The skills shortage facing global supply chains
We are witnessing a major shift in the role of supply chain managers. Businesses expect their supply chain and procurement specialists to be shaping business strategy, assessing global security and managing relationships which span across the world. The challenge to upskill is tremendous, but when supply chain managers are working with the highest levels of supply chain risk since 2013, it is deeply concerning that around half (51% in the UK, 45% in South Africa and 44% in Australia) of supply chain managers admit to not having the skills they need to get the job done.
The problem is not just about the skill level of supply chain managers, but whether they have the right balance of abilities. Communicating across borders, influencing senior management and working collaboratively with suppliers all require new skills not traditionally associated with procurement – soft skills. Indeed, when we asked supply chain managers in the UK what their most valued skills were earlier this year communication, relationship management, negotiation and influencing skills made up the top four. Hard, analytical skills are rendered impotent without the interpersonal skills to make them work. Ask yourself, can you trust everything your supplier tells you? Do you have the emotional intelligence to make accountants understand the reputational and moral significance of worker welfare? And can you confidently claim to have the courage and leadership to drive procurement change at the top of your organisation? These are the skills required for any supply chain manager.
This focus on relationships over process has the power to rejuvenate a business. When Jaguar Land Rover (JLR) found itself with a quality control problem in 2008, it was not for a lack of technical skill. Indeed, measured purely by the rate at which faulty parts were detected, performance was exceptional; some suppliers found faults in as many as 65% of the parts they tested. Contracts were fulfilled to the letter, but the underlying relationship was antagonistic. As a result, not one of the 16 suppliers tracked down the source of the quality control problems and the business lost thousands of pounds a minute waiting as production lines stuttered and started. The answer was not just a financial investment but an emotional one. JLR set out to redefine the way it procured quality control, reducing 16 suppliers to one trusted collaborator. Over a period of six years, JLR developed a new quality control system with their supplier, G&P. The end product saw JLR propelled up the customer satisfaction charts while G&P had invested £2m into a world class piece of technology. The improvement in process and analysis was only possible because of the addition of soft skills.
These soft skills are not limited to supplier relationships, they are becoming increasingly important in the foggy world of cross border supply chain regulation. National governments have realised that international supply chain regulations are as impossible to enforce as they are impractical to follow. Their answer is to harness the power of shame. Whether it’s the Modern Slavery Act in the UK, the Transparency in Supply Chains Act in California or conflict mineral reporting in both Europe and the US, these regulations are anathema to a box ticking regulatory culture. Instead of fulfilling a set of specific criteria, regulators are asking an open question, “What have you done to keep each person in your supply chain safe?”
The impact of this change is tremendous. No amount of process or analytical skill will be enough to arrive at a single correct answer, it is a test of moral integrity. Around half of CIPS trained supply chain managers worldwide believe the fair treatment of people further down their supply chain is their most important responsibility, in the UK it is ahead of any other consideration. Passing these new regulatory tests depends upon whether supply chain managers can convince their COOs and CEOs to invest in a morally superior supply chain. Once again, the soft skills of leadership and emotional intelligence underpin rigorous process.
Which brings us back to the problem at hand. If near to half of the world’s supply chain managers lack the soft skills to survive, what can be done? It is an all too common fallacy that leadership, persuasion and emotional intelligence are hard wired abilities, fortunately they are not. Soft skills are a combination of habits and attitudes which can be learned through practical exercises, self-reflection and continual practice. They form a central part of CIPS qualifications and their acquisition requires just as much study and hard work as any other skill.
Yet the rewards of soft skills, can be much richer. The insight to see past cultural barriers when dealing with suppliers, the ability to lead change in your organisation or the power to safeguard your business’s reputation for a generation. Soft skills, like these allow supply chain professionals to unlock the potential within their business and act on the insights which hard, analytical skills provide. The world’s supply chain managers are facing once in a generation challenges with the impression that they are under skilled and unprepared. The answer may not be to change who we work with but to revolutionise the way we work them.
David Noble is Group CEO of the Chartered Institute of Procurement & Supply (CIPS)
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.”