Global supply chain trends for 2014, by Avnet
Risk Management, Counterfeiting, Big Data, Manufacturing Strategies and Segmentation Are Areas of Focus for Supply Chain Managers.
According to Capgemini Consulting’s 2013 study,1 55 percent of companies surveyed recognize that supply chain management can be a source of competitive advantage. Further, collaboration with supply chain partners results in a supply chain that allows companies to outperform the competition.
“As our global customers examined their financial performance last year, many experienced the positive value that a fully integrated and globally coordinated supply chain has on their business,” said Lynn Torrel, Senior Vice President Global Supply Chain and Strategic Accounts at Avnet.
“Collaboration is one of the most critical elements in an effective supply chain, and we expect to continue to see more companies fully integrate their supply chains throughout their extended network of suppliers and customers.
“Although we anticipate several factors to influence supply chain management this year, we also expect that those who employ a systematic approach to orchestrating their business ecosystem will continue to achieve the maximum financial impact.”
Avnet’s supply chain experts have identified several factors to consider when implementing a fully integrated supply chain this year. These include:
- Risk Management– Despite a growing awareness of supply chain risks and the importance of mitigating them, few organizations employ a comprehensive risk management strategy. As margins for error in the supply chain become slimmer, more organizations will realize they have the power to mitigate the impact of many supply chain disruptions. Proactively assessing potential risk and developing a risk management strategy is critical to a company’s ability to continue to manage supply to meet demand, as well as the expectations of business stakeholders, regardless of the economic or environmental challenges.
- Counterfeiting– Members of the electronics supply chain have become more proactive in their efforts to ensure part authenticity and guard against counterfeiting, and industry initiatives and certifications have helped crack down on counterfeits. While the war on counterfeits will continue, technology manufacturers will be better equipped to combat these issues as tools to help identify parts that could cause disruption to the electronics supply chain become more pervasive.
- Big Data– Business applications of big data analytics will continue to expand from demand-related sales, marketing and customer service and manufacturing, into more supply side areas such as procurement, inventory management, and supply risk management. Implementation and the impact on supply chains will be slow, yet steady this year.
- Manufacturing Strategies– While many companies are considering reshoring and near shoring strategies, few have relocated their manufacturing operations. As labor rates normalize around the globe, and more powerful tools in network design and analytics become available to better manage supply chains across multiple regions and product segments, reshoring and near shoring will become more actionable. As organizations focus more on the customer experience, regional markets, value density of goods, and risk mitigation strategies, the benefits of reshoring and near shoring become more evident.
- Segmentation– As customers continue to diversify their manufacturing strategies, so does the need for segmenting their supply chains based on multiple end-to-end metrics such as cost, expected service levels and both manufacturing and final delivery locations. Segmentation is key to customer satisfaction, yet it is not yet ingrained into the end-to-end view of most organizations’ supply chains. This often overlooked strategy can help manufacturers develop a greater understanding of the costs associated with delivering products to different customer sets around the globe.
With a supply chain ecosystem spanning more than 300 franchised suppliers and 80 countries, Avnet helps its global customers navigate the changing global supply chain landscape to decrease lead times and improve time to market.
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1“The 2013 Supply Chain Agenda, 5th Edition” Capgemini Consulting, Erik Koperdraat and Kris Dieteren, March 2013
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