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Posts Tagged ‘Supply Chain’


At the time of this article going to publication, we are starring at around 338,000 deaths, and 5.2 Million confirmed cases, and 188 countries were affected (source: Johns Hopkins University). The fellow-citizens are perishing at a rapid rate.  All of us are mere spectators watching the sad drama unfolding in the biggest possible screen called the globe.

The Economic Shock:

With the above in the background, no economist is daring to put out a model that predicts the impact of COVID -19 on the global economy. According to “Erin Duffin,” it is predicted that most major impacted economies will lose at least 2.4 per of their GDP in 2020.  A 0.4% drop in economic growth is estimated to be around 3.5 trillion U.S. dollars in lost economic output.

If we reflect our thoughts on how it could impact the global supply chain, it is good and bad news, and we are entering into a period of uncertainty and chaos. Maturity is all about discovering that everything to do with the acceptance of “not knowing.” We are gaging at unknown unknowns.  By accepting what we don’t know, we would demonstrate matured reactions to this global pandemic in managing supply chains globally.  Generally, supply chains work in proactive mode; we are in a reactive way to navigate new challenges; the supply chain professionals across the globe are looking to build resilience into their supply chains.

Resilient supply chains are skilled at preparing and responding to and recovering from unexpected disruptions by maintaining the continuity of operations. Generally, such a concept of resilience incorporates a variety of agile traits such as robustness and flexibility.  Business risk management and continuity, along with reactive planning, become priorities of the management team.

The Bull Whip Effect

As the pandemic crisis deepened and nations have begun instituting lockdowns, supply chains have been experiencing something completely new and unknown phenomena of systemic demand shocks. People are stocking up least expected products, and the most talked-about example, toilet paper, is ironically usually the go-to example of a perfectly forecastable product, since the end consumption is usually rather stable. There seemed to be a fear that food supply chains would be unable to respond to this unprecedented, massive spike in demand. In the case of toilet paper, it is not a product shortage; it all about the ability to replenish and meet the demand requirements.

Living with COVID

As the supply of vaccines’ availability for the virus is unknown, we are calling this period as the new normal. The economic impacts are posing challenges to the global supply chains, as mentioned above, and many economists are predicting a deep recession of unknown length. A good example is the automotive industry is contracting as the sales are dropping exponentially. The coronavirus outbreak has heavily impacted the manufacturing industry. OEMs and parts suppliers have yet to return to full production capacity. Consequent delays in delivery might affect the market at multiple levels from postponed new car model launches, shattered supply chains, financially drained SMEs, and dampened vehicle sales in Q1, 2020. The effects will spill over into Q2 as well, with unfulfilled order deliveries due to ongoing production slowdowns.

Figures recently released by the Australian Bureau of Statistics show that 31 percent of Australian citizens have experienced a decrease in income due to the pandemic.  Besides, 72 percent of Australian businesses reported that reduced cash flow.  These two negative economic factors will have a deep impact on business over the next two months.  In Australia alone, the new car sales/demand have seen almost a 50 percent drop due to COVID 19 (source: Darren Gray, Sydney morning herald). The extent of this plunge in sales is pretty unprecedented in modern times, and it’s going to have significant repercussions. According to James Voortman, chief executive of the Australian Automotive Dealer Association

The global automotive sector employs more than 9 million people alone in the manufacturing of automobiles globally, which includes over 5% of the worldwide manufacturing workforce. Many other industries, including steel, iron, glass, plastics, textile, rubber, software, among others, are dependent on the demand from the automotive sector.

Estimation reveals that global automobile sales will decline by about 23% in 2020. Initially, the disruption in supply and manufacturing hampered the industry significantly. And now with the multifold decline in demand has led to the uncertainty regarding the recovery (the unknown).

Good out of Bad

Something good is coming out of a bad situation.  The new-age manufacturing companies are innovating in challenging times. One company resolved a shortage of parts for life-saving ventilators in Italy by using 3D printing and making them available within a day source: (Independent, U.K.)  Perhaps this triggers the creation of a role for additive manufacturing in the spare parts supply chain.

