Global supply chains, in their myriad complexities and broad impacts, are a fascinating topic that warrant an in-depth exploration. In the recent episode of our podcast, we dove headfirst into the topic, dissecting the impact of recent high-profile events, legislative updates, and sustainability practices.
Starting with a deep dive into recent events, we discussed potential derailments like the potential abandonment of the UK’s HS2 high speed rail link and the US auto workers’ strike. The potential abandonment of the HS2 link is a blow to the UK’s transport infrastructure and has far-reaching implications for numerous stakeholders. Coupled with the US auto workers’ strike, the impact on the auto industry supply chain is immense. The strike underscores the importance of worker rights and fair labour practices in maintaining a stable and efficient supply chain.
Another pivotal event that we examined is the recent settlement by Amazon with its labor board. The agreement, reached in 2021, required the online retailer to allow its workers to unionize. This settlement not only highlights the increasing importance of labor rights in global supply chains, but also signals a potential shift in power dynamics between companies and their workforce.
The discussion then moved to the implications of current procurement regulations in the UK and Germany. In Germany, the recently enacted Supply Chain Act requires companies to monitor human rights and environmental risks in their supply chains. While it strengthens human rights and environmental protection, it also poses significant administrative and financial challenges for companies. On the other hand, the UK’s proposed Procurement Bill, currently making its way through parliament, aims to consolidate existing procurement regulations into a single regime, providing greater transparency and value for money.
In addition to these high-profile events and legislative updates, we also touched upon the ripple effects of the recent car recalls by Kia and Hyundai in the US. The recalls, due to potential fire risks, underline the complexities and challenges inherent to global supply chains. It demonstrates the importance of stringent quality control measures and the impact of recalls on a company’s reputation and bottom line.
Lastly, the episode consistently threaded in discussions around sustainability and ethical practices in supply chains. The call to unionize Amazon workers, the German Supply Chain Act, and the UK’s proposed Procurement Bill are all indicative of a growing emphasis on ethical and sustainable practices in supply chains. Moreover, when natural events like the historic low water levels of the Mississippi River occur, it becomes increasingly clear that sustainable practices are not just an ethical obligation, but also a business imperative.
In conclusion, this episode of our podcast offers a comprehensive and nuanced understanding of the vast and dynamic sphere of global supply chains. From the impacts of high-profile events to legislative updates and sustainability practices, the intricate web of global supply chains continues to evolve, presenting both challenges and opportunities for businesses worldwide.
GlenFlat Containers Looking Good for Multi Modal Transport
Coming Your Way in April
Super Forecasting and AI
The Role of Management Consultants and Business Schools
Ethical Supply Chains
It’s All About the V’s
In the News this Week
Cyber Attacks
Dodgy Pork Meat hits UK Supermarkets
Asia Pacific Trade Deal
Vegetable seed shortages and EU suppliers
Potato shortages possible as energy prices force farmers to switch land use
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Episodes Coming Your Way in April
Super Forecasting and AI
According to Phillip Tetlock Superforecasters are better than average. A large number of people completed the challenge to forecast a range of issues from the likelihood of launching missiles to predicting the economy. These were not all experts in the field and some outperformed others, So why was this the case? Will AI open up new possibilities?
Listen to find out more and to see how this could be harnessed in supply chain management.
The Role of Management Consultants and the Business School Supply Chains that provide them with staff
Management Consultancy is a lucrative business. The number of management consultants in the UK in 2022 grew by 25 per cent according to the Management Consulting Association to around 63,000. There are more than 700 Management Consulting Firms worldwide and the industry is worth $2.5 billion. The US and UK have signficant hubs. Leading firms such as McKinsey, Bain and the Big Four Accounting Firms dominate this market -PWC, KPMG, EY and Deloittes.
The industry is a magnet for leading business school graduates and Harvard lead the pack. Learn why by listening to this episode.
Ethical Supply Chains
It is almost 10 years since the Rana Plaza disaster in Bangladesh hit the headlines with over 11,000 people losing their lives just going to work in a clothing factory. We ask what has changed?
There have been many initiatives to improve ethical trade but do they work? Both the UN and the OECD have issued guidelines.
Myanmar has also seen a number of infringements of workers rights. Once again women are at the sharp end working in clothing factories where they supply leading brands.
Even tea plantations have hit the headlines about human rights infringements.
We also have concerns about the future beyond the factory in AI. Listen to the epsiode to find out more.
It’s All About the V’s
My management thought for the day is “It’s All About V’s.”
Tony Hines speaks about the 7V Framework he developed to create and retain value. The V’s provide structure emerging from research to understand and improve supply chain performance. Find out how you can use this framework to structure value in your supply chains. In difficult times it is important to maintain and build value throughout the supply chain.
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You can listen to any or all of the Chain Reaction Episodes by using the QR Code or by simply clicking on the image link. You will see the full catalogue and of course the weekly Supply Chain News Round Up. This is a great resource for you if you work in supply chains or are a student doing courses in supply chains and business.
We have special editions on a particular topic and we have guest interviews as well as the weekly news about all things impacting global supply chains in that week. So make sure you stay aware, up-to-date and gain useful insights about all things relevant to you.
If you like the Chain Reaction Podcast don’t forget to tell your colleagues and let them share the knowledge. If you are a Programme Leader in charge of a team or have students doing supply chain courses share the links with them so they can learn too. Happy listening!
In the News
This week there has been a lot of discussion in the news media about the potential damage artifical intelligence (AI) might do to society. Some notable voices have suggested that advances are too fast and the dangers might be great. Leading tech influencers such as billionaire Elon Musk, Apple co-founder Steve Wozniak, as well as former presidential candidate Andrew Yang are calling for a temporary halt on AI experiments to address these risks.
