides supply chain visibility. Here I explain why end to end analytics are needed and how you can set about the task of creating your own metrics to measure process performance. I have worked with many retail supply chains over the years and understanding what drives cost and adds value is necessary to improve performance. I use the example of retailers to explain the types of end to end analytics that they use to do that. It is an important example to understand fast moving consumer goods (FMCG). Inventory management is an essential part of retail profitability.

End to end supply chain analytics starts at the point of origin and ends with the final process cycle in the supply chain. In Figure 1 it starts with harvesting or extraction and ends with re-use. Each of the process cycles has a number of operations attached to it that need to be analysed. Workflows need to be measured in time.

Process Maps

Process mapping has been a useful tool to understand what is happening in the supply chain or in any complex system. The DAMA project was one of the best examples of process mapping which analysed every step in US textile supply chains from harvesting cotton through production and distribution to the final customer. If you really want to understand your supply chain then you have to get data about the detail which is exactly what happened in the example. Knowing how much time and cost is involved within each process is the first stage of understanding where cost is incurred and value created. From the process map you can create metrics to inform decisions about improvement strategies.

Seamless Systems

End to end analytics integrates all elements of the supply chain with metrics to understand changes in the supply chain system. These data must capture everything from point of inquiry, conversion rates, order, sourcing, production, supply to customer fulfillment. Artificial Intelligence (AI) is increasingly used to understand changes in the system. Everything from demand planning, forecasts and progress status can be accessed to reduce risk and enhance customer service.

Understanding end to end analytics

Understanding end to end analytics is in mathematical terms a linear programming problem where you want to optimise performance by managing constraints. This is not simply an efficiency matter but it ensures service quality. From the point of origin through to the final customer there are many process cycles and within each cycle operations that need to be managed. End to end analytics should not simply be thought of as part of an enterprise resource planning system ‘big fix’. The hard thinking is in understanding what data you need to manage the end to end supply chain from point of origin through to the customer and beyond – e.g. consumption and waste management. End to end analytics provide the opportunities to share data and eliminate silo mentalities to better understand the supply chain for the benefit of all.

Application

In my Supply Chain Strategies Book I give the example of five performance objectives which are cost, speed, quality, reliability and flexibility. If your performance objective is to lower cost then you need data that indicates the cost of each operation, process or cycle. If the performance objective is speed – cycle or process time, lead times and delivery times are some metrics that will be part of your dashboard. I discuss those here along with quality, flexibility and reliability together with the types of Key Performance Indicators (KPI’s) and you can read more detail in the book. In some ways end to end analytics are easier to implement today with cloud based systems and software technologies gathering data from a variety of sources providing you understand how to integrate it. Comparable data requires careful planning and execution. Structuring data are the key to success.

Listen to my podcast on this topic here.

© 2021 Tony Hines – All Rights Reserved

Ever Given is on its way

Source: Vesselfinder

Ever Given Free at Last!

A number of tugs attached cables and working together managed to pull the ship from where it was lodged to relaunch the stranded ship. This was after dredging and removing tonnes of sand from underneath the hull. Ever Given has finally been freed and is now on its way to the an area know as the Great Lake where technical inspections will take place. Meanwhile other ships will be able to pass. Ever Given is travelling at a steady speed of just over 6.7 knots per hour. It is unclear if it is being towed by tugs or under its own diesel engine. Either way this is very good news! The Marine Salvage Team, the Suez Canal Company and everyone involved have worked tirelessly to refloat the vessel after it was grounded six days ago wedged side to side across the canal.

Source: Vesselfinder – Ever Given enters the Great Lake so the blockage is at an end

This of course is just the important first step of getting traffic moving through the canal. There is a big backlog of ships stuck either side of the point at which Ever Given was grounded. It will take some weeks to get supply chains back to some degree of normality. There will now likely be some backlog at ports where ships caught in the delay will have to wait to enter and be unloaded.

You can read more about the six days and the ship that stopped global supply chains at:

https://www.linkedin.com/pulse/ship-holding-up-global-supply-chains-suez-tony-hines

and on this site – see below.

Ever Given has moved but remains blocking the Suez Canal

The position of Ever Given at 10.30am Monday 29th March 2021 Source: Vesselfinder

The operation to refloat the grounded ship blocking the Suez Canal has been in progress since the accident occurred last Tuesday 23rd March. The stern of the ship has now been freed from the shoreline. The Suez Canal Authority reports the ship has been corrected by 80 per cent. This remains a complex operation and work to move the ship further is expected to recommence at 2pm UK Time today. The ship will need to be checked for damage to the hull by divers before restarting engines to get the ship on its way if possible. The hope is this will resolve the issue.

Peter Bodowski head of the Dutch Salvage Company commented that dredging mud and sand from the bough had brought some progress before he went on to say that containers may need to be removed if this did not work to get more movement.

Some 360 plus ships waiting to recommence their journeys through the Suez Canal will be hoping everything goes to plan. About $10 billion is the value of goods moving through the canal daily. You can read more about this clicking the link below:

https://www.linkedin.com/pulse/ship-holding-up-global-supply-chains-suez-tony-hines

Supply Chain Disruption – In the News

Photo by Dominic Alves Flickr Global Air (Blue) and Sea Routes (Green)

The photograph shows global air and sea routes. These shipping lanes and air routes move goods throughout the world and are critical to the effective functioning of supply chains. Forty per cent of world shipping passes through the Malacca Straits connecting the Indian Ocean with the South China Sea and twelve per cent passes through the Suez Canal a major route from Asia to Europe.

