Comment: Getting your supply chain Brexit ready
The lack of clarity surrounding the implications of Brexit continues to frustrate organisations across the UK. Are we staying in the Customs Union, or not? The Single Market, or not? When uncertainty constrains decision making and undermines confidence, the perception that companies have no option but to operate blind for the next year or longer is radically affecting decision making, mainly through stalling making any significant investments until the final deal is set in concrete.
Isn’t this unnecessary business paralysis? Whether operating within the EU or not, the onus is always on businesses to be looking for the best sourcing decisions. While the thought of exploring new supply chains across Asia, Africa or the Far East may be daunting to those who have only operated within the relative ease of EU markets to date, there are many new opportunities – for those organisations willing and able to explore.
New sourcing models have far reaching implications – from new factories, supply routes and freight operators, to new customs clearance processes, as well as potential ethical trading and product safety concerns. But, with full visibility of your supply chain combined with deep insight into global supply chain operations plus supply chain analytics to enable scenario testing, UK businesses will be well placed to explore and exploit markets, irrespective of political negotiation.
There is no doubt that many business leaders are finding the current lack of consensus surrounding EU related trade post Brexit severely frustrating. At a time when supply chains are becoming ever more compressed and the duration from factory to shop floor becoming ever shorter, the implications of Brexit are potentially devastating, but they needn’t be. From fears of permanent gridlock at Dover and Calais due to new customs checks, to concerns regarding import duties, organisations across the UK face the spectre of slick, honed supply chains being fundamentally compromised.
Firms cannot, therefore, simply sit back and wait for the politicians to, eventually, come to some form of compromise. Indeed, best practice should require organisations to be continually assessing and reassessing supply chains. From the performance of freight operators to the implication on profit margins of currency changes, the introduction of new product ranges or the introduction of a new raw material supplier, there are any number of factors that should prompt routine supply chain scenario planning.
And look around – according to CIPS one third of UK organisations are already rethinking the supply chain. And that means serious competition for the best freight operators, the top rated Asian suppliers and most innovative African producers. Waiting until the Brexit position has been clarified could mean many of the new global supply chain opportunities have already been snapped up. Rather than bemoaning the Brexit induced policy hiatus, companies should now consider this is as an opportunity to strengthen supply chain flexibility to take advantage of trading openings inside and outside the EU.
Global Supply Chain Opportunities
For organisations looking to move outside the familiar – and relatively easy – EU environment into a global supply chain, what information is required to support the right decision making? From changing the port of arrival from Southampton to Liverpool to potentially on-boarding new suppliers in the Far East, assessing the performance of new freight operators and managing the complexity of multiple additional border crossings, the supply chain implications could be very significant.
But the opportunities could also be compelling. How many UK businesses have resisted the temptation to explore outside the EU to date, despite a compelling commercial opportunity due to the fear of creating additional supply chain complexity? How many business opportunities have been missed?
The key is for organisations to use this Brexit induced hiatus to reconsider potential supply chains with robust scenario planning. And that means leveraging in depth insight into global supply chain operations to understand potential new models. Evaluating a new critical path will encompass not only the new customs demands and freight operating costs but also the safety regulations that will come into force with non-EU suppliers, as well as ethical trading standards.
Combining full visibility of the existing supply chain with a robust data source encompassing sea, air and road transportation routes globally, plus new administration requirements at diverse border crossings will enable companies to make very detailed assessments of new critical path options. What is the new cost model associated with a cheaper supplier that will also demand greater management input to verify ethical performance? What is the implication on customer service, lead times and responsiveness of embracing transportation by sea? Using supply chain analytics to test multiple scenarios provides organisations with an essential range of options to support the business, irrespective of the final post Brexit trading model.
Brexit clarity is unlikely to be achieved quickly – and no organisation can afford to wait for the outcome of these complex negotiations. It is essential to act now; to ensure the right tools are in place to deliver full visibility of supply chain critical paths and support robust scenario planning. Without this insight, organisations simply will not be able to determine the impacts of new trading laws and tariffs, as well as the potential costs and duration of new supply chain routes.
Flexibility and scenario cost modelling should be the key goal in the face of this current Brexit limbo – enabling organisations to steal a march on competitors yet to evaluate a non-EU supply chain model. The businesses in the strongest position to handle the challenges of Brexit, or any uncertain political scenario, will be those who have a firm handle on both current and potential new supply chain partners.
With deep understanding of the demands, costs and potential benefits of new partners, organisations will be perfectly placed to respond to change – political, economical or competitive. With the confidence to swiftly on-board new suppliers, cost effectively re-route products and manage new borders and customs demands, organisations can shake off the uncertainty and make the proactive changes required to ensure supply chains remain slick and trading revenues strong.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”