The question is of course is it too late to address these concerns? Many commentators think that a lot more has to be done with regard to address ethical concerns. Is it enough or even wise to attempt to turn back the tide of change – Remember King Canute. It maybe an impossible task.
Cyber attacks on supply chains are back in the news this week. A number of security firms including Sophos, CrowdStrike and Sentinel One sounded the alarm about 3CX’s widely used voice and video calling client targetting downstream customers. The software is used by more than 600,000 companies including American Express, BMW, McDonald’s and the UK National Health Service.
The trojan malware is capable of harvesting system information and stealing data stored in credentials from browsers inculding Google Chrome, MS Edge, Fire Fox and Brave.
Listen to the News Round Up to find out about all things impacting Global Supply Chains this week. Every week we cover the top news stories impacting supply chains. Stay informed.
Best of the rest this week:
Pork Meat from South America and Europe has found its way onto British Supermarket shelves wrongly labelled as British Pork. Rotting meat with dubious country of origin credentials was mixed with fresh meat Criminal investigations underway. Public health risks included Listeria and Ecoli. This has been going on for the past two years.
UK Government claiming credit for Pacific Asia Trade deal with 11 countries many it already had deals with. Likely to increase GDP by 0.08 per cent. So only another 3.92 per cent to make up for Brexit.
Looming potato shortage in the UK as farmers reduce land use for the crop by 10 per cent due to rising energy costs.
Shortages of seeds from the EU for many popular varieties of vegetables – French bean ‘Aquilon’, courgettes ‘Parthenon’ withdrawn by breeder along with chillies, peppers, beans, peas and potatoes. Post Brexit phytosanitary certificates are the problem. Suppliers complain that minor errors stop supplies in their tracks and many have withdrawn from the UK market.
Timing is everything says Tony Hines when it comes to achieving supply chain advantage. Whether it is how long it takes to procure goods, process work-flows or transport goods (raw materials, work-in-progress or finished inventories) to the customer. Time endows advantage. Of course time can also be a problem if you do not manage it well. Managing time in supply chains is a risk. There are uncertainties beyond your control that give rise to risks that you may not have factored in. Even the most savvy supply chain professionals are subject to it.
Cargo
Take the current issues in global supply chains with ports experiencing delays in handling cargo. Satellite pictures of ports in California showed about seventy ships lining up waiting to discharge containers at Los Angeles. Long Beach too has delays. About 40 per cent of US Container traffic passes through these two ports. In the UK too at Felixstowe which handles about 36 per cent of the UK container traffic there are similar problems. In the US it has been taking up to 14 days to get ships into port and in the UK 6 days. There is also increased dwell time in turning around containers. It has raised form 4 days to 10 in the UK. The Biden Administration brought those involved in the US crisis to the table to discuss practical solutions and gain commitments. This is seen as a positive move and parties are keen to operate ports 24/7 to get the job done. In the UK the underlying problem is the shortage of 100,000 HGV drivers to clear the ports and get containers in the right places. Time is everything because these delays are costly for everyone the shippers, the ports, the hauliers, the customers and those managing the various operations. A number of large retailers have been agile in trying to manage the risk by hiring their own vessels to move goods. These are generally smaller ships to weave in between the larger ships and to drop cargo at smaller facilities to avoid the backlogs. Home Depot’s Sara Caliga said the idea started as a joke saying they would charter the ships themselves to get the job done but that’s exactly what they have done. Wal-Mart said their strategy was to hire smaller ships to move goods more quickly. IKEA, Target and Costco are all doing something similar. Coca Cola said it was using smaller vessels usually used for grain or coal to move their products around. In the UK the John Lewis Partnership runs 38 department stores, 12 at home stores and about 338 Waitrose Stores and it too committed to charter ships on 16th September to ensure they had supplies for the run up to Christmas. Hiring ships is not cheap. It is also not a skill expected of retailers to run the shipping operation so it will be interesting to see how they do. These retailers are looking to secure the high velocity inventories the goods that make them most profit. Listen to the podcast and find out more.
Electricity Shortages in China
Electricity shortages in China have impacted production capacity as factories in some of the biggest industrial areas have had to close. This is in addition to the problems experienced from the pandemic shutdowns that occur with China’s no tolerance policy to Covid. This will mean more disruptions to some goods. Recent closures in Vietnam have also seen some production move from there to China but Vietnam is now opening up again.
Driver Shortages
The UK is still impacted from the HGV driver shortage (100,000) meaning goods are not moving as quickly as they should. This is impacting the UK’s largest container ports. This week the reintroduction of cabotage by the UK Government means that EU drivers can do more pickups in the UK but this has not gone down well with UK hauliers who fear their work will be taken away by EU firms.
Planning and Control
Planning and control are two concepts to employ across supply chains if you want to deliver on time, every time. On time delivery is always important but with some categories it is not just important it is essential e.g. medicines, fresh food and ambient goods. To plan effectiveley you need systems, processes, technologies and people working seemlessly together across the supply chain. Visibility across the system for all parties that are partnering in that system is essential. Communicating information that is timely to take action to control the system is essetial.
Time is of the essence. It is about perspective. Time in supply chains is critical. The faster you can move goods from point of origin through to customers means you incur less cost, there is lower risk because you do not have to store goods longer than required. Goods in transit are always better than goods in storage. Warehouses are stuck in time. They are a place where goods travel at zero miles per hour.
Are you working on monochronic time? Put differently does everyone in your supply chain work to the same timescale? To be efficient everyone has to work to the same timescale. If your supply chain works on polychronic time you need to correct it. Time is of the essence. All goods have some type of time criticality. Of course not all goods are time critical in terms of perishability as food is but they all require management to deliver on time.