Disruption to shipping routes

Ever Given is the name of the ship in the news this week causing severe disruption to shipping through the Suez Canal. The ship belongs to Evergreen a Japanese company. There are reportedly 230 ships (and growing) caught up behind the Ever Given awaiting passage to the Mediterranean Sea and on to European ports. Oil, gas, consumer and industrial products are among the many goods held up. Goods valued around £10 billion per day pass through the canal. The 400m-long (1,300ft), 200,000-tonne vessel is lodged sideways across the canal. It happened during high winds and a sandstorm conditions which are not that unusual in the region. Some have questioned the competence of the helmsman but it may simply be that this ship was too big for the narrow canal. Such a blockage has not happened previously but of course these huge container ships are much larger than many that previously travelled through Suez.

Photo by Chris Lovelock on Flickr – Container Ship Passing safely through the Suez Canal

There was a failed attempt to refloat Ever Given by marine engineers and salvage operations on Tuesday 23rd March. Suez is the shortest route from Asia to Europe linking the Red Sea with the Mediterranean Sea. Avoiding Suez adds about two weeks to the journey sailing around the Cape of Good Hope, South Africa. Salvage experts say it could be weeks before they are able to move the ship. Some are more optimistic and expect to dig out the sand to get movement in a shorter time-frame of days rather than weeks. At this point it remains to be seen. Delays will cost millions and expect big insurance claims from suppliers and customers impacted by the disruption. The longer trip around Africa will also have further risk and cost – for example, extra fuel and risks from piracy. Twelve per cent of global trade passes through Suez. It is likely that shipping freight rates will increase as there is a shortage of ships caught up in the crisis and those that sail from the Far East will need to take the longer route around Africa.

MV Ever Given blocking the Suez Canal 25th March 2021

It takes some skill to get a ship blocking a canal side to side like this. Let’s hope it is not something to be repeated. One alternative being considered is to remove the containers to lighten the load but this is an expensive operation that is likely to take longer given there are no facilities immediately available nearby to lift the containers.

Listen to Chain Reaction the podcast all about supply chain advantage

Astra Zenica’s Covid 19 Vaccine is in the News this week

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A rumbling dispute originally framed as a political argument between the EU and the UK erupted as shortages of the Astra Zenica vaccine are said to be limiting the EU roll-out. The EU was of course slow to approve the Astra Zenica vaccine and there have been misleading comments about the efficacy of the vaccine which held up the EU vaccination programme in several countries including France, Italy, Germany, the Netherlands and Denmark. It was reported in Nature the Journal that efficacy rates of 76 per cent were confirmed in trials by Astra Zenica. There had been a claim that a previous statement claiming 79 per cent efficacy was misleading but this was clearly unintentional in a rushed press statement with the company keen to give assurances to the wider public and EU that the vaccine was effective. If Astra Zenica’s vaccine really is in question why is the EU now so keen to get its hands on the vaccine saying its dispute is not with the UK but with the company who they claim are failing to meet their contractual obligations. This is really not helpful. There may be supply chain problems but instead of carping the EU would do better to see how it could help and support the roll-out to its citizens so that everyone is protected.

The company clarified that the most recent figures were estimated 15 days or more after participants received their second dose of the vaccine, and were consistent across all age-groups including people aged 65 years and older. None of the vaccinated participants developed severe disease or were hospitalised.

Nature 25th March 2021 – Latest results put Oxford–AstraZeneca COVID vaccine back on track

The Astra Zenica vaccine is clearly a triumph of science. Yes we know supply chains can be difficult but this is a completely new product brought to market in less than a year with increasing demand on an unprecedented scale. Most supply chains would struggle in these circumstances. What is remarkable is that the supply chain is effective despite some reported production difficulties in scaling up production and distribution. This Covid 19 vaccine has 200 components (including:  glass vials, filters, resin, tubing, trays, packaging and disposal bags in addition to the vaccine itself) supplied from 80 countries with around 20 production centres. One of those manufacturing sites in the UK is Wockhardt UK, in Wrexham, North Wales where they have set up at speed to produce vaccines for the UK government supply contract. One of the largest deals struck by AstraZeneca, UK was to manufacture 2.9 billion doses using 25 firms in 15 countries (Source: Nature 25th March 2021). The largest partnership contract is with the Serum Instititute in Pune, India which is scheduled to produce one billion doses. It is a success story given the quick response to develop, licence and distribute the vaccine at cost on a non-profit basis to millions of people world-wide. The US Drugs and Food Administration Agency is likely to approve the vaccine within weeks for roll-out in the US.

One of the biggest threats to vaccine supply is the political threat to block exports to other countries if conditions worsen or countries do not think they are getting their fair share. The worst that could happend is that bureaucrats intervene and disrupt supplies. Interventions in supply chains never work out quite as planned as students of the supply chain discipline who played the ‘beer game’ as part of their learning about systems dynamics (Bullwhip effect) will happily tell you.

Turbulence in Chip Supply

Apple’s IPhone 12 launch was delayed by two months because of problems getting sufficient microchips to manufacture handsets. Chip supply shortages have emerged as a big threat to the production of electronic goods including tablets, phones, computers, televisions and car manufacture. These shortages are likely to mean higher prices for supplies.

Photo by Miguel u00c1. Padriu00f1u00e1n on Pexels.com

What started as a temporary shortfall as chip manufacturers affected by the Covid pandemic closed or slowed production has grown into a serious disruption in production supply chains for all types of consumer electronics. It is not only impacting the elctronic industry but it has seriously disrupted vehicle manufacture as many modern cars are now fitted with sophisticated electronics to manage fuel and engine systems as well as satnav and in-car entertainment. Chips with everything in the contemporary world has made supply chains vulnerable as they compete to get the components they need to manufacture goods.

Supply Chain Disruption

One thing is certain and that is disruption will occur at some point in any supply chain. There is a need to be ready for disruption when it happens by planning for disruption and developing strategies to cope with disruption. Depending on the type of disruption it is worth being prepared for the inevitable and learning from what other organizations do to make their supply chains resilient and overcome problems. This usually requires a good dashboard system that alerts you to potential problems before they happen. An ability to sense threats is critical to becoming resilient. You may be able to have plans B or C ready to go when needed. Felxibility and adaptability are key to overcoming the disruption.

Supply Chain Uncertainties: Impact of Leaving the EU

Friction in Supply Chains

I have been researching and writing about supply chain strategy for many years (see Supply Chain Strategies: Demand driven and Customer focused). Strategies to reduce cost, improve efficiency and increase effectiveness usually involve taking unnecessary cost out of the chain, reducing what supply chain professionals refer to as friction which is an obstacle that slows throughput and increases cost. In removing friction essentially we unblock the chain and smooth the flow so that goods move seamlessly from producers to customers. If large volumes of transactions in supply chains are moving through from tried and tested suppliers who are used to dealing with others in the chain it becomes easier to achieve a frictionless supply chain and one which is transparent meaning that we can locate goods quickly within any point in the chain. Firms have invested heavily in systems to achieve transparent (track and trace technologies) and frictionless movement through their supply chains. This is better for lowering their operational costs and it improves performance in terms of on time and complete deliveries for customers.

EU trade with the UK is about 54 per cent in terms of imports and we export 47 per cent of UK goods and services to the EU. So about half of our trade is inter EU. If you have few tariff or trade barriers goods move between member states without friction. Hence little cost is attributed to friction in supply chains. There is less volatility. Volumes are transferred fast by road, rail, ship and air. Value is retained because there is less waste due to holdups at customs, ports or transfer hubs. This is particularly important for perishable goods such as food. There is no need to hold additional Just-in-Case (JiC) inventories. Just-in-Time (JiT) supply chains can be managed smoothly with Radio Frequency Identity Data (RFID), mobile devices and sensors with the ability to make transparent the supply chain. As a consequence firms can operate with lower levels of working capital employed. This benefits everyone not least of all customers who get what they want when they need it. Frictionless trade allows for fairer competition in the market because there are no artificial barriers to trade. Put simply, government interference in the market mechanism is lowered. Frictionless supply chains are better placed to lower barriers not build them unlike a frictionfull supply chain. Research by Consuming Future Research (CFR) shows that volatility and disruption are likely to increase by 67 per cent in trade with the EU after Brexit if no deal happens. It will still increase if a deal is struck but we do not know by how much that would depend on the terms of the deal. Bureaucracy will increase by 22.2 per cent adding to increased costs of around 11 per cent. Brexit increases supply chain risk in what has been fairly low risk trade with the EU. It will likely push up prices and ultimately it will be consumers who will pay more for goods and services unless these costs are mitigated in some way. Covid 19 amplifies these difficulties as well as introducing disruptions of its own.

Early in 2020 around 90% of lettuces, 80% of tomatoes and 70 % of bananas were imported via the EU. The UK imports 50% of its food with 30% coming from the EU.

The British Retail Consortium, a trade body, calculates that the average tariff on food imported from the EU will be more than 20 per cent, with some staple foods attracting particularly high levies. The tariff on beef mince is 48 per cent, cucumbers 16 and oranges 12.

Brexit: How much will food prices rise if UK does not agree a trade deal with the EU? Ben Chapman, 20th September 2020, The Independent Newspaper.

Market distortion can have unintended consequences. For example, some hard Brexiters have suggested lowering food tariffs to zero per cent but this will have detrimental consequences for domestic farm production.

The gains made by Supply Chain Professionals in the last two decades are about to be reversed by political decisions erecting artificial barriers to trade in the transactions between the UK and EU. One likely consequence is that this reintroduction of friction into many supply chains will increase transaction costs for most, if not all firms. There will of course be winners and losers. It will make it more costly to cross the borders and if you need to do so more than once as is the case with many intermediary goods then it might pay to relocate to avoid these transaction costs depending on size and volumes.

The Island of Ireland

This perhaps is somewhat reminiscent of Hilary Putnam’s Twin Earth Thought Experiment with semantics at the heart of the problem. It is the nettle that the UK government have been reluctant to grasp. While the Republic of Ireland remains in the EU the six counties in the North being part of the UK will be leaving. Special arrangements are supposed to accommodate the transition. Many, however, are unclear about exactly what these arrangements are including government when questioned. A lot of red tape, bureaucracy and obfuscation is what insiders are telling me. International product certifications and standards will play their part in this brave new world of in or out. More than 90,000 SME’s will need to become versed in import and export regulations from 1st January 2020.

