Relentless challenge

Our daily conversations with supply chain leaders have highlighted a definite shift in the nature and intensity of their roles in the past 18 months. It’s the same across all industry sectors. One CSCO of a global tech company called it “relentless challenge”.

Beyond business-as-usual competitive forces, they are adapting and managing an end-to-end operation while facing directly into macro and socio-political challenges accentuated by COVID-19, global supply disruption, fractious trade relations, changing customer behaviours.

Being technically on top of your game is critical, but the people element is increasingly coming to the fore. Relationships matter, more than ever before. A prime example is the semiconductor shortage. The explosion in demand for smartphones, PCs and gaming heightened by COVID-19, sparked an immediate supply shock and supply shortage. Asia’s largest chip makers, Taiwan Semiconductor Manufacturing Co (TSMC) and Texas Instruments (TI), could not match their capacity to demand. Factor in the increasing automotive electronics in cars (45% of a car’s manufacturing costs by 2030, according to IHS & Deloitte) and it’s a perfect storm.

Facing the unknown, many automotive OEMs ramped up inventory, affecting their just-in-time logistics strategy. At one point in 2020, a supply chain director from a leading automotive OEM told us he estimated over 20% of their suppliers were in “red flag category”, not able to supply on time or to order, and in financial risk status. The supply chain director of a major global telecoms manufacturer emphasised the importance of getting closer to tier 2 and tier 3 suppliers, directly in most cases, to ensure resilience and adaptability in the supply chain, adding: “it used to be all about material supply, but now it’s a question of knowing if there is manufacturing capacity to match demand”.

Despite the huge changes wrought by technology, globalisation and digital transformation, its also who you know that counts. Knowing your suppliers, having enduring relationships and access to alternatives when the chips are down. What really matters is the ability to connect and pick up the phone to make things happen - to hustle, and bypass roadblocks and stoppages in the supply chain.

Organisations are focused on agility and adapting their logistics strategy to meet changing customer trends, or to match their competitors who are getting closer to their customers. B2C pace is expected in B2B transactions too. This is cutting across multiple sectors, such as: customers making bespoke orders direct to manufacturer (high-end bikes, cars, boats), FMCG companies cutting out retailers (selling direct to consumer), aviation companies expecting vendor managed inventory arrangements with their volume / commodity suppliers.

The COO of a major global technology manufacturer shared with us: “everything has come to a head”, with a supply / demand imbalance, components shortage, a power / fuel crisis, shipping logjam, container shortages, and he felt the escalating “worker crisis” would cause a labour shortage in factories, shipping, general transport, and haulage. He added, “as a supply chain student its fascinating, but as a practitioner this is an existential crisis, and we have to adapt and pivot on a weekly basis”.

Sensing the future, thinking big and thinking small, preoccupies supply chain leaders. Our team have seen a huge emphasis on hiring specialists in procurement, logistics and planning. Clients are stressed about not being ahead of the game, managing risk, and pre-empting supply crises. Building in resilience is critical in unpredictable times. Our clients are bringing in transformational supply chain planning leadership (S&OP, SIOP) who can work cross functionally, grow internal relationships, adapt to different international customs and working styles, and build a data driven and proactive planning approach linking manufacturing, commercial, finance and supply chain. We see increasing activity in the SME market, which is unprecedented. Ever more, our work crosses international borders, and the talent pool is global, emphasising the complexity, scale and reach of global supply chains.

Beyond being the drumbeat in the day-to-day operation, the supply chain function will underpin strategy. Supply chain has been pushed to the top of the boardroom agenda, and the CSCO / supply chain director and their team are firmly on the CEO’s radar. Further to being a reliable functional leader, it is imperative to be a strategic as well as tactical advisor in the boardroom, to build trust and confidence with the CEO. We also expect to see demand for NEDs with supply chain leadership backgrounds, with companies seeking an independent voice in the boardroom who can see through the noise and complexity of the supply chain, provide guidance and an honest appraisal on the relentless challenges, threats, and opportunities which will not abate.?