Those with the greatest supply chain agility, visibility and responsiveness secure a profound competitive advantage. However, ever-more demanding customers, a volatile global trading environment, new technologies and pressing concerns around sustainability make achieving such traits a challenge for almost every business.
A supply chain is only as strong as its weakest link – and UK manufacturers understand that their success depends on the strengths of their suppliers and partners, as well as addressing their own internal weaknesses.
In the face of significant disruption, supply chain, logistics and procurement professionals are having to answer business critical questions around:
- How to manage diverse supplier networks
- How to synchronise across functional silos
- What set of policies, procedures and technologies are needed to provide greater visibility and traceability?
- How to calculate true cost-to-serve
- What forces are shifting the supply chain from linear to more circular models
Digital technologies and the data they produce has the power to answer many of these questions, helping to make supply chains more transparent, agile and efficient.
Yet, many professionals lack the knowledge, experience and tools required to make more strategic decisions and tighten every link in their chain.
The inaugural Supply Chain & Logistics Summit, which took place at Aston Villa Football Club (Birmingham), addressed these challenges and outlined how technology and automation improve upon traditional approaches.
Attendees spent the day rotating between a series of 30-minute roundtable conversations, hosted by experts and a world-leading manufacturer.
This innovative format enabled attendees to share their experiences first-hand and network with their peers across a day of knowledge-sharing and growth-focused conversation.
Digitalisation of the Supply Chain
Digitalisation of the supply chain is happening at pace. Traditional supply chain goals of visibility, collaboration and predictive capabilities are increasingly being delivered by the innovative deployment of readily available and increasingly affordable technologies.
Nick Boland, from global leader in business cloud software products Infor, took to the stage to share ideas and case studies of businesses putting new technologies to work and set the scene for the interactive discussions to follow.
According to research conducted by Infor, supply chains face mounting pressures which are impacting profitability:
- Customer service – almost half of businesses (46%) take more than three days to identify product location and availability
- High inventories – 55% suffer from high lead-time variability and uncertainty
- Working capital – around $6 trillion is currently tied up in supply chains
- Receiving – 70% have no capability to predict delays in product flows
- Excess cost –7% – 20% in excess costs in supply chains
- Business agility – 76% rely on manual reports and email for visibility
At the same time, risk is increasing due to hyper-personalisation, disruptive competition, increased complexity, trade uncertainty and global value chains.
“Peaks and troughs are a reality of the world we live in. Our job is to mitigate risk and manage fluctuations,” said Boland.
The way to achieve an optimum level of control is through data, yet upwards of 80% of the data and processes needed to effectively run global supply chains resides with partners.
Real-time transparency, data-driven decision-making and automated execution helps unlock that 80% and make it available to you, Boland noted.
By harnessing the power of data to gain greater supply chain visibility, Infor’s customers have experienced:
- Quantified benefits – increased revenues from greater customer service, on-hand and in-transit inventory reduction, lower logistics / freight costs, productivity improvements
- Qualitative benefits – improved and consistent parts availability, better and more timely customer updates, reallocated staff focusing on more value-added tasks
- Strategic benefits – digitised supply chain, global solution, connected disparate systems and processes, end-to-end transparency
Integrated Business Planning
Boland’s comments led into the day’s first roundtable, where experts from Infor and Matt Yeates, supply chain director for strip products and Tata Steel, led an insightful discussion on how ‘failing to plan is planning to fail’.
Many manufacturers are struggling to align their tactical and strategic plans from multiple, often siloed, functional areas. Integrated Business Planning (IBP) is the business process that aims to fully align the end-to-end supply chain.
It requires the development of processes, systems and people to synchronise otherwise disparate planning activities, and businesses that have successfully implemented IBP have seen significant improvements in their service levels, efficiencies and profitability.
Our conversation found that security and control were the two biggest barriers to IBP, with many questions still unanswered as to who owns large swathes of supply chain data.
Furthermore, if individual OEMs are dictating which IBP platforms and systems their suppliers use, how does an SME contracted to supply work to multiple OEMS possibly afford to adopt multiple systems?
Another challenge revolved around how enlightened board-level decision-makers are. Tata Steel has been on a journey for more than a decade, having recognised it was operating with very siloed business departments.
The decision was made to turn the business around and, functionally, the supply chain team would drive IBP.