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Recent Evidence

The overall cost of the UK leaving the EU has been estimated equivalent to the total paid into the EU during its forty-seven year membership. Estimates put the figure at over £200 billion (Sources: Bloomberg Economics; LSE; Business Insider). These costs are likely to increase if there is no deal. The Institute of Fiscal Studies (IFS) noted that trade deals are supposed to lower prices for consumers but this appears unlikely even under the best scenario prices are likely to increase by about 6 per cent according to studies by Warwick and Bristol Universities. A recent study reported Covid 19 is likely to cost around £40 billion which places the impact from Brexit in context (LSE Study, The Guardian). A number of industries including automobile and aircraft manufacturers are already under pressure from lower demand due to Covid 19 and because of looming environmental regulations and proposed government policies to lower CO2 emissions and improve air quality.

According to the Society of Motor Manufacturers and Traders (SMMT), £735 million has been spent by manufacturers on Brexit measures already, with £235 million spent in 2020 alone.

uk.motor1.com/news/453626/carmakers-spending-billion-on-brexit-preparation/

The Chartered Institute of Procurement and Supply (CIPS) survey of supply chain professionals (21st October, 2020) shows that most expect to pay 22 per cent more for goods this Christmas due to a combination of Covid 19 and Brexit disruptions. Most of the cost will be passed on to consumers. Nearly half of those surveyed expect delays in deliveries at borders of a week or more. A Brexit no deal would worsen the situation. One in three supply chain managers have said that they have selected a new UK supplier to replace an overseas supplier in an attempt to reduce risks and approaching 40 per cent have indicated that they have lost a supplier due to bankruptcy as a result of Covid 19.

Bloomberg have reported that there are critical gaps in planning for border systems to cope at the end of the transition period (31st December 2020). This lack of preparation is likely to significantly disrupt supplies and increase prices. The new freight smart system is designed to allow only trucks with appropriate documentation into Dover and to reduce hold-ups on the M2 and M20 approach roads. The UK Government has promised to be ready by 1st January 2021 (in beta test mode). Logistics UK the industry body has said they do not expect a fully functioning system until April 2021. It is problematic because even if it is introduced in January no one is trained as yet to use it. Many logistic companies and others in the supply chain are ill prepared for what disruption lies ahead according to Logistics UK. According to Supply Chain Digital the government stated worse case scenario is 7,000 trucks maximum queuing at ports with associated delays of two days. This would appear optimistic given other evidence here. The expectation is that the first three months of 2021 will be problematic and there will likely be large disruptions to all supplies including food and medical supplies; the latter one reason why the government is currently stockpiling supplies. For commercial businesses facing other medium to long-term disruptions due to Covid 19 with falling revenues and non-existent cash flows it is not an option to invest heavily in inventories.

A return to WTO terms would put the UK at a competitive disadvantage with its current leading supply chain partner the EU. No longer a partner but a competitor unless a mutually beneficial deal is struck. The EU plan to introduce full border checks for goods entering the EU from 1st January 2021. Goods entering the UK from the EU will have another six months before full checks are in place. Often when one part of a system is disrupted repercussions roll out in waves to other parts. It could of course cost lives if medical supplies are held up in the chaos. It is more than likely that some, if not all of the following issues may be realized. Deal or no deal there will be increased friction in supply chains and increased transaction costs as a consequence with possible increases in delivery delays and higher inventory levels by holding safety stocks just in case. Higher risk of deterioration, redundant, scrap or waste for those inventories held in case there is supply disruption. Customer service levels are likely to deteriorate as delivery times become extended and consumers will most likely pay the price for the lack of planning by government to ensure a smooth transition.

Free Ports Plus ça Change

The UK Government this week confirmed that they will be re-introducing Free Ports. Free ports are not a new concept they have been around since the Cinque Ports were established in the 12th Century and Dover was one of them. The attraction is that they are tax free zones aimed at stimulating the regional economy in which they are situated. The government has committed to having one in each of the devolved administrations, Northern Ireland, Scotland and Wales. Aberdeen, Blythe, Belfast, Sunderland and Teesside have all been identified as some of the areas that could benefit. They may be considered as part of the levelling up agenda by government. Interestingly Free Ports were last introduced in the UK in 1984 by Prime Minister Thatcher’s Government and lapsed under Prime Minister Cameron in 2012 when the government chose not to renew legislation. Belfast, Cardiff, Liverpool, Prestwich and Southampton were all free ports during this period. The Isle of Man a crown dependency neither part of the UK or the EU still has a free port. Government claims free ports could add £9 billion to the UK economy. Rather than stimulate new business it may simply accommodate existing businesses who move in to Free Ports to avoid taxes. Thus, moving the existing revenues into a tax shelter and lowering the tax take.

It should be noted that the UK had free ports whilst part of the EU and the EU currently has 82 free ports. So it should not be assumed that this is enabled by Brexit. Free ports may help establish tariff free zones if there is no deal. It is likely this is the reason they have been re-established now. The government could offer aggressive tax incentives that make it attractive to invest in free ports to avoid taxes for overseas companies. Put differently, create tax havens. As the UK seeks to establish ten free ports the EU is clamping down on the 82 they have over concerns about organized crime, money laundering and the financing of terrorism. The establishment of Free Ports right now is likely to irritate the EU which is something the timing of this announcement may have been designed to do as part of UK tactics to negotiate a deal. The WTO or member states may also object.

Supply Chain Strategies to Mitigate Risks

Most mitigation strategies to fix the problem are not a quick fix. It takes time to find new markets or to source new suppliers if transaction costs and frictions disrupt existing fast flow systems. As a strategist the best option is to avoid this option but it appears too late for that now. So mitigation is the best but not necessarily the optimum solution.

