Future-proofing your supply chain

Supply chain professionals no longer get blank stares when they describe their work to friends and family, according to Abe Eshkenazi, CEO of the US-based Association for Supply Chain Management (ASCM). “The awareness of what a supply chain is has just exploded,” he says.

Few people, however, appreciate the steps involved in delivering a package to their door. “There’s very little understanding of all the activities in the supply chain that it took to get it there,” says Eshkenazi. “People don’t understand the complexity of the supply chain, the synchronization necessary, and the global nature of the supply chain.”

A shortage of personal protection equipment (PPE) in Africa, for example, could affect the delivery of a pair of shoes in Vancouver. “We live in a globally-connected environment,” says Eshkenazi. “The impact of increasing or decreasing capacity in one node has a ripple effect both upstream and downstream for organizations and the entire supply chain.”

These factors have contributed to pandemic-related supply chain disruption in virtually every sector. “What we’re hearing from our members and their companies is that we’re headed for another very difficult time over the next six to 18 months,” says Eshkenazi. “In terms of rebalancing supply and demand, we’re still seeing surges and shifts, and the supply chain, in terms of delivery, has not caught up with the demand side as yet. But on the other hand, the consumer hasn’t changed in terms of their expectations.”

As consumers faced numerous disappointments in the past year, supply chains have become a convenient culprit for anything from manufacturing shortages to hoarding to political instability.

“Supply chains get a bad rap,” says Vijay Pandiarajan, director, supply chain intelligence at IBM Sterling. “I see it as an acknowledgement because it brings attention to the supply chain as an unsung, yet critical, business enabler. But I honestly think it’s not so much that supply chains have failed. It’s because people’s behaviors and buying preferences have changed with the pandemic and continue to rapidly evolve; the supply chain is simply a byproduct of that demand and how it’s managed at scale with greater workflow intelligence needed to do it well.”

Contributing factors

Promoting a responsible, data-driven approach to supply chains is a key focus of the George Weston Ltd. Centre for Sustainable Supply Chains at the Schulich School of Business at York University in Toronto. “Should we blame supply chains and supply chain professionals for the situation we’re in right now? No more than we should blame science for the fact that we have a pandemic,” says the centre’s director of research, professor David Johnston. Johnston is also the director of Schulich’s Master of Supply Chain Management program.

According to Johnston, the disruptive impact of the pandemic has been amplified by existing vulnerabilities in global supply chains. “What has happened is that there’s been a confluence of supply situations that have been years in the making,” he says, “and these have been impacted by a slate-cleaning, systemic disruption, which is the pandemic. But just to keep things in perspective here, we did have supply shortages before the pandemic, and in some cases we had imbalances between supply and demand.”

The drive to meet high consumer expectations has drawn supply chains out on a limb. “We’ve been driven by lowest cost for decades,” Johnston says. “And everybody wanted to buy their cheap stuff that’s sourced from cheap places connected by very long and vulnerable supply chain lines. So now we have more disruptors – we have the pandemic, climate change, labour shortages, and social and political unrest. So when you have already vulnerable supply chains and are confronted with more disruptors and more frequently, more shipments are bound to not arrive on time.”

Growing concerns about sustainability have also compounded the difficulties of meeting consumer demand for faster, cheaper, and better. “Supply chains won’t be about just price anymore, but compliance with sustainability regulations, their customers’ sustainability goals, and their own as well,” says Jan Burian, head of IDC Manufacturing Insights EMEA, who is based in Prague and London.

The issue is not just about sustainable products, however – it’s also about the supply chain itself. Accordingly, creating sustainable supply chains isn’t just about meeting requirements – it’s about ensuring that supply chains will continue to be viable in the face of myriad challenges, including the perennial issue of recruiting qualified employees.

“I think there are some really major sustainability issues in the industry,” says Johnston, “and it’s not just carbon and stuff like that. It also includes, for example, how companies are utilizing some of their manpower. For example, companies haven’t been very good at dealing with things like inclusion.”

“We need to do a much better job of increasing our inclusion,” Eshkenazi agrees. “We have a great opportunity. There’s a huge demand for talent, and we need to open our aperture in terms of qualified and capable individuals.”

