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WELCOME
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e are extremely proud to bring you the first issue of our global digital supply chain magazine, CHAIN. It has been a labour of love for our very talented team, and we are excited to show you what we have been working on these past few months. First up is our exclusive interview with Tiger Biletnikoff, Director – Sourcing & Procurement, Kärcher North America (p6). From cross-functional global collaboration, to sustainability and the importance of forging key business partnerships, it was a privilege for us to learn about the supply chain strategy of the one of the world’s leading household and industrial cleaning product providers. Along with our in-depth interviews with Stefan Måhl, VP Strategic Operations, and Ena Ryan, Director Sourcing Non-Product Related Materials and Services, at Munters (p38), and Marko Väisänen, CPO at Eltel Networks Finland (p96), we also have some fascinating articles courtesy of an esteemed panel of experts. TAPA Chairman Tony Lugg discusses business continuity and recover plans when managing crisis situations (p28), while Carl Ralph, Sr. Director, Supply Chain Engineering Services, at Sierra-Cedar, waxes lyrical about lean thinking as applied to supply chain engineering (p74). And that’s not forgetting our report on resilience from Neil Coole, Director of Food & Retail Supply Chain at BSI Americas (p62), our rundown of the impact of Supply Chain 4.0 (p86), plus The Chartered Institute of Procurement & Supply’s key procurement trends to watch out for in 2020. We hope you enjoy the issue – look forward to receiving your feedback!
Editor
Director
editorial@ithink.media
d.harris@ithink.media
Anna McMahon
Senior Digital Designer
Daniel May
design@ithink.media
Danielle Harris Director
Tom Barnes
t.barnes@ithink.media
+44 (0) 203 890 1189 enquiries@ithink.media All rights reserved. Every effort is made to ensure the accuracy of material published in CHAIN Magazine. However, the company cannot accept responsibility for the claims made by advertisers or contributors, or inaccurate material supplied by advertisers. CHAIN magazine is a product of iThink Media Ltd. Company Registration Number: 10933897. Company Registered in England and Wales
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TAPA Chairman Tony Lugg’s advice on managing supply chain complexities
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Kärcher North America’s strategy for cross-functional global collaboration 4
Report fr Neil Coo Director & Retail S Chain at Americas
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Munters Europe’s Stefan Måhl and Ena Ryan
FIRST EDITION
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rom ole, of Food Supply t BSI s
McKinsey’s review of the potential impact of Supply Chain 4.0
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Carl Ralph on applying lean thinking to supply chain engineering
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Marko Väisänen’s roadmap for the digitalisation of procurement 5
BUSINESS INTERVIEW
Worldwid Network 6
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The supply chain strategy of Kärcher North America is at a crossroads, as it transforms its culture to one of crossfunctional global collaboration. TIGER BILETNIKOFF, Director – Sourcing & Procurement, Kärcher North America, tells us more.
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Transformation is the word on Tiger Biletnikoff’s lips, as he discusses Kärcher North America’s plan for a global supply chain strategy.
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ith headquarters in Winnenden, Germany, the company is now working towards bringing its regions more closely together. As Director – Sourcing & Procurement, Kärcher North America, Tiger explains, “There are multiple locations throughout the world for Kärcher. From a transformational standpoint, we are really focusing on more of a global approach with a greater level of collaboration across the different regions. In turn, we can leverage best practises, the existing supply chain, and also focus on consolidation, rationalisation and standardisation of the supply base.” As is the case for many organisations operating by way of a worldwide supply chain, technology is playing a key role in fulfilling Kärcher North America’s strategy. AI-powered intelligence provider, Scoutbee, has been assisting the company in obtaining competitive data and business intelligence from the worldwide web in order 9
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to identify potential sources, cost-down opportunities and benchmarking. Tiger says, “Scoutbee has a great AI platform, and we are working with them on having them analyse our supply chain, essentially cross-referencing that against the worldwide web, so you can find competitive data. If you look at import/export, there are a lot of records that are publicly available to review. We are able to get a good idea of the various cost structures that our competitors or others in similar industries are leveraging, so the research that we have to do individually is a lot less.” The biggest program that Kärcher North America is currently working on is the upgrade of its SAP system to include functionality for supplier collaboration add-on, SNC. Tiger explains, “What that does is it automates and digitises the communication between Kärcher and our supply base. You can avoid emails, Excel spreadsheets and all of the tedious, manual items by creating a web-based portal for our suppliers to interact with us on a digital platform. Whether it’s deliveries or quantities, whether there are delays or risks, it is all captured 12
Together, we make a difference
“Danau supports the company’s aftermarket business customers, and is a key partner in broadening Kärcher’s product line and offerings” 13