Political Time
Political time is often short. Governments are voted in to office for specific time periods usually 4 or 5 year terms of office. Decisions taken by government are not always in the interests of the population or indeed the state. Government’s are populated by people with different interests and priorities and they do not always act or behave in democratic ways even in a democracy. Factions emerge and sometimes they become dominant sometimes this can be good and other times not so. Governments in a democracy are supposed to represent the views of the people being governed. In a party system that is usually but not always limited to people who voted for the party in government. Time is of the essence. To get things done within their term of tenure governments have to act quickly. This often limits their time horizons on what to do, which means they will action what they can do within time. In this decision algorithm they will limit policy choices. Implementing only those they can within time, with maximum gain meaning they will have one eye on the impact this will have on attracting sufficient votes to stay in power for another term.
Just-In-Time
Just-in-Time is what it says something that arrives just-in-time and not too late. It is in the ‘nick of time’. For politicians it might be the introduction of a policy to correct some injustice or inequitable allocation and distribution of resources. It might be an action to prevent something from occurring which is harmful or undesirable. If it is just-in-time it may stand a chance of working when it is too late it does not.
In supply chains just-in-time (JiT) is a system to move goods from one point to another as they are required. An example might be a material planning requirement to get materials just when they are needed. This way inventory risks and the cost of holding stock just-in-case is minimized. It means that working capital requirements are significantly lowered. JiT supply lowers carbon footprints by reducing waste as well as time in production and distribution. Thus, increasing throughput in a shorter time. Just-in-time systems are efficient. You only produce what you need to. JiT supply systems can of course be disrupted in the same way that other supply chain systems are. When this happens they can appear less resilient than supply systems holding buffer inventories to mitigate risk but there is nothing stopping JiT system adjustments to mitigate some risk by holding a minimum risk level of inventories. This is the premium for resilient supply chains. This will work most effectively for non-perishable goods. After all there is a limited time to hold perishable goods in any supply system. The bland criticism in the press that JiT systems are to blame for supply chain problems is just not true. How well these JiT systems are managed is the issue. Any friction in the supply chain such as additional time delays at ports for any reason will impact JiT systems. If you know this is likely in your supply chain you can take steps to mitigate risks. JiT supply chains work most efficiently when friction is removed. Sometimes unforseen frictions occur causing disruptions e.g. volcano eruptions, floods, adverse weather conditions, cargo lost at sea or delays due to other causes that are not known in advance. In the case of goods disrupted at UK ports because of increased time taken with border checks and administration after leaving the EU (Brexit) then this is bad planning and preparation either on part of government or by businesses. Most examples I am aware of have been because government did not plan particularly well and was unclear about processes. Furthermore, processes were not only unclear but were not clearly communicated to those who were bound by them in time to prepare and act. It was a case of too little, too late.
Too Little, Too Late
Too little, too late, is a political malaise when governments either do too little or are too late to act. This type of malaise can occur when governments fail to recognise their responsibilities or decide that something is not their responsibility. Complacency or indecision is another reason for delays in taking action. It can affect business too. This malaise of too little, too late will be recognised by business leaders. In supply chains those that act fast are the one’s to succeed. Procrastination is not an option. ‘Procrastination is the thief of time’ meaning you will always be too late.
The list of supply issues in the UK grows ever longer: Labour shortages in food processing, shortage of butchers in abatoirs, shortage of C02 for stunning animals, putting fiz in drinks and in food packaging, fuel shortages because of a shortage of HGV drivers, Food shortages at supermarkets and retail stores because there is a shortage of 100,000 HGV drivers after many returned to their home EU countries after Brexit, Builders and other construction workers and materials, doctors and nurses, medicines, microchips, shipping and shipping containers, not enough farm labourers, flower pickers and crop pickers with daffodils left to rot, blueberries too, courgettes, lettuces, tomatoes and potatoes also left in the fields. The PM said he wants a high wage economy and we are going through a period of adjustment but this belies the facts. Many of the daffodil pickers for example earn £200 per day if they pick around 1600 bunches and many do, so that is already decent pay. Some sectors in which there are skill shortages are already by most standards highly paid such as doctors. Migrant workers have always travelled to pick crops so there is some fundamental misunderstanding by many, that people just sit and wait for the work to come to them, it doesn’t work like that. The impact of the pandemic is one issue but the elephant in the room is Brexit restrictions on the movement of labour and a failure to act quickly to issue work permits to allow skilled people to do the work when needed. Even when the UK government did act timely they were swallowed up in their own post Brexit red tape. Employment licenses were too slow to be enacted. There was said to be a shortage of 20,000 HGV drivers five years ago when the UK was in the EU. In China there is a reported shortage of HGV drivers – 20,000 – for a completely different reason – increasing demand for goods. In the UK prior to the pandemic this number of HGV drivers had swelled to around 60,000 a substantial number returning to their home countries prior to Brexit. After the UK left the EU on December 31st, 2020 it became impossible for many EU nationals to remain and a further 20,000 are said to have returned in the run up to that. Growing demand during the past few years accounts for the remainder.
At present the labour shortages in many supply chains have become critical. This despite the UK Government issuing 5,000 short term visas to attract HGV drivers – apparently only 27 people have applied so far. The time limits and restrictions on the visas were set too tightly to be of much use in encouraging people to apply. Also, in some quarters the loss of self-employed status for some contractors including HGV drivers (and IT professionals) has been blamed with HMRC pushing contractors to employed status through the IR35 rules. This moves those contractors to PAYE tax at source and an inability to claim expenses against income which some relied on. There are 5,500 visas available for food processing workers.
Supply Chain Disruptors
Time To Put Things Right
Who is responsible for putting things right? As with many things this answer is not straightforward. Government have a responsibilty to ensure that citizens have security. This security extends from personal safety through to other securities inter alia including, cyber, health, welfare, energy, food, financial and employment. So when it comes to managing the infrastructure to achieve such security the government has a clear responsibility. Government has a responsibility to take action, implement policies and put in place regulatory frameworks that ensure security in these matters. Governments are not responsible for disruptions due to matters beyond their control such as accidents or what insurance companies refer to as ‘Acts of God’. Labour shortages in an industry are caused by many factors including pay and conditions of work. It is up to government to ensure safe working conditions through legal protections and law enforcement. It is up to government to put in place arrangements that make it easy to employ people and minimise the impact of bureaucratic arrangements that impede employment opportunities. For example, if a government department is unable to issue driving licenses to HGV drivers in time then that is down to government to act. If a government is slow to carry out a responsibilty to test HGV drivers in order to license them through DVSA then that is down to government to take corrective action. Actioning work permits in a timely manner when necessary is a government responsibility. These are matters that firms have little control over but they can be badly impacted by too little, too late. Time is of the essence.
Time Enough
It was 2016 when the UK voted to leave the EU. More than five years have passed which you might think is a good length of time to plan and prepare effectively for a smooth exit to minimize the impact on businesses and people who have to adapt to different systems that affect their daily lives. Governments are responsible for conditions created by their actions or inaction. How come five years was not long enough? Well maybe because much of the available time to negotiate an exit deal was wasted and wasteful in negative rhetoric. Government did not really get on with it despite the rhetoric. The vote may have taken place but the fights were replayed in Parliament, in every newsbite, soundbite and political meeting. Without going into great detail not much was done in that period to secure a smooth exit to reduce risk and minimize the impact of all the necessary changes that would come into play after Brexit. The task was grossly underestimated and the detail was thin. Many of the claims and promises made to persuade people to vote to leave the European Union by the ‘Vote Leave Campaign Group’ melted away as positions on both sides of the vote became frozen, hardened in the passage of time. Not a great deal of thinking about what future arrangements between the UK and EU might look like was given mind space or indeed communicated to the nation who would have to pick up the pieces later. Signals of future disruptions were coming from industries who had benefited from frictionless trade with the UK’s biggest trading partner, the EU. Not enough time was set aside to deal with the detail of these real issues until it was too late to act and get a deal in the best interests of the UK. Despite all the rhetoric about ‘an oven ready deal’ the reality was different. The eleventh hour trade deal struck by the government in December 2020 with a few January tweaks did not give sufficient time to communicate with businesses about what they needed to do to prepare and plan by putting appropriate systems and procedures in place. Inevitably, the chaos emerged with hold ups at Dover and other ports and the fiasco to build a lorry park at Dover to store the delayed trucks waiting to move cargo to Europe. Many businesses incurred additional costs that they had not been able to budget for because of the failure to plan and prepare properly. Each transaction now had to contend with extra bureaucracy that added a minimum of £180 to a consignment. Some businesses rapidly began to seek out premises in the EU to move their operations outside the UK to lower their costs. There were ludicrous examples of small consignmnets perhaps worth only a few pounds having to pay a hundred pounds or more to export the low value item. Many smaller firms gave up. Others made big investments in facilities in the EU. Although initially this might cost substantially more by way of investment they were planning to reduce the cost of supply chain friction longer-term.
Covid Time
In the first quarter of 2020 it became clear that we were all entering a strange period threatened by a virus that had started in Wuhan, China, Covid 19. A virus that began to infect and kill people at scale. The whole world was caught short. Apparently back in 2016 the Government in the UK had simulated the impact of just such a threat to the environment and concluded the UK was not particularly well prepared to meet all the challenges. There were some damming reports about a lack of any follow-up regarding the simulation failures. How true this prophetic conclusion became as equipment shortages in the form of ventilators in Intensive Care Units (ICU) and Personal Protective Equipment (PPE) were all difficult to source and procure. There was also no antidote to the virus and epidemiologists, immunology experts and virology researchers started to cooperate to find one. This was done in double quick time. Within a year there were several vaccines including the Oxford Astra Zenica, Pfizer and Moderna vaccines. From March 2020 the UK Economy locked down under governmnet directives. The impact on businesses and people’s livelihoods were to some degree mitigated by government funding but not everyone was protected. As a vaccination programme was rolled out by the National Health Service (NHS) in the UK early in 2021 the worst of the pandemic began to ease and restrictions were slowly and painfully in many cases lifted. There were some false starts until pressure on the NHS were lowering. Non Covid Health Services during the pandemic had been badly impacted and many patient treatments were postponed. As with all bad news stories there were many other failures blamed on the pandemic to deflect attention away from the real cause of problems such as underinvestment in health and care services. Not enough was done quickly enough to protect the elderly in care homes and medical staff were at high risk on a daily basis because of a shortage of PPE. Time is always of the essence in these circumstances. Unfortunatley time had passed to invest in resources that might have achieved better outcomes in this pandemic. This week a joint report from the Commons Science and Technology and Health and Social Care Select Committees said government had “made big mistakes” in handling the pandemic. They cited ‘Group Think’ among ministers and scientific advisersers preventing lockdown sooner. Poor performance of Test and Trace and social care not prioritised. Maybe next time we can learn the lessons from this experience.
As people became ill with Covid 19 supply chains became disrupted. Ports in China were closed as outbreaks occurred sporadically and elsewhere in the world too. Factories had to close or reduce their output and materials were often late or difficult to procure due to Covid.
