25 Mar 2019
Facing up to global disruption in the supply chain - Part 1
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Lucy Harding and Pieter Ebeling, Partners in the Global Procurement and Supply Chain and Consumer, Retail and Digital Practices of Odgers Berndtson in the UK and the Netherlands, respectively, discuss global disruption in the supply chain economy and what this means for leadership.
What’s happening in the modern supply chain, where’s innovation and disruption coming from, and what will companies have to focus on in leadership and talent management in order to ride the waves of disruption and thrive? We put the questions to Lucy and Pieter in the first of a two-part series.
In your conversations with supply chain leaders, which themes emerge as highly disruptive to their business?
Lucy Harding (LH): Well, it varies by industry. And it depends on their level of maturity as to what they are trying to achieve. Essentially, the supply chain has become a key enabler and a key factor in customer experience. The efficiency, responsiveness and the speed of the supply chain has a direct impact on their brand and their customers’ experience, in a way that it hasn’t had before.
Businesses like Amazon have shaped the consumer expectation so that you are automatically going to compare your experience with the one you had with Amazon.
Their emergence has influenced all consumer-facing businesses actually, to really look into their supply chain and understand how they compare. The customer expectation has now been set at that level, all consumer-facing organisations need to look at the efficiency of their supply chain. But they need to do that in a way that they can still compete on price with a pure e-commerce provider.
Investment from a technology perspective to compete at that level is huge. And more so for established and mature businesses with legacy systems and legacy infrastructure to update and upgrade, that may need to be moved to a different location. So those are the disruptive things really.
Pieter Ebeling (PE): Digitisation, centralisation versus decentralisation, the extent of flexibility within the supply chain. If you look at the competitive playing field, the larger companies in the supply chain have to deal with competition that is organized more flexibly, which makes it hard to withstand the smaller players. So how do you capitalize on the scale of the organisation and the scaling opportunities that go with it, and do you also have the flexibility and speed to be customer-focused? That is the challenge.
Is there anything more or equally as disruptive right now?
(LH): Well, other things that are disruptive are global economic instability, Brexit and the impact that will have on the supply chain. People are talking about and are concerned about global trade tensions between the US and China. They are trying to understand the tensions between major trading nations, something the current leadership generation has not had to deal with before.
(PE): Technological developments. If you look at the systems that are used within the logistics process, company-wide, fairly standardized processes were the norm. Now, there are new systems that can bring some flexibility into it.
Do supply chain leaders outside of the UK need to take Brexit seriously, and why?
(LH): Yes, they do, because the UK is still a major market in terms of sales for companies across Europe. The UK needs to trade with Europe and Europe needs to trade with the UK. Those organisations still need to get their physical product into the UK, seamlessly, so if there are going to be disruptions at borders, it is going to disrupt on both sides of the channel. It is not something that European companies can ignore.
With physical disruption in the UK, there will be a physical disruption in Europe as well. What contingency planning are they making around that?
The key initial spikes of concern will be around the fresh food supply chain, for example, and the physical blockages and the physical traffic queuing at the border. So yes, it is primarily a British problem, but trade flows go two ways. If there are blockages, there are blockages both ways.
(PE): The entire financial systems and value increase or reduction has, of course, an impact, to have your manufacturing footprint there or not. That will also have to do with pricing, production, ingredients, everything. In the case of Brexit, the costs could go up there, which could mean that you would no longer want to have the production location and the supply chain there. You may prefer to become more flexible, work with third party suppliers. Or integrate them into the existing supply chain.
How large of a challenge is talent management within the supply chain economy, and what are the specific challenges?
(LH): Because technology is impacting across every area, it is essential to have people on board that can embrace technology. They must be able to work with so much ambiguity right now, both in terms of the technical aspects, but also the macro-economic and the political landscape, which are changing. So there is a lot of uncertainty, a lot of ambiguity. We need people that can understand that, can process that, not overreact to it and can navigate their teams and their business through uncertain times.
The technical skills that are required as jobs change are in short supply; people that are very analytical.
But it is not just about the analysis and the data science, you have to be able to interpret what the data is telling you, and provide insight on the back of that data.
So we must not get lost with populating our businesses with just data scientists that can process numbers. We need to know what the data is telling us.
Key questions are: How are we trying to implement that information into strategy and into a workable plan and what is the insight for the business? So, it’s those skills that we need to find and clearly, these are all new and emerging skills due to new and emerging technologies.
(PE): The most important gap in the supply chain is that supply chain specialists can be rather one-dimensional. They can calculate what the efficiency of certain processes is better than anyone, and how things are streamlined. But what you see a lot is that the communication skills of a supply chain person could be better, including at a higher level. Certainly, that’s true of the leadership too.
So in addition to the technical capabilities needed, you see that the market is changing faster and faster so that adjustments within an organisation are made faster and are more important. In order to be able to bear these changes, you need certain leadership that can connect the various departments but can also look at how the organisations are structured at the moment, and what the talent pipeline should look like to be able to answer future issues.
Thank you, Lucy and Pieter, we look forward to hearing more in the final part of the interview.