Fighting resilience’s status quo
Hello, and welcome to this week’s edition of Straight Talk. Inside, we discuss:
Resilience fatigue
Coming out of Covid, organizations were focused on improving their resilience. But, like many trends, fatigue may have set in. Resilience is still important, but now that daily disruptions have returned to a stable level, the C-suite is not as focused on resilience as it was in 2020 and 2021.
“Let's go back to Covid,” explained Craig Moore, vice president of sales, North America, at K?rber Supply Chain Software. “We were all anxious. Those of us that believed in the value of getting a vaccine, we got our first vaccine; we got our second vaccine; maybe some of us even did a booster. And then it starts to wane, right? Because it didn’t feel so pressing anymore. It felt like, hey, maybe we’re in the clear here.”
I spoke with Moore at the recent CSCMP Edge conference on a variety of topics, but the idea of resilience and preparing for contingencies struck a cord with me. Moore noted that in the software supply chain space, he is seeing some similarities to those Covid years.
“I see the same mentality in that world of leadership regarding supply chain solutions where sometimes those operational decisions get buried in the warehouse or in those operations,” he said. “It doesn’t, perhaps, constantly consume the mind of an executive officer or a board of directors where they’re looking at it going, okay, we made it through the challenges. Now is everything just running status quo?”
A survey from?Boston Consulting Group?earlier this year found that 65% of executives are?prioritizing supply chain and manufacturing costs?as the biggest levels for organizations to pull for cost savings. This trumps traditional cost-reduction areas such as labor and nonlabor overhead costs (cited by 52%).?The Hackett Group’s?2024 Procurement Key Issues?research found that the top issue for procurement professionals this year is cost reduction.
Preparing for the future
When I was growing up, my father once told me (I’m sure he learned it from someone else) that “good companies respond to competition, great companies behave as if there is always competition.” The sentiment is simple: Don’t be complacent. And it applies to all aspects of business and life. How many businesses rest on their market leadership, only to get passed by someone a bit hungrier?
“Insightful organizations are saying, well, status quo should never be good enough,” Moore told me. “Are we doing enough to extend ourselves to be ready and to operate efficiently? And I think that’s the other part of what we’re trying to do is getting into conversations with organizations to say, okay, how can we help you tighten it up so that the short-term benefit is that you’re running as efficiently as possible—you’re increasing your margins. And then, the long-term benefit is that you’re ready for the next challenge.
“I think more and more organizations are running in that good company mode and the great ones, we’re not seeing as many of those right now,” he added. “And it takes a lot of courage to get out over your skis to say, we’re going to make those investments because [we don’t know if] something is going to happen? Well, we don’t know, but we’re going to be ready if it does. And can you get executive officers and board of directors on board with the investments so that you are ready for that next challenge?”
MercuryGate acquisition
From a K?rber Supply Chain Software perspective, Moore said the company is looking to build out its solutions so that those companies looking to build resilience can turn to a single source for their supply chain solutions. Earlier this month, the company formally closed its previously announced acquisition of MercuryGate International. MercuryGate is a top provider of transportation management systems (TMS). Moore said the acquisition allows K?rber the ability to offer customers solutions both within the four walls and now outside.
“We’ve done a really good job over the last decade-plus of putting together a portfolio of solutions that have enhanced the work that happens inside the four walls of a warehouse,” Moore said. “And of course now we’re going to go beyond that and there’s a really important part to that. We feel that K?rber Supply Chain Software, better than any vendor, has built a true, scalable, large-scale model of true multi-channel execution fulfillment, and now enhancing that with transportation management capabilities that are brought to us by MercuryGate. That continued connection with our customer’s customer is something that we’re really looking forward to being a true champion in not just the execution of fulfillment, but then also the delivery mechanism as well.”
While Moore didn’t explicitly say it, the effort to offer more technology options—in this case by expanding into TMS—gives K?rber the opportunity to pitch solutions that work together well and can be packaged to better weather difficult times. In this age of data proliferation, interoperability is a key selling point and having multiple solutions in-house that offer that interoperability in a seamless way makes good business sense.
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K?rber Supply Chain Software is not the only company that has expanded its capabilities to address more end-to-end solutions. The approach is similar to what retailers have gone through as e-commerce has ramped up: meeting the customer where the customer wants to be met.
“It’s that journey of the consumer,” he said. “If we talk about it from the perspective of, say CPG for a moment, it used to be the consumer met it at the store. Well, they still do that, but now there’s also a consumer that expects the product to meet them at their doorstep. So that additional channel that is growing … is moving in another direction. I need solutions that empower me to be able to meet my consumer with a service-level expectation that they have that’s built on value and timeliness, and that requires supply chain execution solutions.”
K?rber Supply Chain Software is not the only company that is now taking this approach, it is just the latest to display that approach through its MercuryGate acquisition (which will add approximately 25% to the company’s annual net revenue).
While retailers have moved to omnichannel to meet customers at their preferred point of contact, the supply chain software space is creating its own omnichannel approach, and that means diversification of portfolios. TMS is just the next step.
Organized labor and the supply chain
The latest U.S. port strike ended after just three days, but there is another deadline upcoming on Jan. 15 and a major sticking point between the parties remains the use of automation in the ports. University of Tennessee, Knoxville, associate professor Don Maier recently published a blog that looked at the impact of the negotiations. Specifically, he explored the role organized labor has had, and will continue to have, in the supply chain for years to come. “It appears the dockworkers’ unions are demanding extremely high wages and no automation as a bargaining chip. The ILA is smart enough to realize that automation is coming. So, what will they gain? Think back to when Malcom (McLean) created the container. The union accepted the adoption of the new technology as long as they were compensated for the ‘loss’ of jobs, a benefit they still receive today, in one form or another,” wrote Maier. Click here to read more insights of Maier’s insights.
Saying goodbye to a titan
Last week, the business community lost an advocate that influenced industry in many ways. Thomas J. Donohue, former U.S. Chamber of Commerce CEO, died on Oct. 14. Donohue spent much of his professional life lobbying on behalf of business—first as president of the American Trucking Associations for 13 years before moving on to lead the U.S. Chamber from 1997 through 2021. He was 86. “As a business leader, Tom was a towering figure, and across his decades-long career, his Irish toughness, combined with his genuine compassion, made him a unique and impactful voice in Washington and around the world. He gave business a seat at the table and a voice in the debate in a way it never had before,” the U.S. Chamber said in a statement announcing his passing. You can read the full statement here.
What I read this week
In the latest episode of the?In Transit podcast, Navneet Lekshminarayanan, founder and managing director of?Holocene, discussed the challenges of managing spare parts supply chains. … Roberto Isaias, executive vice president and chief supply chain officer at Mattel, gave a riveting keynote address at the CSCMP Edge Conference, highlighting the approach Mattel took to revamping its supply chain. … More supply chain roles are being filled by women, but industry can still do more. … The nation’s economy remains the top issue for truckers according to the latest ATRI Industry list. … A limited strike against overtime at the Port of Montreal is expected to create delays for cargo shipping. … DAT’s Truckload Volume Index is indicating a new freight cycle has begun.
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Thank you for reading,
Brian