Brexit crunch – where to from here?

As the 29^th March approaches the UK Government appears to be no nearer to resolving the Brexit deal. This is likely to be only the start of what has already been a wasteful two and a half year period with little executive focus beyond Brexit. Meanwhile all sorts of other major issues that affect people’s daily lives have been paid little attention. There is a significant growth in homelessness, increases in poverty, disadvantaged communities under pressure from new benefit rules, increasing knife crime involving teenagers, cuts to police resources, reductions to military capabilities but we are prepared as a nation to tolerate the billions spent on Brexit driven by political ideology. If you want to know the impact of Brexit on the most vulnerable read on http://sticerd.lse.ac.uk/dps/case/spdo/spdorp03.pdf.  If you want to know more about the inadequate border preparations read this National Audit Office Report https://www.nao.org.uk/wp-content/uploads/2019/02/The-UK-border-preparedness-for-EU-exit-update.pdf. If you want to know how Brexit will affect you and your standard of living there is some sobering research from the Resolution Foundation that you can read here https://www.resolutionfoundation.org/app/uploads/2019/02/Living-Standards-Outlook-2019.pdf.

 The National Health Service despite best efforts appears to be in meltdown as a national service missing all sorts of government targets so much so that the government wants to remove targets so that problems are not highlighted which does not appear to be very sensible. Whilst targets in themselves may not be a panacea they are indicators of service and should not be brushed under the carpet. There are real issues about priorities and funding which are highlighted in this comment piece by the Kings Fund commenting on the November 2018 budget. https://www.kingsfund.org.uk/blog/2018/02/priorities-nhs-2018-19-and-beyond.

Only history will tell the tale of what Brexit means or meant for the well-being of the United Kingdom. It is likely to be one of the most calamitous and politically inept decisions by any British Government and there have been quite a few already detailed in the history books. This is not about the immediate impact Brexit will have although that is likely to be very damaging with many long term commitments broken. It is doubtful that there will be much manufacturing taking place given the threatened withdrawals by Nissan, Land Rover, BMW (Mini), Honda, Toyota, Ford and others.  Take a look at this Civitas Report written back in May 2017 the writing was on the wall but these messages have been largely ignored by an inept Brexit executive. http://www.civitas.org.uk/content/files/supportingindustrypostbrexit.pdf .See also the earlier article in Supplychain news from 2016 http://www.supplychainonline.co.uk/article/uk-auto-industry-raises-concerns-over-post-brexit-supply-chain-tariffs/

It is about the return to darker days, isolationism and withdrawal from the global economy and all the benefits that accrue through collaborative partnerships properly negotiated by a community for the benefit of those in it. We know that the EU has many shortcomings but returning to a world where negotiations are returned to Westminster may not be the smartest move and the track record of their negotiation skills is not proven as we have witnessed first-hand. Many politicians appear to be completely out of touch with any sense of reality.

Brexit has also created panic and given rise to some strange decisions for example take a look at the National Audit Office Report on the cross-channel ferry capacity debacle. https://www.nao.org.uk/wp-content/uploads/2019/02/The-award-of-contracts-for-additional-freight-capacity-on-ferry-services.pdf

We know that there is going to be disruption to many supply chains and delays and administrative burdens are going to increase time taken and the cost of moving freight into and out of the UK. This is why there has been serious concern expressed by every quarter of business involved in serious EU trade which accounts for over 50 per cent of all trade contributing to UK National Income. There are some dissenting voices harkening back to a bygone age of Free Trade that never really existed being more myth than reality and it was of course the era in which the Empire was fuelled by The British East India Company formed in 1601. Today’s global trading system is much more complex. Many rich people of course do stand to gain by gambling on the treasures that Brexit Buccaneers such as Dyson may be able to realise by moving manufacturing outside of the UK to South East Asia but for most working and living their daily lives in the UK the story is different.  Take a look at the National Audit Office Report on the cost of the referendum  a reduction of £1,500 in annual disposable income, according to this Resolution Foundation analysis
https://www.resolutionfoundation.org/app/uploads/2019/02/Counting-the-cost.pdf

Be good to wake up from the Brexit dream or nightmare depending where you sit on the matter.

Six of the best

When I was at school in the last century ‘six of the best’ had a very particular meaning. Here it refers to six of the best books I have had the pleasure to read. These books were adjacent on my bookshelf and I began to wonder why I read them and what connected them to me and my interest and motivation to read them. In this piece I will share my reasons and make sense of why I chose them justifying their place on my bookshelf.

The Soulful Science a book about what economists do and why it really matters was a book I came across in a bookstore on my travels. Those people I know who have accompanied me on trips will know that I often spend several hours browsing bookstores. A habit I developed in my school days that has not gone away despite the digital age providing many opportunities to acquire information and knowledge instantly. There is always something aesthetically pleasing about holding a book. From the cover to the pages that unfold one at a time as one reads the author’s thoughts placed into the manuscript. Diane Coyle’s writing is crystal clear, concise and convincing. Her arguments are developed through her vast knowledge of her subject. The author’s own curiosity about the subjects she writes about is evident for all to read. My combined interests in economics and philosophy attracted me to the title of this book and when I opened the pages I was not disappointed. This is a thoughtful book tracing developments in economics and its application to what appear to be intractable problems of our everyday lives. The author tackles what she has called ‘The Mysteries of Wealth and Poverty”, notions of free choice and how economists are now more than ever able to consider evidence to establish policies that might just work better than they did in the past. This is not simply a book about economics for economists but is worthy of a wider audience that want to know why organizations, institutions and individuals behave the way they do to influence our quality of life. The author’s enthusiasm and insights into how we are all affected by what economists do is enthralling. Within these 279 pages of text the reader is able to grasp the fundamentals of how and why policies are established for better and worse. Carlyle’s quote alluding to economics being a dismal science because of the bad outcomes is replaced by an understanding of modern economics having a place to become the ‘soulful science’ a discipline that has compassion and hope achieved through better understanding the data and behaviours.