Businesses exist in a system that is subject to regulation by governments. Institutional arrangements determine how businesses behave and act within the system. It is not simply possible to trade freely with businesses either inside the system managed by a national government or to trade internationally without being subject to regulatory frameworks put in place by governments. Even trading groups such as the EU and NAFTA have regulation so called free trade areas. This regulation is a form of protectionism. Any free market is regulated. It is the degree of regulation that gives consideration to calling it free or not. Communist states were said to be planned economies which somehow suggests that market economies are not planned when in fact they are. Both types of economy are regulated and government control ranges from total to some point on a measuring scale that is less so. If markets were completely free a business would simply hire labour from anywhere at a price it was prepared to pay for that labour without any regulation or control from government. Taxation and public spending would not be necessary if markets were completely free. Clearly they are not free if the aim is to protect industry and to provide public goods because to do that we need government to generate taxes to fund the administrative structures, regulations and investment required. There is somehow a myth of time that once upon a time we had free markets without government regulation. In this polemic it is up to merchants to manage markets and for government to manage affairs of state and never the twain shall meet. The reality is very different there has been some degree of regulation in international trade since the emergence of nation states through quota restrictions and tariffs. All forms of economic activity – feudal, agrarian, industrial, service – were subject to regulation be it manorial, guild, community, state, national and international. The pre-industrial age relied much more on local arrangements than national and international regulation. The rise of nation states gave rise to international regulations. Regulations were designed to protect a nation state from other nation states; a means of security. In England it took the form of what came later to be described as ‘Mercantilism’. It is in these roots we find discussions of trade, health security, food security and security of other national interests. In 1563 the ‘Elizabethan Statute of Artificers’ ensured overseas trade was subject to State control. Today the World Trade Organization (WTO) administers the rules by which all nations trade with each other. This regulatory authority was set up by the Bretton Woods Agreement in 1944 setting out a General Agreement on Tariffs and Trade (GATT). Trading Blocs too like NAFTA and the EU have to abide by WTO rules.
Regulation of trade has given rise to wars between nation states. When Britain tried to impose taxes on the tea trade in Boston 1773 it caused the American Colonies to break away from British rule. It was said to be “Taxation without representation.” Quota restrictions and tariffs where there are imbalances seen as unjust by one party can escalate. Others have resulted in bitter trade wars between nation states such as the Smoot-Hawley Act 1930, The Chicken Tariff war in the 1960s, The US 1987 trade war with Japan related to cars, electronic goods and motorcycles, Canada-US lumber wars, the 1993 Banana Wars betwenn the US and Latin America and the current episode between the US imposing 19 per cent tariffs on China.
Time is Money
The one thing that most business people and governments would agree upon is that time is money. The faster business can produce outputs, supply goods to customers and get payment for their service means they will generate profits to invest. The shorter these cycles become the more money they accumulate. This is capitalism. Governments too know that time is money as they collect taxes within time periods to ensure they have sufficient funds to pay for public services and affairs of state. Given that time is money it is incumbent on government to act fast to solve problems that affect the business environment and the livelihoods of citizens. It is incumbent on businesses to act fast to solve their problems too. Agility, responsiveness and resilience is an investment required by government as well as businesses if we are to increase national income in a global economy and improve the wellbeing of citizens and maintain security. Put differently, businesses can only be as good as the systems and environments they operate in. Individul businesses cannot maintain the regulatory frameworks and the business environment in which they find themselves.
Out of Time…
Below you can play an audio transcript of this article TIME in the Tony Hines Blog
“Disruption is the new normal according to Tony Hines. In this episode disruption in food supply chains are discussed in the context of food security, environment and climate change.”
Imagine a world 2.5 degrees warmer; The loss of the white snow and ice reduces reflectivity of the sun’s rays retaining and increasing heat in the planet. Polar ice caps melting; Temperatures rising above 40 degrees or more in temperate climates with more sudden rainfall causing regular floods; Sea temperatures rising and fish moving North or South to stay cool and survive. These changes increase risk from fire, flood, volcano eruption and other natural disasters. Biodiversity is reducing and the forests are already receding with carbon capture severely reduced. If we decide to turnover more arable land to forests to replace the depleted forests the capacity to grow crops recedes. The opportunity to feed the world is severely impacted. Thomas Malthus was concerned that Britain would not be able to feed itself in 1800 as the population increased to 1 million people. Fortunately, that prediction did not happen as technology and food imports from the new world maintained food supplies to allow further population growth. History may not repeat itself next time.
Food Security
Today we have around 67 Million people in the United Kingdom. Food Security is about the risk we face in supplying sufficient food for the population. Disruptions change the balance. The National Newspaper reports problems in Scotland and Brexit has caused disruptions to the UK Supply of Food particularly in Northern Ireland.
Sustainability is often referred to as preserving the planet for future generations. In the case of food we are talking about the sustainability of human life and the environment is critical to food production. Defintions of food security are drawn from Tim Lang’s excellent book “Feeding Britain – Our Food Problems and How to Fix Them”. Sustainability means different things to different people. It is a synonym for environment according to Lang in the context of food security. Tim Lang is Professor of Food Policy at University College London and he spent seven years as a hill farmer. So he knows what he’s talking about.
Food logistics includes transport, trucks, ships, planes and involves distribution hubs and ports. The UK imports 50 per cent of its food supply give or take and it exports food and beverages such as whisky, fish, meat, cheese and other processed food and farm produce. Food logistics is important to food security. This goes beyond trucks, planes, ships and other transport and covers systems including sensors, satellites and cybersecurity to protect data and information systems managing the networks.
Government Priorities
Three priorities for Government: Healthy food for healthy people; maintaining a healthy environment and ensuring sufficient food is grown for the population. Policies are needed to achieve these goals.
Food Supply Chains
The success of supply chains is in part one of the things that has allowed government to be complacent when it comes to establishing appropriate policies to ensure food security. Much of the responsibility has been developed by large food retailers acting in their own interest.