LVMH Moët Hennessy – Louis Vuitton SE, L’Oréal S.A, and Coty Inc. and others have stepped up and repurposed production facilities intended for fragrances and hair gels to produce hand sanitizer. In addition to providing a valuable resource that may help save lives, this move helps keep workers on and facilities operating despite challenging economic conditions for luxury items.

Conclusion

The supply chains are in unfamiliar territory and unlearning to learn new methods of delivering outcomes.  We are yet to see the pinnacle or top of the learning curve.  There is a possibility of a change in shopping methods, and stores may disappear, and virtual shopping on online shopping could take a front seat.  Similarly working from home could be a new and big popular initiative, Twitter announced that their staff could work from home for life.  The possible good thing coming out of this initiative is commuting gets reduced and good for the environment.  It will hurt the automotive industry and the Petroleum products industry.  It has a negative impact also, according to Medical News Today, “Many people are required to stay at home in a bid to stop the novel coronavirus from spreading. Some people may feel isolated, which can lead to a range of feelings and emotions. Quarantine, self-isolation, and physical distancing (also called social distancing) can cause anxiety, depression, and loneliness, all of which are common ED triggers.

See the below changes to the lifestyle according to “Statista.com.”

 

The Truth:

The world of “normality” no longer exists. Lives have altered in ways that no one could not have possibly imagined in their wildest dreams. Many considered 2019 was an irrational, unkind, and dysfunctional place. Now, we refer to the previous year – a mere six months ago, as a time of “normality.”  We have no clue when we return to normality from “BAU COVID 19.”

Fauci, (the famous American physician and immunologist who has served as the director of the National Institute of Allergy and Infectious Diseases since 1984)  repeated his call for a vaccine as essential to stopping the pandemic. He said he is optimistic they would find a workable candidate, but warned of potential pitfalls in developing any vaccine.

Source: IATA

My Belief

“The only way to make sense of change is to plunge into it flow with it . . . and join the

dance.” – Alan Watts

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Today’s customer-driven markets environment is becoming increasingly complex, unpredictable and uncertain for companies that operate in highly globalised markets. The grown pressure to create competitive advantages is driving shorter product life cycles combined with faster technological leaps. This situation results in the effect that a continuously growing number of entities faces an ambivalent challenge of trying to cut costs further while being more responsive and flexible towards changing customer requirements. A survey executed by McKinsey in 2011 (The challenges ahead for supply chains) revealed the biggest challenges nowadays that companies in cyclic industries have to cope with are uncertainty and market demand volatility.

A static supply chain fails to flex as customer needs change and will be known as the “one-size-fits-all” approach of the organisation and the supply chain remains insensitive to customer ever-changing needs and demands.

Flexibility

“The measure of intelligence is the ability to change.” ― Albert Einstein

According to SCOR (supply chain operations reference) supply chain flexibility is divided into two segments. The first segment deals with Customer-facing metrics and the second segment deals with Internal-facing metrics. The success of flexibility is to satisfy both metrics within any organisation that intends to be flexible. Let us test this with an example.

Supplier One – Carries red, blue, black and white cars of the same model in order to meet the customer needs instantaneously. Based on customer-facing supply chain metrics, supplier one scores high marks because they are flexible and meet customer needs. Whereas by carrying all above-mentioned colours, the supplier inventory carrying costs are high and scores low marks when assessed based on internal facing metrics.

Supplier Two – Carries one popular colour per model in the showroom. And based on customer’s requirements sources different colour car from the dealership network across the country with an assured delivery date. Customers are willing to wait in case of capital investments. This supplier will score high both on customer-facing metrics and internal facing metrics.

The global and dynamic markets demand better quality, more product variances and extended services including higher reliability and faster deliveries. Each of those requirements can be a crucial differentiator that decide whether a company sustains on the market or not. Besides that, customized products with short lead times characterize the current situation in various industries. Flexibility is not all about customer-centric objectives and ending up with financial losses. It is all about being flexible to meet customer needs by able influencing customer requirements.