The second book in this sextuplet selection is also by Diane Coyle entitled simply GDP. GDP or to give it the full name “Gross Domestic Product” is something we hear in TV News or read about in the press. It goes up and it goes down. We assume up is good and we can all sleep safely tonight in our beds. If it goes down we exercise ‘fear and trembling’ because the assumption is that our life might just be worse tomorrow. Unless of course we can correct it’s trajectory. Coyle traces the history of this socially constructed measure of economic performance. In this book we learn what GDP is, how it has been defined and how the measure has decided the fate of political leaders. Coyle’s thesis is that GDP was fit for purpose in the twentieth century but may be less so in the twenty-first century when the balance of the economy has moved significantly away from trade in goods towards a dominant service based economy. Recent Brexit plans by the UK Government have made much of how they have squared the circle and yet in doing so it is puzzling to observe the exclusion of the service economy in the Brexit plan. Perhaps politicians and their advisors would do well to read this book if they want to understand how irrelevance can be avoided in design of the plan.

The third book claims its place because it is relevant to contemporary economic discussions as well as to organizations attempting to develop sustainability as a strategic supply chain option. McCarty, Jordan and Probst combine their practical knowledge of six sigma [1] which provides a set of techniques to reduce variation around a quality standard (e.g. variation around a mean of plus or minus 3 standard deviation measures). This means that the standard moves towards zero defects by ensuring that variation is limited around the arithmetic mean in a normal distribution. This together with the DMAIC frameworks (define, measure, analyze, improve, control) of the Plan, Do, Check, Act cycle that they claim can be developed to tackle environmental concerns and simultaneously create business value. The authors outline how these methods of continuous quality improvement moving towards six sigma or zero defects can be applied to achieve lower carbon emissions, energy conservation, recycling of materials and efficient water usage. In this book they make the business case for investing in sustainability using these operationally tested techniques of six sigma and DMAIC.

The fourth book is something of a hobby horse for me. It is Measurement Madness by Dina Gray, Pietro Micheli and Andrey Pavlov. Increasingly I witness obsession with measurement. Often those doing the measuring appear to be doing so because they can and not because it is something that can do to really improve a situation. Of course measurement is important. I am not arguing against measurement just against the madness of bad measurement. In this book the authors make the argument that well-meaning managers often introduce measures that do not achieve what they set out to do. Worse measures may instil false hope and belief in the objectivity of the measures implemented when they may actually be subjective. Anyone who has worked in finance, production, marketing, management or indeed any business or public service will know how bad the impact of poorly designed measurement systems can be. This book is not a how to guide on what to do but it rather identifies, analyses and discusses how to avoid the pitfalls and seduction of measurement madness. There are many examples and the book is an interesting read for any professional with an interest in measurement systems.

Think is a book everyone should read. For many years in the classroom with aspiring MBAs, PhDs and Executives I encouraged them to step back and think. This is easier said than done as they told me. They asked me what they could do to improve thinking. Simon Blackburn’s concise book simply called Think was my advice. Some would ask why I had recommended a book on philosophy. “It is not practical” came the claim. “That is the very point it is not meant to be” I told them, although in fact it is perhaps more useful than that. In this very readable small book everything you might want to know about human existence is touched upon; knowledge, reason, truth, mind, freedom, destiny, goodness and justice. It is a very clear and interesting read. Most agreed after they gave the book a chance by bracketing their preconceptions. It is a book that I return to because it is so accessible and if you want to make a clear, critical argument within these pages there are many nuggets to help you think.

Last but certainly not least is An Invitation to Social Construction by Kenneth R. Gergen. This was a very interesting and influential book that helped me to clarify my own ideas about the nature of reality and how knowledge is claimed. Gergen, is able to distil his own lifetime experience into a succinct, coherent and clearly focused discussion that challenges the preconceived ideas of knowledge, rationality, truth and beliefs. In explaining traditions in trouble we are given a thesis of intellectual and scientific traditions that have brought us to where we are. Moving from what he refers to as the shaky scaffold of the self; our sense of self, conscious thought, reasoning as decision-making individuals played out through behaviours and dialogues makes us what we are. Overlay this with our cultural heritage and belief systems established over time and our existence from Plato’s pure ideas through metaphysical concerns of soul and religious beliefs, doubt, existence and the complexity of human being is exposed. In the critique that follows alternative visions of knowledge, truth and the self are identified and we are shown new ways to think about how processes may be redefined by paying attention to common discourses. Theory and practice converges as constructionist scholarship and societal practice become one allowing for alternative futures to emerge. This is your invitation to social construction. A means of being able to think differently about the world and our place in it.

[1] Six sigma is a statistical measure + and – 3 standard deviations from the arithmetic mean of a normal distribution i.e. six sigma or 6σ 

Six of the Best in Order of Appearance

Coyle, D. (2007). The Soulful Science: What Economists Really Do and Why it Matters. New Jersey: Princeton University Press.

