Fresh demand for expert Supply Chain CEOs as baby boomers retire
As a society, we take for granted our ability to order a Netflix DVD today and have it delivered tomorrow. We have come to expect berries from Chile in January, and Alaskan salmon on demand. And FedEx is so ubiquitous it has gone from being a noun to a verb. We are deep in supply chains, even if we don’t always know it.
The supply chain industry is more integral to our lives today than it ever has been, and yet it is threatened by a growing shortage of trained supply chain and logistics professionals to manage and lead the industry. It is a disaster waiting to happen.
Chris Norek, a senior instructor of supply chain management at Pennsylvania State University’s Smeal College of Business, says the shortfall in top supply chain leaders and managers reflects the demand for new talent, the retirement of Baby Boomer logistics experts and even a shortage of supply chain faculty at colleges and universities.
The US Bureau of Labour Statistics reports that jobs in logistics are estimated to grow by 26 percent between 2010 and 2020, an average growth rate that is nearly twice as large as the 14 percent rate of growth for all occupations. Demand for supply chain professionals now exceeds the available talent pool by 6 to 1.
As a corporate learning expert, this circumstance intrigues and worries me, because it both represents an opportunity and a significant economic threat. Companies that are innovative in their approach to supply chain hiring and training will have the advantage as the market tightens. Those that don’t move swiftly will be left behind and we, as consumers, will pay the price for it.
Moreover, as this shortage grows, the supply chain industry is becoming more elaborate. There is less standardisation and more complexity, and the skills needed to be logistics leaders a decade ago are changing as supply chains become more data-focused and rely heavily on virtual tools.
In my view, Amazon is the best supply chain company in the world today. It has employed technology, data science and smart strategy to create a mindset of supply chain excellence. Its leaders have turned this excellence into a competitive advantage, dramatically illustrating how supply chains are more a differentiator than cost centre these days. It is a remarkable story.
With Amazon and others in mind, Norek likes to point out that the path to the CEO suite will increasingly come through supply chain offices in the future. Why? Because supply chains have become a critical high-stakes game in business today and only companies with leaders primed for end-to-end supply chain excellence will succeed.
Already, savvy companies are mastering supply chain management and alerting the public to its importance. Take outdoor clothing and gear manufacturer Patagonia. Its Footprint Chronicles website tracks its supply chain from farm to textile mill to factory. It is both a promotional tactic and an illustration of one company’s exceptional supply chain management.
Starbucks dedicates a section of its website to sharing its philosophy around ethical sourcing and fair trade, expanding on the practices it uses to build sustainable relationships with farmers and suppliers. By linking its supply chain efforts to its global responsibility initiative, Starbucks further showcases its commitment to supply chain excellence.
If the looming crisis in supply chain management is to be averted, these efforts must be duplicated and expanded upon. Obviously, the first step is to build a more robust alliance of supply chain professionals. Companies like mine are working with corporations to create these new supply chain leaders for tomorrow.
The second step is more nuanced but equally important. By educating the public about supply chains, and weaving corporate stories and objectives into the marketing mix, successful companies will not only make supply chains their competitive advantage, they will transform them into PR calling cards. Don’t believe it? Ask Amazon.
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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.”