Broadening the conversation

Much of the focus during the pandemic has been on reactive measures to bring supply chains “back to normal”, when what’s needed is a bigger conversation involving all stakeholders. “I think all the ripples and bullwhip effects from the pandemic will settle down,” says Johnston. “But stakeholders need to be sitting with each other, maybe with the help of government, and asking ‘how do we assure a minimum level of supply for critical goods and services under different scenarios of disruption?’”

Government’s role will be essential in areas such as ensuring public safety. “You need to think about what works best in an emergency,” says Johnston. “We don’t have a free-enterprise, market-driven solution to respond to a humanitarian logistics crisis when fire and flood take out industrial infrastructure.”

“I think we need to get that public-private partnership into the discussion,” says Eshkenazi. “How can we be better prepared for just-in-case? Where do we see disruptions? Who is responsible for the initial inventory or responding to PPE or ventilators? How do we respond as an industry? And how do we respond, as economies, to the changes in the challenges that we faced before? It cannot be on the back of a private enterprise – there have to be public-private partnerships to respond to these types of shifts and changes or the demand spikes.”

Meeting the information challenge

Better information sharing on an ongoing basis will be key to this discussion. “The major issue that companies face right now is visibility, both upstream and downstream,” says Eshkenazi. “The pandemic-related disruptions that were caused last year were predominantly tier-two and tier-three suppliers, not tier-one suppliers, for a lot of organizations. And unfortunately, most of the companies did not have visibility – whether it’s through technology or through relationships – to analyze those tier-two and tier-three issues and make informed decisions.”

This need for better visibility is being intensified by sustainability concerns. “It’s not just where things come from,” says Pandiarajan. “It’s how they were sourced, what manufacturing methods were used, how it was transported, labour practices. All this becomes part of the story of what the product is, particularly from a environmental sustainability perspective.”

Technology will be key to achieving this. “We look at sustainability as something that should be enabled by digital technology,” says Burian. “To start recycling is fine, but to be able to reduce your carbon footprint and get to net zero, you’ve got to be able to track it and measure it. And to track and calculate carbon during the lifecycle of a product through the whole value chain takes a lot of collaboration, and a lot of capturing and sharing of data.”

Artificial Intelligence (AI), IoT sensing technology, mobile apps, and improved integration between diverse data platforms are all helping companies create this higher degree of transparency. More recent is the use of blockchain technology, which can ensure an immutable record of all the supply chain events leading to the delivery of a product.

“We believe blockchain and AI together have a huge part to play in this, because you need to know these things in an immutable way, and you need to know what to with the information to help gain a competitive advantage,” says Pandiarajan.

Investments in technology to achieve this can have far reaching benefits. For example, monitoring the provenance of a product to ensure that sustainably sourced materials were used, or that unfair labour practices weren’t involved, also creates the level of visibility that can help companies identify vulnerabilities in their supply chains. Equally important, it can help build stronger supply chain partnerships.

“Visibility is a critical aspect of trust,” says Eshkenazi, “and I think this is one of the areas that organizations need to focus on is that collaboration across the enterprise. Also, visibility and trust are a great foundation for extended supply chains – you need to know that your partners are providing you the accurate information so that you can rely on that data to make the necessary decisions for your organization.”

Learning curve

The learning curve, however, will be significant. “A lot of the supply chain organizations don’t have the expertise to use the technology well,” says Johnston. “They are at the same stage as manufacturers in the 1980s and 1990s were when they were trying to figure out how to adopt robotics and harness it to improve products, people, systems, and processes.”

Many companies will have to change their policies about developing their employees. “What often happens is that when companies are impacted by a negative financial outcome, the first thing to get cut is professional development investment in their workforce,” says Eshkenazi. “This is where we need to walk the talk. I think every organization will tell you that their employees are their number-one asset. So in your worst of times, what do you invest in? Your best performing assets or your worst-performing assets? I think clearly, we need a greater focus on investment in talent.”

Executive competencies will be key here – Johnston believes that supply chain managers will be called upon to manage not just to the financial bottom line, but environmental and social bottom lines. “Governments are going to become very pushy about things like climate change, as will the investment community, who will want to reduce the risk of business disruption,” he says. “And they’re going to zero in on organizations that are sloppy in accounting for their impact on people and the planet.”

These trends are already raising the bar for what is considered good supply chain management. “The definition of good management has changed to be one that encompasses a broader definition of supply chain risk, and includes investment in capabilities to anticipate, mitigate, and avoid them,” Johnston says.