Collaboration and flexibility

Collaboration increases flexibility and makes it easier for organisations to meet customer needs. The stakeholders (both internal and external) within the supply chain start embracing change rather than fearing it and learn to turn a potentially challenging situation into an opportunity. In fact, this type of teamwork and collaboration are the very foundations of agile work methodologies, which allow teams to be more flexible and thus, responsive.

Change Drivers

In any flexible supply chain change is the way of life. The drivers will be there in every organisation exerting force for a change that’s not recognised within the organisation. Some companies will be slow in recognising the drivers that initiates flexibility and collaboration through the change process and that ultimately leads to customer satisfaction. But the need for coming to grips with change is inevitable. Flexibility with a collaborative approach and willingness to change is the ultimate mantra for business success.


Source:Alamy stock photo

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The core idea of lean manufacturing is actually quite simple and that is to work on eliminating Muda (wastefulness) from the manufacturing process. Every manufacturing process will experience some kind of waste, it could be time, it could be material or it could be productivity.

So what is a waste? Waste is defined as any activity that does not add value from the customer’s perspective. According to research conducted by the Lean Enterprise Research Centre (LERC), fully 60% of production activities in a typical manufacturing operation are waste – they add no value at all for the customer. The core objective of any business process is to add value and realise the value (through tangible outcomes)

The good news is that through lean six sigma tools every company has a tremendous opportunity to improve, and other manufacturing best practices. Techniques that enable you to deliver higher quality products at significantly lower costs. The competitive advantage in the market place is differentiating the organisations. Lean manufacturing techniques help us to minimise waste and improve productivity.

Graphic by NEWCASTLE Systems

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In the last article, it was identified and established that Supply Chain is the key enabler for business growth. It is time now to understand what measures within supply chain drives supply chain excellence. As shown in the below figure, five elements contribute towards supply chain excellence. It starts with People, Quality, Velocity, Cost, and finally Agility to react to the dynamic business environment.

SC Excellence 1

In this article let me share my experience about how people can effectively contribute to the success of the business.

People:

Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” Success is not a permanent partner, success is a visitor in some cases, and hence, people may have to pursue the path of continuous improvement to sustain in this challenging environment. “Success consists of going from failure to failure without loss of enthusiasm”. If one critically examines the only difference between successful people and the rest is nothing but lack of will to succeed.

In order to be successful in business we need a leader who can articulate the vision and goals of the organisation and along with him we need group of people whom we can call them as cohesive team. In order to be a successful team we need few critical attributes and they are:

Engagement – It is a challenge to any organisation to create an environment where employees who are part of the cohesive team understand the organisational goals and commit to the organizational vision created by the leader. Job engagement and organisational engagement leads to employee engagement. Happy employee is a productive employee. Hence, it is a key measure.

Leadership – It is an old school of thought that there is only one leader in the organisation. Yes, there is one leader at the top and he/she needs leadership support from many functional silos. It is essential that these emerging leaders should be trained in the areas of Communication; Motivating teams; Team building; Risk taking; Vision and goal setting. Last but not least is to recognize and reward the team’s performance. Say at least thanks for their contributions.

Think outside the box – Today’s business is dynamic, volatile and challenging, and the ability to improve continuously is very critical to the success of the organisation. The core driver to make your team to think outside the box is to deliver competitive differentiation in the market place. Due to product proliferation, there is no dearth of choices to the consumers, the product has to be unique and deliver total customer experience. This process is not static and it is continuously evolving. Unless one develops ideas and transforms them into reality that meets tomorrow’s customer needs, it would be highly challenging to survive in the market. Thinking is unlimited, there is myth that humans use only around 10% of their ability to think. It is not thinking that matters, Lateral thinking is the need of the hour!

Team Work – Success of any team depends upon the team work and team’s collective strength and wisdom. The best teamwork comes from group of individuals who collectively agree to work independently and together towards one identified organisational goal in unison. Let us not forget ““The strength of the team is each individual member. The strength of each member is the team.” In short WE = Power of Success!

