The changing role of IT tools in the supply chain
By James Small, Managing Partner at Oliver Wight
Lean supply chains became a reality for some organizations during the economic downturn; not through increased efficiency or design, but through panic as they drained inventory to cut costs. Now as the market recovers, these same organisations face the challenge of restoring the capacity and performance required to maintain customer service levels.
Previously organizations might have been sent scrambling for an IT solution to the problem, but at Oliver Wight we’ve seen an increasingly widespread acknowledgement that up to now the tools (on their own) haven’t delivered the type, size and performance of business organizations wanted, and now investment in people and process has become more of a focus. Rather than spend $5 million on a new IT system, organizations are choosing to invest five to 10 percent of that figure in people and process instead, and they’re getting substantially better results.
Many executives will admit their business management processes have room for improvement, citing poor or average visibility of global demand, supply chain and supplier capacity, and with little or no ability to evaluate different planning scenarios. They can’t blame IT for these things; neither can they expect IT to fix them.
IT tools do, of course, continue to have many merits, and you should be expecting IT to help, rather than hinder improvement action. These merits have not fundamentally changed; it is how they are being used, which we are seeing evolve. Companies need information to drive their business management processes and consequently they want information rather than data from their IT systems.
Software vendors have done a good job of late in beginning to shake off their reputation for ‘never-ending projects,’ with implementation times becoming shorter. This does not necessarily mean, however, that the quality of implementation has improved. The best tool implementations are those that have addressed the people/behaviours and the processes in preparation for the tool deployment. To their credit software vendors have recognized this, but there are still those businesses, which look to software to fix the problem, and outsource the problem. It is these businesses which will struggle as customer demand returns.
At Oliver Wight, we are helping businesses redesign that information requirement and to present it in ways that make sense of history to project the future and drive decision-making. There is an art to presenting information, and this cannot be achieved using IT tools alone. Statistical forecasting, for example, has its place in a consensus forecasting process, but in many markets history is not repeating itself and that presents a challenge to the forecasting systems. Without better communication and better information flow between the links in the supply chain, it will take a very long time for history to again become a good basis of information for the future.
Recognition by the leadership team that data and how it can be transposed into information, is critical - to the extent that data strategy should be owned by the leadership team. This may require a substantial change of behavior. Data integrity is obviously vital to any organisation, but delivering accurate data requires passion and commitment to data excellence - from the leadership team, down through all levels in the organisation. And of course, what gets measured gets done. At Oliver Wight, we are committed to working with customers to ensure that they have data integrity that is measured - and is more than 95 percent accurate.
Given that supply chains have become leaner, without necessarily becoming more effective, businesses are perhaps unsurprisingly, looking to supply chain optimisation software. While conceptually sound, you need to know when it is the right time to introduce optimization. For instance, if a supply chain is only achieving 80 percent schedule adherence, is the greatest source of the error in the plan or in the execution? If schedule adherence reaches 90 percent or more, then the error may in fact be in the plan and the supply chain will deliver on the benefits of an optimized plan.
Ultimately, the future will require supply chain collaboration to be the norm rather than a concept. To achieve this, businesses will need an integrated approach – people and processes, as well as tools, will play an important role in its realization.
Driver shortages: Why the industry needs to be worried
While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks.
A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so.
What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.
"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"
That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.
But where has this skills shortage stemmed from?
Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.
COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.
It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing.
So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done?
Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change.
Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.
Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line.
On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains.
Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months.
Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector