Danone Nutricia, supply chains and the VUCA world
In the supply chain world, the well-known acronym ‘VUCA’ – volatility, uncertainty, complexity and ambiguity – has never been more relevant than it is today. The geopolitical landscape is evolving on an international scale, while as Brexit unfolds in the UK and EU, it’s hard to gauge what’s going to happen in either the near or long-term future. The 4th industrial revolution is taking hold, transforming the nature and pace of our working environment and processes. And we’re seeing an increasing number of disruptor businesses that are changing traditional supply chain models and relationships.
The industry’s go-to approach of using the past to predict the future through statistical modelling and forecasting isn’t as accurate as it used to be. At the same time, business and consumer expectations are changing; stakeholders across the wider production and distribution supply chain want things to happen more quickly and efficiently than ever before, and there is little room for failure.
In short, the markers around how we operate are moving – and it’s putting our function under increasing pressure. Initiative and innovation are now essential for businesses to meet these challenges and evolve their commercial strategies in line with the new operational landscape.
This is particularly important in today’s digital era. Social media allows opportunities and risks to be shared across regions and time zones. Consumers and stakeholders can therefore see and react to changing circumstances within seconds. As much as possible, we need to be ready to deal with their reactions, and make sure they are aware of the changing world. It’s about managing expectations. There should of course be a continual focus on developing new ways of working that allow you to maintain service levels and keep up with the pace of change. However, there should also be clear communication around how changing trends and seasonality are affecting the business, to help ease pressure.
It’s also important to encourage a sense of reason. It’s about accepting that even the most advanced new forecasting methods won’t provide the same level of accuracy as we could give in a more stable context. Instead, businesses should adjust their strategy – focusing less on the relative importance we place on forecasting as a skill, and more on the tools you have within your business to help deal with the consequences of unpredictability.
At Danone Nutricia, we very much see our people and teams as our vital asset. Working on the frontline, our supply chain team are the crucial connectors between our business strategy and objectives, and the outside world. They’re often the first to see the changes coming on the horizon and we have a responsibility to equip them with the skills they need to take the initiative and flex our business models to accommodate the evolving landscape around us.
One way we do this is by ensuring our supply chain function is plugged into and driving all the business’ key decision-making processes, with a direct line of communication to senior business leaders. This gives us the transparency, insight and access to truly understand our business’ objectives and enables us to be more agile whenever we sense that the company’s direction of travel is off-target.
But at the heart of empowering our response to greater volatility in the day-to-day of supply chain management is our core purpose – to help babies get the right nutrition in early life, to support positive health outcomes for a lifetime. It’s the mission which drives everything we do across our business, and something that all of our people are fully engaged in. Each and every Danoner in the supply chain function, from analytics to logistics, understands why it’s important to not just our business success, but our consumers and the wider public health agenda too. They’re committed to delivering an efficient and dynamic supply chain because they understand how what they do relates to our bigger dual company commitment to delivering commercial success alongside social progress. And, critically, this knowledge gives them the confidence to make sound judgements on the strategic priorities and actions that will help us flex around the outside world, to meet our objectives and be successful while purpose-fit.
It’s an approach that comes into its own as we face some of our greatest supply chain challenges, such as globalisation. As with many industries, our consumers’ shopping habits are changing, and demand is coming from unexpected areas. During recent years, we have seen more and more secondary unofficial sources buying in one location but selling in another region; demand and supply forecasting has become increasingly difficult as a result. Yet having our supply chain team so closely involved in our business strategy in the context of our mission means we’ve been able to identify the specific risk areas where negative impact could hit, and re-route our entire plan around this issue to help protect our reputation and performance.
In a very tangible way, making such strategic operational decisions in the supply chain becomes a much easier process when you are guided by a clear business purpose. For us, we understand that enabling continued company growth in the market also enables continued expansion and progression of the positive impact we can have on nourishing early lives. We are maintaining supply of our products to ensure that we are there to support parents and their little ones.
Whether your business is big or small, global or local, the importance of the supply chain team in navigating a VUCA world can’t be underestimated. The pace at which external factors are changing ways of working is not going to slow down. While our processes and methods have to adapt in line with the context we’re operating in, it’s the people within your supply chain function who will make sure any changes are both business and mission-fit. Engaging your people and knowing how to empower them with the knowledge and tools needed to play their role effectively should be a top focus.
After all, with growth in the competitive FMCG market becoming ever-harder to find, a supply chain team that understands your business objectives and purpose can only help to overcome external challenges. Such a team is also important to help identify and unlock new opportunities for commercial development that could be the key to helping your business get ahead.
By Mark Broxton, Supply Chain & Quality Director at Danone Nutricia Early Life Nutrition
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”