Change Management – “Change is the law of life. And those who look only to the past or present are certain to miss the future” John F. Kennedy. The world is changing in other words, it is evolving and if you live in the past and deliver a product belonging to yesterday for tomorrow’s world, the outcome would be disastrous. Obviously change is driven by a vision, get your vision right, build a team that could deliver your vision, empower the team, celebrate short term successes, and most importantly communicate and deliver the change message periodically. Change ushers exciting opportunity and at the same time could deliver loss, disruption or threat to some organisations. How such change process is managed can be the difference between surviving and thriving in a work or business environment. Change management should be developed as an inherent characteristic of any organisation who would like to survive and thrive in this world.

Perseverance – As mentioned earlier success is a visitor if you fail to pursue it consistently, it will desert you. In my opinion one may face many defeats in our journey in search of excellence, but you should never get defeated. The defeat teaches the critical lessons to how to succeed. Whereas success only makes you complacent. In order to manage sustainable success, it is absolutely necessary to be persuasive. Abraham Lincoln once said, “I am a slow walker, but I never walk back.”

Continuous Improvement – “Excellent firms don’t believe in excellence – only in constant improvement and constant change” Tom Peters. We can write tons of information how we can achieve continuous and sustainable improvement through the leadership vision and team work. Let us examine a case study which delivers invaluable information how continuous improvement in supply chain delivers competitive advantage in the market place.

Supply Chain Excellence2
Note: Please double click the image to see it large.

The human being is yet to invent an automated system that could foster sustainable continuous improvement in any field. It is all driven by the committed teams all around the world. Team of individuals is not a system, it is the group of people with commitment to make tomorrow a bright one and with emotions to win with persistent efforts and with a faith to turn hopeless failure into glorious success.

Any business organisation must have a clearly identified unique core objectives which differentiates the organisation with competitors. The so called differentiation comes through innovation of the people in the form of enhanced technology, improved quality, cost competitiveness, total customer experience. All these factors are articulated by a leader and implemented by the group of people whom we called an integrated and cohesive team.

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A decade ago people used to believe that people, process and technology are the three Business enablers.  John F Kennedy once said, “the Chinese use two brush strokes to write the word ‘crisis.’ one brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity”. In today’s world globalization propels the business growth and at the same time, presents massive challenges in the form of supply chain.  This phenomenon called globalization impacts the economy, product life cycle, society, environment and personal life too.

I am not sure if anyone measured the increase in competition due to globalization, but surely the globalization has immensely improved sustainable competitiveness in many organisations.  In order to be competitive in this world of uncertainties and volatile market conditions, we need a successful formula that could deliver and address challenges such as global reach, price competitiveness, agility and rapidity to reach the market, improved production and supply lead time, make vs. buy decisions, identifying non-core activities and outsourcing, improved operating profit after capital charge, on top of all this, EVA, total customer satisfaction and happy investors.  The role of the supply chain has never been as important as it is in today’s globalized economy. Supply Chain speed and agility have become two key levers for competitive differentiation and increased profitability. Today’s supply Chain successfully handles all the challenges identified above and converts those challenges into opportunities in order to deliver competitive advantage to the organisation. And it is proved time and again  that Supply Chain is the core business enabler apart from people, process and technology.

Today there is no dearth for technology, we have variety of technological tools that offer variety of automation, the need of the hour is the people who can understand the business dynamics and customer expectations and develop effective supply chain processes that adds value and delivers competitive advantage and sustainability to the business.

Supply Chain delivers broadly four competitive advantages to the business and that includes, cost benefits, flexibility benefits, quality benefits and last but not least is the lead time benefits.  These benefits are driven through Planning, Continuous Improvement, Quality (standard work to achieve consistency) and the ability to reach global customers faster and efficiently.

The below figure shows the supply chain functional pyramid:

Pic1Whereas the business is not a charity, in order to be successful, it has to generate profits keep the shareholders happy and encourage them to invest more money into the business.  George W Bush rightly pointed out that, “you can’t do today’s job with yesterday’s methods and be in business tomorrow”.  And that is where we need effective, advanced and cutting-edge supply chain processes and efficiencies.  A good business leader should create a vision, articulate it passionately and drive towards completion.  Any good vision will have four “P”s in it, people, process, product and profitability.  If you look into the business objectives pyramid, you will find all these elements in one form or the other.