Many leading retailers have been outspoken about supply chain difficulties and the empty shelves facing customers. Supplies are threatened on all fronts. Since Brexit and the end to free movement of people across borders both to and from the EU has caused a number of difficult circumstances converging to provide a perfect storm. Firstly, the failure of planning to prepare for change after the UK left the EU can be placed squarely with the UK Government and its lack of readiness is laid bare for all to witness. Secondly, the return of HGV delivery drivers of between 14,000-20,000 according to various estimates from trade organizations has caused disruption to the once smooth supply chain logistics. Thirdly, the increased cost and bureaucracy at the borders and the failure to resolve the Northern Ireland protocol has meant severe shortages in some food categories and other goods. For Northern Ireland it is now commonplace to see retail advertisements and offers with an asterisk at the side stating ‘This offer is not available in Northern Ireland’. We are now surely a disunited kingdom when it comes to food supplies. Fourthly, there are still delays at many UK ports and these may well get a lot worse in coming months in the run up to Christmas as new Border Checks happen from October 2021. Fifthly, the National Farmers Union have been drawing attention to the shortage of available labour to harvest crops and pointing out that many of the crops are time critical. The UK Government has been dismissive and exceptionally slow to react to these criticisms. Unfortunately, opposition parties are not much better when it comes to challenging the lack of action on the part of government. The outlook does not look promising. Add to these self-inflicted wounds the challenges occuring to food supply systems from climate change with fires and floods destroying crops and the problems with global shipping and container shortages it is likely to be empty shelves and higher prices for all.
Listen to Disruption, Food Security and Environment
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
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At the time of writing the MSC New York is just off the coast of China at Ningbo waiting to offload its’ cargo of containers.
Source: Vesselfinder
Miquel Serracanta Domenech asked me a question last week about my thoughts on the disruptions in global shipping following disruption at Yantian and other ports in China due to Covid 19. A supplementary question was what will the new normal look like? Many businesses are asking the question: Where is my box? This got me thinking more about the problems currently being experienced by many businesses who want to import or export their goods and the knock on effect it has on global supply chains. In this article I want to examine global sea trade carried by containers in a little more detail.
Is it a case of Plato’s cave when it comes to inflated prices being charged by shipping companies and multi-modal logistics firms? In Plato’s allegory the slaves were kept in check by the appearance of guarding soldiers behind them casting large shadows onto a wall of the cave that the slaves faced. They could not look around to see the world as it really was with normal sized people not giants under penalty of death. The world they could see was one of appearance. So it is with firms acting as a single supply monopoly or colluding as an oligopoly visibility is obscured from view for the customer and this facilitates price fixing for cartels. Increasing concentration with shipping owned and controlled by a relatively few large companies and the biggest multi-modal logistics companies handling a high percentage of cargo is it the case that the rapid rise in prices for containers is somehow being artificially inflated to recoup lost profits during the pandemic? If you work in shipping let me know what you think?
Things are desperate for some UK businesses attempting to book containers to move their imports and exports. Reports of price increases as much as five times higher than a year ago for containers between Chinese ports and the UK with average box prices up by 400 per cent. Similar price increases are being experienced in the EU and in the United States. The main reasons given by shippers and logistic firms is that there is a box shortage and yet there are now more boxes in the world than ever according to the statistics held by UNCTAD, World Shipping Council and the large shippers operating in these markets. So where are they? Where’s my box? Another reason given is that boxes are in the wrong places and the shippers have not been able to move as many empty boxes to the return ports as they would in normal times. Demand for boxes is also said to be higher than normal. While these reasons are plausible it is also clear that the profits earned by the largest players are increasing despite Covid 19. So is it the case that these large businesses dominating the global sea trade have seen an opportunity to clawback some profit by fixing higher prices through a quasi cartel?
In recent episodes of my Chain Reaction Podcast disruption and complexity have featured heavily. Disruption is number one in my list of trends to be managed to achieve supply chain advantage. Layered complexity is also in my top ten too. Today’s supply chain networks are complex and the type of system complexity is what I describe as layered. Since the Suez Canal hold up caused by the Evergiven container vessel stopped the flow of sea freight travelling through it in March the situation has worsened and now we have many ports in China stopping ships from entering or leaving because of an increase in Covid 19 in their sea terminals. According to Maersk this has increased delays by two days from 14 to 16 days. This is adding much time and layers of complexity to moving goods around the globe. Nearly one quarter of China’s exports pass through Guangdong and the port cities of Shenzhen and Guangzhou. Other ports in the province including Yantian, Shekou, Chiwan and Nansha, have stopped vessels from entering. Ninety five per cent of electronic goods out of China travel this route.
When shipping lines carry containers to a port of discharge where cargo is unloaded they request permission to enter and dock at an unloading berth where the containers are lifted off the ship. Usually they are loaded either directly onto waiting transport where they are either moved directly to their onward destination or to a storage facility. If cargo gets stuck at a port for longer than the permitted berth time it incurs charges known as demurrage. These fees are expensive. They are an incentive to get things moving. Excessive delays can incur costs greater than the value of the container. Containers are often provided by shippers and they expect them to be returned to use as soon as possible after discharging cargo. Customers return them to the allocated port where they are picked up and put back in use The shipper may have to move them to a pickup port.
Detention Charge: The customer picks up the container from the shipper and loads the cargo in the box wherever they have the goods stored. The container is then delivered to the embarcation port. There is a time allowance for doing this part of the operation. If the customer keeps the container longer than that time they incur a detention charge. If customers exceed the free day allowances that shippers give they have to pay detention charges until they are returned to use. Ten years ago it was rare to have detention charges. Nowadays such charges can be $100 per day so you can soon run up a large bill.
Demurrage Charge: Once the container is inside the port again there is a time allowance for any loading or unloading. If this is exceeded then demurrage charges apply.
How much global trade travels by sea?
