Linking Up Value in the Supply Chain

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Agility in the supply chain is essential these days for a business to keep in step with its customers, yet care needs to be taken over the extent to which efficiencies are pushed. The danger is that if things are left unchecked it creates risk around the business and, as such, greater influence should be sought over suppliers to ensure everyone is adhering to the organisation’s values.

Jane Griffiths, Company Group Chairman for EMEA at Janssen, the pharmaceutical division of global health care organisation Johnson & Johnson, comments: “In our efforts to be a more sustainable business we ask our suppliers to do certain things. For example, like us, we want them to have a good environmental sustainability record. So we set ourselves a goal, like having a certain percentage of supplier companies that have diverse boards… we might even use a company that’s all women in order to fulfil that requirement.”

Mistakes won’t be tolerated. Pam Powell, NED at Premier Foods, and formerly Group Marketing Strategy and Innovation Director at brewer SABMiller, says: “In today’s interconnected world, if you treat suppliers poorly in one of your markets, consumers will find out about it… News travels so fast that you need to have consistency and behave with integrity, whether dealing with customers or suppliers, wherever you operate.”

Once a scandal hits, customers can quickly change their buying habits. Tom Taylor, Chief Executive of the Agriculture and Horticulture Development Board, comments: “Lost confidence takes a long time to recover, especially if the supply chain is too complicated to react to a problem.”

The shape of things to come

Supply chains must be designed to meet a business’ needs. “Decide what you are prepared to trade off,” says Ian McCubbin, SVP for North America, Japan and Global Pharma Supply for GMS at GlaxoSmithKline. “In the pharmaceutical industry, for instance, where the patient needs a medically critical product normally at quite a high margin, you would trade off being less lean for being a whole lot more reliable. That means finding ways to transmit the information from the demand to the supply end of the supply chain as quickly as possible.”

Nick Wilkins, Global Head of Manufacturing and Supply Chain at EMI Music, says: “We’ve found the trick is to match the size and profile of our supplier to that of our company. For example, 15 years ago when we were producing a higher volume we would have gone to the biggest suppliers, as we would have been a significant part of their business… Today, our strategy is to find and maintain suppliers where we’d make up maybe a third of their business.

“We are large enough to still be an important and valued client, and we can still get leverage commercially, but we aren’t so large that they would go bust without us. It’s just more sustainable.”

It also makes sense for suppliers to be closely integrated with the rest of the business. “The way to keep the supply chain agile is by keeping it close to your customer insight… and to build in a development capability within the supply chain team,” says Norman Bell, Group Development Director at building material supplier Travis Perkins. “The more you can involve the supply chain in cross-functional work with the commercial, operations and finance teams, the more benefits you will extract from it.”

Checks should be regular and rigorous to avert any potential disaster. “I have a litmus test,” says Heather Benjamin, Non-executive Director at Portsmouth Water and formerly Chief Procurement Officer at Centrica. “Once everyone has done all of the work, I ask: ‘What happens if you get a call saying your supply chain is broken? What would you do in the first seven minutes, the first seven days and the first seven months?’ For something that’s absolutely critical, like your call centre going down, having a plan in front of you gives confidence to the whole business.”

Tom says: “Assurance schemes are not perfect… The time and effort to undertake thorough spot-checks is tiny compared to the reputational damage that can be done by flaws in the supply chain, as ‘horsegate’ so well illustrated.”

I hope to see you soon.

Matthew

https://twitter.com/criticaleyeuk

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