Ejazur Rahman, Managing Director, Mind Mapper Bangladesh; CEO, ISCEA Asia
Creating a Competitive Advantage has remained the main agenda for Supply Chain Management. The Sooner the CEOs and top management focus on re-imagining their supply chains and aligning all parts and relationships of it to match the competitive priorities of the business, the better.
Let us understand the subject matter of this article in two relevant parts:
1) Why should the CEOs and Top management make the supply chain a central focus and
2) What needs to happen to establish such a focus on the supply chain
Why should Supply Chain become a central focus?
Supply chain management includes planning and management of all stages that are involved directly or indirectly in fulfilling customer requests.
Top leaders who know about the supply chain operation and its strengths, weaknesses, threats, and opportunities grow leadership that inspires the management team, helps overcome obstacles and drive change management more effectively in the organisation to create much-needed competitive advantage.
Covid-19 has put Supply Chain in the spotlight like never before. With such disruption, almost every company were forced to realign their supply chains in the new normal. And with recent Russia’s assault on Ukraine, the world has changed in a fundamental way, and it is not expected to return to normal in the near future. Due to the war, significant pressure points have been created, from supply chain dislocation to shortages of key materials and soaring costs for components and shipping, coming on top of pandemic lockdowns and US-China tensions.
Current reality: Inflation Driven by Food and Fuel
Food and energy are the main drivers of current inflation. In recent time, food inflation alone has eroded global living standards hugely. A similar story holds for energy costs, which show up both directly and indirectly through higher transportation costs. (Source: September 2022, IMF)
Consumers have been heavily affected across the globe by rising inflation. Disposable income is exhausting, buying essential daily needs and is unavoidable. Thus, heavy spending economy the USA and Europe markets are observing a sharp decline in demand. Our experts are already under a hit of delaying orders and even cancellations.
Our domestic market is facing severe challenges importing goods at a higher cost both due to currency devaluation and scarcity of food items in the global market. It is a sheer blessing that we are still heavily dependent on our agriculture for major food supplies.
Nevertheless, demand for almost all goods is in a hit. A deep global recession is underway.
Variability and Predictability
Variability means the tendency to shift or change — of being “variable.” Variability in Supply Chain is manageable only if it is predictable and vice versa. In today’s uncertain world, variability has become a big concern for the contemporary supply chains and the people behind them. Uncertainty always pushes the Supply Chain cost to go up and always impacts demand negatively. Thus, its impact on business is a two-edged sword alike.
Hence business leaders need to put in place an integrated process that enables better predictability resulting in the best value creation for customers and all other stakeholders, optimising end-to-end business processes and driving profitable growth. This is where the establishment of a supply chain management culture comes really handy.
The wise saying – ‘the strength of a chain is determined by the strength of the weakest link in the chain’ is worth remembering to understand the benefit of ‘managing the chain of supply’ or ‘supply chain management. As supply chain management is about planning and managing all the stages and relationships that take part in fulfilling customer requests, any stage or relationship that remains misaligned with the overall set-up of the supply chain processes will cause the overall chain to underperform.
And to manage and benefit from an integrated supply chain, business leaders need to effectively lay the basic processes of the supply chain (i.e., plan, source, make or transform, deliver, return and enable) and ensure an appropriate fit between two things: 1) What the business promises to deliver and 2) What the business is capable of delivering.
While ensuring such fit, supply chain managers focus on the effective and efficient handling of 3 kinds of flows: a) materials flow b) fund flow, and c) information flow. We believe that business CEOs and top management would easily relate to the importance of managing these 3 flows timely and cost-effectively.
What needs to happen to establish the right kind of focus on the future supply chain
Supply Chain Management is clearly the competitive weapon to deal with present and future uncertainties in any form of business. Hence it is critical for business leaders to re-look at their supply chain set-up and design a future-proof strategy and process.
New supply chain priorities
Source: McKinsey & Company; Future-proofing the supply chain; June 2022
CEOs and top management now need to focus on new priorities alongside the traditional objectives of a supply chain that include cost/capital, quality and service and redesign their supply chains. As indicated above, the next normal strategy should focus on a few additional priorities – resilience, agility and sustainability.
Such additional priorities relate to mitigating risks of supply, becoming more flexible in how the supply chain fulfils customer requests and building robust sustainability credentials by taking environmental, social and governance (ESG) agenda seriously.
New Supply Chain agenda for the CEOs and Top Management
For remaining competitive now and in the future, focusing on a set of contemporary supply chain agendas will be critical for CEOs and top managers in any organisation.
A shift from efficiency to resilience
Finding a balance between efficiency and resilience is a tough call businesses have to make. Every action & process within the supply chain needs to be carefully relooked for this shift. Identifying the vulnerable actions & processes and redesigning for resiliency is a critical task.
This is a strategic call and a long-term game. Thus, a carefully crafted Supply chain strategy with this consideration is key to thriving in the near future. Nevertheless, it should be kept in mind that this transformation should not cost customers a big time.
Securing the right supply chain talents
With the growing importance of supply chain, the world has been experiencing supply chain talent shortage for quite some time across industries. It is, therefore, critical to onboard professionally qualified supply chain talents and also trains existing resources on modern supply chain concepts, tools and best practices.
Focus on customer centricity
The world has been experiencing demand volatility like never before—a focus on delivering differentiation through profound customer centricity and personalising customer experience can deliver greater results. Therefore, leaders need to reimagine their customer-centricity agenda.
Note that how the supply chain should be set up in an organisation primarily depends on its customer service policy.
Sustainability and innovation
Supply chain leaders need to become serial innovators—to link social and environmental issues with business solutions.
Data-driven decision making
Data-driven decision-making (DDDM) is defined as making decisions based on hard data as opposed to intuition, observation, or guesswork. The value of data-driven decisions is dependent on the quality of the data and its analysis and interpretation. DDDM is generally used to gain a competitive advantage through a proper balance between efficiency and responsiveness.
Automation for the Future
Industry 4.0 and IOT are already with us. Business leaders need to seriously focus on automating their supply chains through the use of modern technologies and reduce manual tasks to streamline workflows and increase efficiency. Focusing the use of warehouse robotics, robotic process automation, the internet of things, artificial intelligence, and predictive analytics are a few such examples of where the leaders need to focus.
To establish the supply chain of the future, organisational leaders need to make the supply chain a top strategic business agenda. Designing appropriate supply chain structure, establishing relationships, rules and priorities and embracing a ‘New Supply Chain Agenda’ should become the central focus for all CEOs and top management to thrive amidst present and future vulnerabilities.