About 80 per cent of Global Trade by volume and 70 per cent by value travels by sea freight and 60 per cent travels from Asia with one-third of maritime trade travelling through the Straits of Malacca and through the South China Sea (Source: United Nations Conference on Trade and Development UNCTAD). Trade passing through the South China Sea is valued at $3.71 trillion. Europe and the US are heavily reliant on these trade routes. Sea freight is one of the biggest disrupters when it goes wrong the impact is high and the interconnected supply networks feel the full effect with many businesses and consumers detrimentally affected. Fifty Two per cent of DWT is under control of just five nations; Greece 18%, China 11%, Japan 11%, Singapore 7% and Hong Kong China 5%. Sixteen per cent of all merchant ships are registered in Panama. The beneficial ownership will of course be located elsewhere.
Even prior to the recent disruption some signals were already emerging from the noise. I recently mentioned the sharp increase in the cost of hiring 20 and 40ft sea containers had risen with 40ft boxes rising from around $4,000 to $10-12,000 moving freight from China to the US. Moving goods in a 40ft container from Shanghai to Rotterdam is costing in the region of $10,000-11,000 up by 350-400 per cent on prices last year. This will feed into business costs and consumer prices in the months ahead. Price inflation is likely to increase as the shortage of boxes intensifies. Most of the world’s sea containers are manufactured in… you’ve guessed it…China. Many boxes are tied up in the supply chain as they remain at ports, on ships and elsewhere because it is taking much longer to complete shipments than it did prior to the pandemic. This extra time is adding to the pressure on the existing container stocks. Three in four containers returning from Los Angeles to China do so empty. Maersk estimate it costs them $1 billion to ship and reposition empty containers annually. Most shippers want their empty containers in Asia for the next pick up. There is also a mismatch of increased demand to shrinking supply for transport.
Facts About the Boxes
It is estimated that there are 93,161 maritime vessels (Various Sources), 5,222 of these are container ships. The capacity of container boxes in use is estimated at 38.5 million dead weight tonnage (DWT), This is the weight of everything on board a vessel including cargo, people, water, ballast, fuel, food and crew. Around 1,400 containers are lost at sea annually on average. Sometimes but not often a whole ship sinks which pushes averages upwards. In a normal year up to 6 million containers are manufactured usually in China where they make 97 per cent of all containers. There are two standard boxes known as the 20ft and 40 ft container with a height of 8’6″ (High Cubes are 9’6″). While the 40ft box is exactly that the 20ft box is 19’10”. In addition there are 6 million High Cubes which are 9’6″. These containers make about 200 million trips p.a. equivalent to 811 million Twenty Foot Equivalent Units (TEU) carrying $4 Trillion in container cargo value. They travel to 150 ports in over 80 countries.
There is no complete register of containers but best estimates suggest that there are:-
23 million shipping ‘in service’ containers or 38.5 million TEU ( of these about 67% are 40ft and 33% 20ft)
14 million not in-service shipping containers or 23.3 million TEU
6 million new shipping containers or 10 Million TEU added annually
Total 43 million Shipping Containers or around 72 Million TEU
So if there are 23 million containers in use, 14 million not in service and 6 million new boxes added each year it appears that there are close to double the number of boxes available than are currently in use. This suggests that the efficiency level in container utilization is exceptionally low compared to other parts of the supply chain. So where is my box? There have obviously been disruptions die to Covid 19 but is this sector doing enough to remedy the situation? In normal times pre-pandemic demand was obviously more predictable and less volatile than it is today. Inefficiency is disguised when you can operate at lower volumes. So it maybe that there has been no urgency to improve customer service until now.
Reverse Logistics
Reverse logistics is the big issue to be tackled in shipping. It doesn’t make sense to move empty containers on large ships half way round the globe in large quantities. Maersk alone moves 4 million boxes empty to get them to where they are needed. Maersk has 16 per cent of the market in shipping containers. Improvements were made in road haulage transport when attention was paid to backhauling rather than returning empty so perhaps this is one area that needs attention if bottlenecks are to be avoided to make the supply chain more resilient. One suggestion has been for shippers to co-operate by sharing containers so that the empty box is reused at the destination port by other shippers to improve efficiencies. It cannot be that difficult in the digital age to set up a digital register of containers so that shippers have visibility to allocate, reuse and return boxes to ports of origin or somewhere else where it is needed.
So what does the new normal look like?
Well it looks disrupted. Supply chains and networks are going to need to employ agile and flexible solutions to the continuous disruptions likely to break-out without much notice. Contingency planning is the name of the new normal. Each and every supply network needs to audit and assess the vulnerabilities and risks in order to plan for those ‘what if’ moments that are likely to be more frequent. Shipping has to be a high priority to address for many. However, if you were to look beyond this immediate shipping crisis to the root-cause analysis it would suggest that Western businesses have become too reliant on China and Asia to satisfy their every need and it is the imbalance of global trade that is a major risk. A new normal might begin to examine what it takes to rebalance trade.
Layered complexity means that this has to be tackled by governments creating incentives to encourage investment in production hubs, service centres and transport infrastructure. In the United Kingdom these are areas that have for too long been put on the back burner. In the US the Biden Administration is committed to making supply chains more resilient and this requires significant investment. It would be good for UK policy makers to do something similar. If government needs some encouragement to think this through then it might be worth pointing out that Factory costs in China have risen by more than 9 per cent in the past year which is higher than in the previous decade. They are likely to continue on this trajectory in the short to medium term as they struggle to contain cost. Consumer price inflation in the US,UK and Europe is also on the rise. While international trade brings many benefits it has to be balanced. Balance is needed for stability, risk reduction, reduced environmental impact and to secure employment. It is also necessary to build strategic capabilities. While China has been building its strategic capabilities much of the developed world has been sleep walking into a turbulent future. Downsizing, offshoring and outsourcing may all sound attractive when faced with immediate threats or in search of immediate returns on profit and performance measures. They were relatively easy ways for global companies and their accountants to push cost overseas while at the same time lowering them. It is not the way we should build the future. We need to build back better. It is time to reskill, relearn and reinvest for a better future. This is not a simple argument to re-shore or near-shore although there may be benefits in doing so in some cases. This is an argument about rebalancing the economy. A manifesto for making it resilient and fit for purpose.