The below figure shows the Business Growth and Prosperity Pyramid:

Pic2

 

 

The Alignment:

In the month of December 2013, Hitachi Consulting group report (published in Europe) indicated that 80% of supply chain managers do not see their supply chain as an enabler of business strategies within their organisation.  Greg Kinsey, VP of Hitachi Consulting, said: “The results from our survey make one thing very clear – disconnect between a company’s business transformation strategy and the day-to-day management of the supply chain remains a serious, yet hidden, problem for many organisations.  Hence, it is absolutely necessary to align the supply chain transformation strategy with the business strategy in order to excel in today’s dynamic, challenging, volatile, confusing, compelling, and exasperating world of business.  The below figure explains the alignment between supply chain transformation and business growth and prosperity with right people, processes and with the help of technology.

Pic3

 

It is very critical that the supply chain transformation is well aligned with business growth and prosperity strategies.  The below figure illustrates the path for the alignment.

Pic4jpg

 

Organizations may have to recognize that the supply chain transformation and alignment with the organisational goals and objectives delivers a competitive market differentiation.  The uniqueness sells; let us not forget that uniqueness’s core objective is to create that magic of alignment between supply chain and organisational goals.  In order to achieve the short and long term goals the transformed and aligned supply chain will have critical influence on business and organisational outcomes and to large extent on the shareholders and customers.

It is worth concluding this article with 7 simple supply chain lessons taught by Steve Jobs of Apple Computers (Source: Supplychain247.com)

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Globalisation 4

In my opinion Logistics industry can be described as wheels of Globalization and key to the market expansion and competitive product availability to the growing global consumers. Dynamic business conditions and confronting economic conditions are driving globalization. Globalization is resulting due to expanding markets, exploding retail market, product proliferation, ever changing needs of customers, economic downturn, cost pressures, technology, cultural integration and government policies around the world. It would be wrong to assume that globalization influences economy and trade only; we are seeing integration in the areas of culture, media, education, research and development, tourism and even climate change.  On political front, we see collaboration and collective approach in addressing daunting challenges we face today.   Globalization will make our societies more creative and prosperous, but also more vulnerable and in transforms economies more competitive.

Let us review some vital statistics (Source: Armstrong & Associates Inc.).  First let us review the region wise Logistics spend vs. 3PL revenue (2012):

Globalisation 1

Obviously Asia Pacific Region heads the chart in all categories if we exclude remaining other countries which were consolidated under other countries.  It would be worth looking into Asia Pacific region by country in order to identify the growth countries.  Top five are highlighted here under:

Globalisation 2

If we look globally, it would be interesting to compare the numbers and easy to identify the globalization impact on different countries:

Globalisation 3

It would be very interesting to analyse 2013 numbers as the world trade is not promising.  World trade is expected to grow by 2.5 percent this year and 4.5 percent in 2014 (source: The World Trade Organisation).  More and more companies are developing agile supply chains and compressing product supply lead time and at the same time reduce the cost of production.  In order  to achieve all these goals, outsourcing supply chains is one of the solutions.  According to CAPGEMINI Consulting 2014 report 72% of the shippers are planning to increase use of outsourced logistics services and whereas the 3PL companies believe that 78% increase in business.  Let us hope economy responds well in 2014!

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Leadership Pyramid Showing Vision Values Empowerment and Encouragement

Establish positive attitude and demonstrate your integrity to engage the team; and engagement leads to commitment and commitment results in enhanced productivity and improved productivity produces economic benefits to the Customers (Superior Quality and Cost Effective Products), Shareholders (Improved return on Investment), Employees (Career Growth and Job Certainty) and to the Organisation (Improved Brand Equity and Superior Financial Results).  Supply Chain is a team game and without cohesive and collaborative team you go nowhere.  In order to achieve all this; one should have the right attitude.  Someone appropriately commented that, “a bad attitude is like a flat Tyre, you can’t go anywhere till you change it”.

Positive attitude leads to great leadership and great supply chain results (Source: Gartner Supply Chain Top 25)

Top 25 SC Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

last 4 years comparison top supply chain

 

 

 

 

 

 

 

 

 

 

Believe in creating a successful future and not predicting the future!

future

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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