04 SCS : Viewpoint www.supplychainstandard.com
PETER BARTRAM
Peter Bartram is a business writer,
journalist and author of 20 books.
Looking to the east
So, we’ve waved a fond farewell to the Noughties.
(Come to think of it, not such a fond one considering
the decade contained two recessions.) What will the
next decade bring for supply chains?
Ihave a feeling that the coming ten years could see more far-reaching changes for supply
chain than the last 50. And the big question is going to be: are logistics professionals ready
for them? The key to all this comes down to the tension that’s going to be created between
a shift in the balance of economic power from western nations to the east – but also, to a
lesser extent, South America and Africa – and the growing competition for world resources.
First, let’s briefly consider the implications of the economic power shift for logistics pros.
What it means is that there are going to be more consumers with more money to spend in
more places.
When people in the remoter towns and cities in China find more yuan in their pockets, they
will want to spend it on goods and services. The same applies for consumers in out-of-the-way
towns in Brazil, Russia, Nigeria, Indonesia or a host of other countries whose economic power
will grow during the next ten years. Yet these are all places that have weaker infrastructures and
are often at the ends of already stretched supply chains.
So the challenge is going to come in two parts. The first is anticipating where there will be a
growth in demand for your products – that’s one for market research. Logistics hasn’t always
been good at working closely with market research – so a need to build some bridges there.
The second is then extending the supply chain
into new areas. That’s going to involve
The point about all this
is that it’s going to mean
logistics pros need to
develop a much broader
management outlook. I
don’t want to be unfair
here.There are many
logistics professionals
who already make a
strategic contribution to
their business.
developing local knowledge and taking some key
strategic decisions about how to distribute
products. During the next decade, expect to see
more companies using a much wider range of
strategic partnerships to get their goods into new
markets. The point about all this is that it’s going
to mean logistics pros need to develop a much
broader management outlook. I don’t want to be
unfair here. There are many logistics
professionals who already make a strategic
contribution to their business.
Yet there are others who still have a tunnel
vision view of logistics. They will need to change
or find themselves steadily sidelined as the
coming decade progresses. The business schools,
especially those which have logistics specialisms,
such as Cranfield School of Management, should
be playing a key role in raising the strategic vision of a new breed of supply chain managers.
The second issue where logistics has a growing strategic role to play is in managing what will
become growing competition for world resources. We have already seen the effects of this
during the past decade in the demand for commodities of all kinds from oil to concrete. As
emerging nations become economic powerhouses in their own right, they will create demand
for more resources to feed the insatiable appetite of their own economies.
Again, two issues for logistics pros. The first is a sourcing issue – and this is where
procurement professionals are going to find themselves playing a more central role. In many
cases, there needs to be more emphasis on developing strategic long-term partnerships with
suppliers of key commodities. That may mean biting the bullet by foregoing some short-term
opportunities to play the market for cheaper prices. The key point here: security of supply
could provide a greater strategic advantage than a couple of points off the price. But decisions
on this need to be made on a case by case basis.
Which brings us to the second point. There’s been a huge variation in the price of many
different commodities during the past ten years. Expect that to continue in spades during the
coming decade. So, here, procurement needs to work even more closely with the traders who
buy key commodity futures to ensure security of supply at the best available prices. Again, this
will involve much more thought and predictive work than many will have been used to in the
past. For those who want to see how this can be done to advantage, I commend Shell’s work on
scenario planning; now a business school classic.
The bottom line here: the work of logistics professionals during the coming decade becomes
much more strategic. But I need to add a caveat. It may well be that many logistics pros
themselves already appreciate the significance of all this. But do their boards? On that point,
success or failure may well hang.
BILL
BRONSKY
Bill Bronsky is the
managing director
of OBA.
Only the
collaborative
will survive
The current recession has been a testing
time for large and small corporations
alike. It has, however, been preceded
by one of the most optimistic times in
recent history and such was the positive
atmosphere till 2007 that there was an
emerging body of thought that was willing to
label recessions a thing of the past.
And yet, the impact of the last meltdown
was not so far back in the past. Surely,
successful organisations would have
absorbed the lessons from previous
recessions into the very fabric of their supply
chains and would be well prepared for the
current meltdown. This was the starting
hypothesis for our research.
If there’s one thing that was conspicuous
after the tech-bubble slowdown, it was that a
large number of corporations, across business
sectors had spent an inordinate amount of
time, focus and resources on surviving the
slowdown – effectively under investing in
being prepared for the upswing following the
meltdown. Both manufacturing and services
firms found themselves ill-equipped when the
tide turned and a fair proportion of failures to
either survive the downturn or capitalise on
the upswing were expectedly attributed to
weaknesses in supply chain links. There are
five key areas where companies should be
building capabilities:
CONTROL: In recessionary times, very often
the natural tendency for organisations is to
turn inward-looking, focus on protecting
themselves and limit the amount of
information they share with their supply chain
partners. Our research showed on the other
hand that winning firms had systems and
processes already in place which allowed for an
uninterrupted and sometimes increased level
of information sharing during recessionary
times. In fact, as one would expect, the sharp
demand fluctuations that occur during
recessions warrant a more integrated
organisation (across supply chain entities) that
seeks to minimise the bull-whip effect, thus
eliminating inefficiencies and balancing supply
and demand effectively.
RISK MANAGEMENT: There is no other
way to spell it out. Winning firms take
contingency planning seriously. Whenever risk
management is “de-prioritised” – particularly
forward-looking scenario planning – the results
during recessionary times can be catastrophic.
Companies had different levels of
preparedness for today’s difficult economic
situation. Some had taken advantage of the
economic peak times to prepare their
operations for the typical downturn – “Cost
efficiency programmes were already on the
way and current climate only supports this”.
However, some of the responses also stress the
challenge of the true globalisation in supply
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