Raising the bar - Supply Chain Management in a legal business
With the traditional law firm models changing and the legal market evolving at a rapid pace, how do such businesses improve their supply chain management?
We recognise this issue all too well as in March this year, DWF became the largest listed law firm to successfully float on the main market of the London Stock Exchange. The transition from a partnership to a PLC only served to reinforce the need for a robust approach to managing supply chains with an increasing emphasis on consistency, transparency and innovation. For us, this meant greater interest from clients, investors and other stakeholders in how DWF assesses the suitability of its suppliers.
Addressing these challenges required subtle, but fundamental changes to the engagement and management supplier approach. Investment in a Procurement & Supply Chain Relationship Management function was undertaken, recognising that the focus of establishing, embedding and maintaining best practise required professional resource with a specific skill-set. This was followed by setting the vision for supply chain management within the business – "To provide a coherent and consistent approach for managing risk, driving innovation and delivering competitive advantage across the entire DWF supply chain". With the vision articulated, the procurement and SCM strategy was revised to reflect both the ambition and drive, and also the changing landscape of how supply chains need to be managed. As a result of external factors such as the introduction of Section 54 of the Modern Slavery Act 2015 requiring transparency within supply chains, and by extension an increasing interest from clients, investors and other stakeholders in how enterprises assess the suitability of their suppliers.
A potential misconception is that some aspects of due diligence - such as those required for modern slavery - prevail within industries. Legal businesses are far from immune to the potential risks associated with any such potential breach of obligations, and consequently, the revised procurement strategy included a substantive element of rigour implementing appropriate due diligence measures before any contract award – but just as importantly, on an ongoing basis. Undertaking supplier due diligence is not just a 'box-ticking' exercise. DWF is pushing forward with applying best-in-class approaches, and this includes developing a governance framework for SCM, which encompasses a dynamic approach to due diligence.
Pre-contract award, suppliers are provided with a "Supplier Code of Conduct", a document which articulates how DWF wish to engage with their supply chain. The code highlights the approach that needs to be taken concerning social, ethical and environmental challenges that organisations face today, a positive response is required from the recipient stating that they can comply. An intrinsic element of the Request for Proposal ("RFP") is an "Ethical Sourcing Questionnaire" spanning subjects such as diversity, inclusion, environmental factors and equality, which suppliers are required to complete. This allows for any unexpected responses to be challenged, permitting a risk-based assessment to be taken. Finally, a "Conflicts of interest" declaration has been developed, providing information on actual, potential or perceived conflicts of interest which may be present. Exploratory work is already in progress to develop an automated approach to managing these elements, allowing suppliers to become 'self-servers' via online documentation upload. The roll-out of this technology will reduce administrative burden, streamlining the overall process – and support a strategic objective of proactively managing due diligence on an ongoing basis by utilising time-based triggers. Any data-driven documentation (e.g. copies of required insurance certificates) are always valid, supported by structured review meetings with frequencies determined by categorisation based upon spend segmentation techniques, and overlaid with the establishment of a programme of supplier audits.
There are plenty of good reasons to adopt a comprehensive approach to supplier due diligence within the SCM framework:
- Legal, the requirement for organisations of a certain profile to produce a Modern Slavery Statement to comply with Section 54 of the Act,
- Ethical, it is unacceptable to perpetrate or condone inappropriate business practices, whether through ignorance or otherwise, and
- Commercial this aspect is twofold:
- Clients and customers, both incumbent and potential, expect to see evidence of how organisations are identifying and addressing areas of potential risk within their supply chains, and hence applying a very superficial approach could be a negative differentiator;
- In the event of any incident occurring that potentially could have been avoided by appropriate supply chain due diligence, the adverse publicity could be extremely damaging to a reputation, and a have a corresponding suppressive impact upon share price.
And all of these point towards risk mitigation – an often unseen or unconsidered benefit which professional procurement can deliver.
Internal stakeholder engagement is a key component of bringing this strategy to life – to make a difference, you have to make it breathe. The appetite for change, and the innovative culture at DWF means that pushing the boundaries and redefining supplier management has been welcomed with open arms - and establishing the tangible benefits that the application of a structured approach to SCM can and will deliver is already generating momentum and creating internal advocates for early engagement with the procurement function.
Businesses in transition can use their procurement function to really transform their enterprise in positive ways; DWF has embarked upon a procurement transformation, transitioning from tactical purchasing to delivering an agenda of collaborative, performance-driven supplier relationships, embodied through the application of the principles and techniques of strategic supply chain management – and this is absolutely in accord with one of DWF's strategic pillars of "doing things differently."
Article by Quenton Arber, Procurement & Supply Chain Relationship Manager
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.”