Coyle, D. (2014). GDP: A Brief But Affectionate History. New Jersey: Princeton Univesrity Press.

McCarty, T., Jordan, M., & Probst, D. (2011). Six Sigma for Sustainability. New York: McGraw Hill.

Gray, D., Micheli, P., & Pavlov, A. (2015). Measurement madness: Recognizing and avoiding pitfalls of performance measurement. Chichester: Wiley

Blackburn, S. (1999). Think. Oxford: Oxford University Press.

Gergen, K. J. (1999). An invitation to social construction. London: Sage.

 

What will your Supply Chain look like after BREXIT?

 

The first quarter GDP figure for the UK stood at 0.3% growth. This compares to 0.7% growth in the last quarter of 2016. The Bank of England had expected the figure to be 0.6% so the fall is significant. In France growth also stood at 0.3% while Spain stood at 0.8% both above forecast, whereas the US came in below forecast at 0.7%. It is likely that there are stormy waters ahead according to most economic forecasts. Disruption is a reality for modern business in the normal course of operating. However, the UK has added to its own uncertainties and increased risk following the BREXIT vote in June 2016. Here I outline some of the factors that will add to uncertainty in the months ahead and identify some likely supply chain winners and losers.

Higher inflation is expected at 3% or above by the end of 2017 (Bank of England forecast 2% for 2017), the volatility of UK currency and the decline in consumer purchasing will all have an impact on the British Economy in the months ahead. The period of instability is likely to last for the medium term as the trade terms of BREXIT are negotiated between the current EU members, the rest of the world and the United Kingdom. Nevertheless, some sectors are doing better than others so the picture is not necessarily negative. In manufacturing, textiles, machinery, transport, wood and pulp as well as electronics and other manufacturing the UK is doing relatively well. Food and drink shows a very small decline while other categories including rubber and plastics, electrical equipment and metals show larger falls. The biggest fall is in pharmaceuticals approaching -8%. The key for longer term prosperity will be how the mix and balance of exports and imports change the make-up of UK GDP. Sectors selling more than 30% of their output in export markets have seen a 2.6% increase in growth in the first quarter of 2017. These sectors include transport and machinery. This is not all due to a weakening pound since BREXIT. It is also due to an increase in world-wide market activity in the first quarter of 2017.

Between January 2017 and February 2017, export prices decreased by 0.5% and import prices decreased by 0.9%, with the value of sterling increasing by 0.8% in February 2017 compared with the January 2017 average. However, it remains 10.4% lower when compared with February 2016. (Source: ONS data).

In 2015, the UK recorded the largest current account deficit among the G7 economies at 5.4% of GDP. UK exports grew faster than world exports in 2015, for the first time since 2006. Within this the UK has seen increased trade activity in goods with non-EU countries, with their share exceeding that of EU countries in the last four years. Trade with non-EU countries continues to grow as a proportion of the total. The recent fall in the pound has seen some export categories increase trade while import costs have risen. There has been a slight rally in the pound against the dollar and the Euro since the announcement of a General Election on 8th June 2017. Most commentators opine this is due to the removal of some uncertainty regarding BREXIT. Although, the initial meeting between Prime Minister May and EU Commission President Jean-Claude Juncker at Downing Street did not go smoothly according to reports. It is unlikely to be plain sailing. It will be interesting to see what happens if there is a hung Parliament with no overall majority for any single party. Most people think this unlikely but who knows, opinion polls do not have a good track record when it comes to predicting the British electorate and choices they make. Opinion polls for BREXIT were not a good indicator for what actually happened. More indecision by any Government would increase uncertainty and risk for the British economy.

Table 1 shows the monthly change in volumes by category for imports and exports for both EU and Non EU countries. It shows that most export categories moved upwards apart from semi-manufactures and food to the EU. Consumer goods other than cars as well as chemicals were major exports to the rest of the worlds. Basic material imports with the EU fell while they increased by  23.4% with the rest of the world. It is possible that firms are already increasing forward purchasing to offset currency volatility but the data set is too limited to be sure. Other consumer goods from the rest of the world fell by 11.1%. Car imports rose by 14.4% from the rest of the world and by 2.2% with the EU.

Table 1: Shows Monthly change1 in goods commodity volume, February 2017
EU countries	Exports % change	Imports % change	Non-EU countries	Exports % change	Imports % change
Food, beverages and tobacco	0.9	0.0	Food, beverages and tobacco	0.9	0.9
Basic materials	1.2	-3.2	Basic materials	-7.3	23.4
Semi-manufactured goods; of which	-0.9	0.0	Semi-manufactured goods; of which	0.0	-2.0
Chemicals	-4.3	-3.3	Chemicals	5.0	-9.8
Finished manufactured goods; of which	1.6	4.7	Finished manufactured goods; of which	1.0	-2.8
Cars	2.9	2.4	Cars	-7.4	14.4
Consumer goods other than cars	-1.6	4.0	Consumer goods other than cars	12.0	-11.1
Intermediate goods	-0.9	5.5	Intermediate goods	5.8	0.0
Capital goods	1.7	0.0	Capital goods	1.0	-0.9
Source: Office for National Statistics
Notes:
1. Monthly change is February 2017 compared with January 2017.