That decision came straight from the top from a board who absolutely saw the value in it, according to Yeates; adding that the business has recouped 10-times its initial outlay by using data to drive more efficient demand planning.
“People are your primary barrier, not budget or resource. If your CEO or board don’t see the value but you do, take them to see credible examples and have them speak to businesses who have already started the journey and have garnered demonstrable value,” he advised.
Demand planning & synchronising across functional silos
Demand planning is the essential process of forecasting demand for a product or service so it can be produced and delivered more efficiently and to the satisfaction of customers, according to Soraya Karimi-Ghovanlou, supply chain director at Smithfield Foods.
Given the current volatility of markets, many businesses are justifiably stepping up their scenario and demand planning activities.
However, it can be almost impossible to accurately assess the ‘what if’ without a firm grasp of ‘what is’ – something made even more problematic if accurate data isn’t universally accessible and shared.
Our conversation concluded that predicting the future is a difficult task, but if you don’t understand the here and now then difficult becomes impossible.
Silos may seem like just another buzzword but the reality is that they significantly inhibit collaboration and the speed of decision-making across a business, reducing competitiveness and responsiveness, and increase vulnerability to disruption.
If information (data) is the lifeblood of the modern enterprise; silos cut off the circulation, noted Ted Mellor, from British enterprise software leader Sage.
Silos happen when teams, departments or sites either can’t or won’t easily share information with other relevant parties. As a result, departmental priorities supplant your company’s long-term goals.
“Data and silos aren’t the only issue,” noted Carl Haycock, UK Operations Director for Cambridgeshire-based Domino Printing. “Businesses often experience operational and functional inefficiencies as a result of their organisation being set up as fixed, separate departments rather than in ‘value streams’.”
Calculating cost-to-serve
Cost-to-serve is a process-driven tool to calculate the profitability of a customer account, based on the actual business activities and overhead costs incurred.
In the context of supply chain management, it can be used to analyse how costs are consumed throughout the supply chain. However, many businesses struggle to calculate what it truly costs to deliver a good or service, explained Gavin Clark, logistics and distribution expert at BOARD International.
One of the most starkly apparent issues is that cost-to-serve means something different to almost every business/sector.
That’s an issue that must be overcome because understanding the total cost-to-serve is important for both manufactures and their customers, said Adrian Chell, plant director at ZF Lemforder.
For customers, judging a part purely on price alone could make an overseas supplier more attractive. Yet, when you factor in advantages such as quality, reliability, service and domestic provenance, a UK-based supplier becomes significantly more competitively priced.
For manufacturers, understanding the total cost-to-serve means challenging your expectations around what it is your customers want and value. Several of the businesses sat around the table were making life more difficult for themselves by uniformly offering every customer the same gold-standard of service and the strict timeframe that entailed.
Yet, many of their customers would be comfortable accommodating +/- a few days, allowing businesses to consolidate loads and utilise alternative transport modes (shipping rather than air freight) – both of which greatly reduce CO2 emissions.
It was agreed, however, that while businesses often have a firm grasp of internal costs (materials, labour, production, etc.), many are relying on gut instincts and guess-work to manage less tangible or unforeseen costs.
The key question facing supply chain professionals is how do they challenge themselves to use data and technology to gain greater visibility.
Supply chain integrity
Supply Chain Integrity is defined as a set of policies, procedures, and technologies used to provide visibility and traceability of products within the supply chain.
Procurement department’s supplier relationships can vary widely, said Nathaniel Jevons, supply chain leader at global cosmetics manufacturer Coty.
In some cases, the relationship is strong and productive. In others, the relationship can be tense, fraught with disagreement, or fully dysfunctional.
Among the reasons for this supplier-related conflict is the lack of a shared perspective on what types of behaviour are appropriate – in other words, different levels of business integrity.
Strategies to improve supplier integrity and, consequently, the relationship between the supplier and your department may include: incentivising ethical behaviour, setting standards, and maintaining control of the contract.
From our discussion, strong ethical and environmental conversations are being had, but typically the yes/no decision boils down to cost.
The other key question was around how businesses audit what their suppliers say is the truth. Once again, accurate, incontestable data is going to play a strong role.
“You may have worked hard to eliminate the use of plastics in your own business, but what about in your suppliers or distributors? Not many organisations currently go down to that level of granularity, but that may change far sooner than you think,” Jevons concluded.