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.
When you get the invitation to the ‘C’ Suite it is something you worked for, you may feel worthy and you hope you will now be rewarded for your business experience, organizational and leadership skills developed during your career. Those things may have qualified you and opened the door to the office of CEO but your future success will rest on results not the attributes that others have acknowledged in appointing you. However, it is worth reflecting and acknowledging all may not always be as you had imagined. There will be times when you wish you had protective clothing similar to the photograph to protect you from the outside world which can be a hostile environment. It may not just be the outside of course sometimes threats come from within your own organization. So what are the responsibilities that accompany the invitation into the ‘C’ Suite strategy room?
Leadership is defined by results not attributes.
Peter Drucker
CEO’s Responsibilities
The Chief Executive heads up the ‘C’ Suite. The ‘C’ Suite is comprised of the Board of Directors responsible for running the company. The CEO leads and the directors direct. The Board are paid to manage the business on behalf of shareholders and they balance the needs of other stakeholders including employees, customers, suppliers and wider public interests. The organization’s culture determines how this works in practice. For example, is it top down or collaborative but no mistake the CEO has the ultimate responsibility for the company meeting its objectives. Responsibilities come in the form of leading the organization and all that means. There is no hiding place. Every decision will be scrutinised, analysed and criticised, it goes with the territory.
Leadership is the capacity to translate vision into reality.
Warren Bennis
The CEO is responsible for leading, developing and executing organizational strategy and achieving the goals set. Organizational effectiveness, efficiency, profitability and return on investment are three concerns for those occupying the ‘C’ Suite. As Warren Bennis put it “leadership is the capacity to translate vision into reality”. It is a skill developed through experience.
Between 70-90 per cent of a company’s assets are tied up in the supply chain. If you work in or are responsible for your organization’s supply chain it is likely to represent much of the Balance Sheet value. Fixed Assets can include warehousing, production, handling equipment, plant and machinery including delivery vehicles, cranes, fork-lift trucks, ships and in some cases aircraft. Inventories on many company balance sheets represent somewhere between thirty and fifty per cent of the value. When you add it all up you will see why the supply chain contains a lot of the value and it all needs to be managed to achieve the company’s strategic and operational objectives. Supply chain pro’s come in all shapes, sizes, from different backgrounds with a range of skillsets. Having the ability to communicate effectively in written and spoken word along with numeracy and analytic skills will establish a good foundation for the future. Today roles carried out in the supply chain provide an excellent training ground to learn about business. Forget the MBA as a stepping stone to a leadership career learning on the job may be more valuable especially if it is in the supply chain. If you know about sourcing, procurement, production operations, warehousing, distribution and customers then you have acquired a range of transferrable skills that might take you all the way to the ‘C’ Suite and even to CEO.
You may think about acquiring formal qualifications on the job as part of your continuous professional development while you get paid. Staying in touch and keeping abreast of competitors demands a commitment to continuing professional development (CPD). CPD can take many forms and it is not just the formal qualification, short and long course routes that matter. Learning from others inside and externally, keeping up with trends and as any sporting professional will tell you there is no substitute for real game time by which I mean experience.
Experience is not what happens to you; it is what you do with what happens to you.
Aldous Huxley
Supply chains are a source of value, cost and differentiation. When Michael Porter first wrote about competitive advantage I doubt he was thinking necessarily about supply chains although he did introduce the term value chain to the world in 1985. The term ‘supply chain’ was only coined in 1980 and did not come into wider use until much later. Nevertheless, supply chains are the central focus for many businesses wanting to achieve competive advantage. It is easy to see why it covers every stage from sourcing through to delivering the goods and services to customers. Supply chains are the central spine of most organization operations embedded in wider networks creating value for supply chain partners and customers. I once read that if you wanted to move to senior roles as a supply chain professional you needed to talk the language of finance – ROI, Profit Margins, Asset utilization and less so about fill rates, returns, backhauling, work-in-progress, fullfilment, stock-outs, back-orders, purchasing and sourcing. The truth of it is like most things in life somewhere in between. Isn’t it about time that the the ‘C’ Suite occupants were able to speak supply chain? Understanding the organization’s supply chain offers the capability to understand the business and potential sources of competitive advantage. Well the good news is that some do!
Many people on the Board of retail businesses, FMCG and manufacturing companies have spent some time working in the supply chains of businesses where they cut their teeth. The skills are transferrable and could take you on a journey to the ‘C’ Suite and even to CEO. There are a number of notable CEO’s with previous when it comes to supply chains including Tim Cook at Apple, Alan George Lafley at Proctor and Gamble, Tom Hayes at Ocean Spray Cranberries Inc. and Mary T. Bara at General Motors. This experience has proved invaluable when they step up into leadership roles. It has a number of benefits that include respect from the workforce knowing that you are one of them cut from the same cloth, know and understand the detail of what makes the business tick, and the skills you learned performing supply chain roles not only informs what you do but also helps identify capabilities and competencies that the organization requires. Flexibility and agility are not just supply chain concepts they are necessary to think, plan and guide an organization to a future position. Experience of teamwork and development roles on the way up will prove necessary at the top to move the business forward. Supply chain pro’s have a lot to offer when it comes to being the CEO.
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