There will likely be a turbulent few years as trade terms across categories and countries change as result of the complexity of negotiations. Supply chains will need to readjust to new trade patterns, sourcing trends and shifting economics. This is no time for complacency. If you want to stay ahead of the curve your supply chain will need to be agile.

Doing the right thing for a sustainable future – 2020 vision is the new supply chain imperitive

Poster courtesy Penn State 

Doing the Right Thing, Doing Things Right: Sustainability and Supply Chains

Effective organization requires a focus on doing the right thing. Supply chains are at the center of global trade. Efficiency has been a key focus to improve profitability across the supply chain. This requires organizations to do things right with a focus on lowering supply chain cost. This is of paramount concern to ensure that operations are as efficient as they can be. However, it is only one side of the coin. There is a corollary to this which is that organizations have to do the right things to manage their supply chain effectively. As I say in my Supply Chain Strategies book “Organizations need policies, procedures, and systems to deliver effectively. These three factors need to be sufficiently flexible to respond to the customer if they are to be effective.”[1] It is incumbent that organizations have 20:20 vision and not myopic vision when it comes to both doing things right and doing the right thing.

Those managing end to end global supply chains have an enormous responsibility to preserve and sustain natural resources for future generations. The scientific evidence informing global warming due to human intervention is convincing.

“The concept of sustainable development has been debated since publication of the Brundtland Report (1987) and the Rio Declaration (1992) following on from the Earth Summit in the same city in 1989. The Brundtland Report noted that ‘critical global environmental problems were primarily the result of the enormous poverty of the South and the non- sustainable patterns of consumption and production in the North’ thus, making the distinction between the developed and developing world. It called for a strategy that united development and the environment, which is now described by the common term sustainable development (World Commission on Environment and Development, 1987).” Hines (2014:323)

Policy Measures

The Rio Declaration (1992) and the Kyoto Protocol (1998) called for action on production patterns that showed increasing toxic waste emphasising the need for renewable energy sources, recognising a growing shortage of water and calling for more sustainable public transport systems.

The largest emissions of greenhouse gasses (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride) and two gases arising from these, hydrofuorocarbons and perfluorocarbons, come from emissions in the industrialised countries of the USA, EU, Russia, China, Japan and India.

The Stern Report (2007) noted that irreversible damage was being caused to the natural world and the ecosystem. It was estimated that there were 30,000 major dams preventing flooding of fertile land to sustain food production for an ever growing global population; in 1750 there were none of any consequence.  As indicated in my book:

 “Water usage has increased from around 1,000 km 3 per year in 1900 to nearly six times that quantity by 2000; fertilizer consumption has increased from a zero base to 300 million tonnes in the same time- period. There are now over 700 million motor vehicles where there were virtually none at the start of the twentieth century and CO 2 emissions have risen by 22 per cent between 1980 and 2000. Furthermore, since 2000 they have tripled over the average from 1990–99.” Hines (2014).

While governments can do much by setting a policy agenda the practice is part of everyone’s responsibility to do as much as we can by doing the right things. We do so in small ways in our domestic lives by recycling waste materials. However, if we manage organizations and especially large organizations we are able to do much more.

Practice

Interventions at every stage of the supply chain can contribute to a better world, one that is sustainable in the sense it is defined in this paper. Establishing and maintaining governance throughout each of the supply chains managed is the starting point. This ensures that partners in the network have a responsibility to be compliant in order to maintain their place in the organization supply chain. This has a dual function to educate and to raise supply chain standards that will achieve a sustainable future. The critical role of first tier suppliers has been identified as an agent of change to achieve this.[2] This may be limited by the resource availability of the lead organization, their abilities and commitment to the ‘triple bottom line’, the power they have to exert on the lower level suppliers and their alignment of the procurement and purchasing activities with sustainability.   Some have argued that it needs to go further than compliance to commitment. [3]

Sourcing strategies need to balance the twin aim of being efficient by lowering cost to ensure profitability but not at the expense of sacrificing sustainable futures if it requires doing the wrong thing. In our changing world customers and consumers are becoming more aware of the need to manage end to end supply chains effectively to be clean, green and sustainable.

Recent research has identified a supply chain position paradox [4]which effectively means that those organizations further down the supply chain that is those closer to the consumer are more likely to invest in supply chain sustainability. One important reason for this is that these organizations are more visible to consumers and are more likely to receive a backlash from them.

Sourcing and procurement strategies have a central role to play in establishing criteria for sustainability. These strategies are closely linked to ethical trading arrangements. If supplies are to be procured from countries where their governments are less concerned with environmental standards and working conditions it cannot be right for global firms to exploit this situation in pursuit of profit alone.  There is a moral obligation to do the right thing. A point made over 250 years ago by Adam Smith. [5]

1. Hines, T., Supply Chain Strategies: Demand Driven and Customer Focused2014, New York: Routledge.
2. Wilhelm, M.M., et al., Sustainability in multi-tier supply chains: Understanding the double agency role of the first tier supplier. Journal of Operations Management, 2016. 41: p. 42-60.
3. Foerstl, K., et al., Drivers of supplier sustainability: Moving beyond compliance to commitment. Journal of Supply Chain Management, 2015. 51(1): p. 67-92.
4. Schmidt, C., G., K. Foerstl, and B. Schaltenbrand, The supply chain position paradox: green practices and firm performance. Journal of Supply Chain Management, 2017. 53(1): p. 3-25.
5. Smith, A., The theory of moral sentiments2007 [1759], New York: Cosimo.