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in real time by the system, so we are able to prepare for any fluctuations or changes in the supply chain. The other advantage is that it allows us to collaborate with our logistics partners on scheduling information, managing transportation, as well as with our Quality organisation, so it is all done digitally, which is driving a greater level of efficiency.” The reports received from Scoutbee play a vital role in driving efficiency for Kärcher, as Tiger explains, “We can receive reports on a very specific commodity we are monitoring, be it engines or motors. With that information, we can review our current supply base to look at opportunities that would allow us to utilise a different supplier or develop a second source. Around 10 years ago, if the capabilities were not there or they were not keeping up with technology, we moved on to a new supplier. Those suppliers realised that they were losing business, so they made upgrades. We are now coming back to suppliers we have used in the past, who have invested in their technology, and now match our needs.” 15
“Battery technology and energy storage are demanded by our customers, so a lot of our equipment is migrating towards this” TIGER BILETNIKOFF, Director – Sourcing & Procurement, Kärcher North America
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Tiger believes that what this teaches us is that change is necessary, and it is occurring very rapidly. He adds, “Nowadays, you are looking potentially daily or weekly for updates, instead of quarterly or annually. In business, this
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helps us. If we had to source a hard-to-find component through the internet manually, it would take time. When you have these large data management AI tools that can search in milliseconds, they generate more analysis in
one day than we could do in six months. This gives us the information quicker, it allows us to make decisions quicker, and we can then translate that into action quicker than we normally could. Our focus is on building a robust infrastructure
that is both scalable and sustainable through business cycles, market changes, and addresses customer preferences.� Aside from Scoutbee, Kärcher North America has a number
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TIGER BILETNIKOFF on Delta-Q Technologies
“Having a partner that can keep us on top of the latest trends and technology is essential”
of other key partners who have assisted the sourcing and procurement function in various ways. Delta-Q Technologies, for example, produces innovative battery charging equipment. Tiger says, “Battery charging technology is changing. It is at the forefront of all of our institutional equipment. Having a partner that can keep us on top of the latest trends and technology is essential. Fundamentally, what it comes down to is how quick you can generate charge cycle on a battery pack for our customers, as they need to have that asset working,
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“Würth is a global partner for Kärcher, supplying the hardware used in their manufacturing facilities”
Supply Chain Solutions Fasteners | MRO |Safety
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Würth Industry North America (877) 99-WURTH www.wurthindustry.com
operable and fully charged. I have worked with Delta-Q in the past, so I am very familiar with them. They are a very strategic partner who can help steer us in the right direction, insofar as not only the applications and equipment, but also staying ahead of the curve of technology.” Würth is a global partner for Kärcher, supplying the hardware used in their manufacturing facilities. They have a global network that is positioned to support almost every Kärcher facility in the world, while Danau has provided pump accessories for many years. Danau supports the company’s aftermarket business customers, and is a key partner in broadening Kärcher’s product line and offerings. In addition, Tiger mentions partners, Frieder Gamm and Logistics Plus. He says, “When you talk about strategy, what Frieder Gamm did was teach our strategic group new negotiation techniques. Using FBI-related profiling of suppliers, we can generate more effective negotiations. It is one of the most innovative activities I have been involved in over the last 10 years. I have also worked with Logistics Plus 23
for over 13 years. They are at the forefront of leveraging business intelligence and technology for logistics and transportation. They transformed how we do logistics and transportation, and it has driven very significant cost savings, as well as opportunities for improvement that previous
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methodologies and processes did not allow. Logistics Plus therefore provided us with a great advantage in the marketplace.” Tiger praises Kärcher’s Global VP of Sourcing & Procurement, Heiko Braitmaier, for the company’s migration from regional to a core global
commodity team, leveraging commonality across suppliers and commodities, joint contracts and rationalisation of the supply base to the ‘right size’. He explains, “Heiko is not only one of the best leaders and partners I've worked with, but is, in many cases, a catalyst for many of the strategies we are deploying
and partnering on. We have been on a journey of a year and a half, transforming Kärcher’s sourcing organisation globally. What we are doing is leveraging commonality, not managing by region for region, but taking a global approach. If you have someone working on gasoline-powered engines, you may not have commodity
“What we are doing is leveraging commonality, not managing by region for region, but taking a global approach” TIGER BILETNIKOFF, Director – Sourcing & Procurement, Kärcher North America
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leaders in each region monitoring that. Now what we do is select one person who is an expert in that field and they collaborate with the regions on centralising contracts that encompass all regions. The advantage is that suppliers have one face. You can also aggregate all of that spend to have better leveraging power than you would if it was fragmented. What Heiko has done is set the organisation on a path to benchmarking internally who the experts are, key suppliers we want to partner with who could support us on a global basis, and implementing contracts that speak for all of Kärcher globally. This has really driven communication, collaboration and team work.” On the subject of sustainability, battery and storage technology are two areas in which Kärcher North America is focusing its attention. Tiger adds, “Battery technology and energy storage are demanded by our customers, so a lot of our equipment is migrating towards this. From a green perspective, when recharging these assets, you are reducing your carbon footprint. It is the responsible thing for us as an organisation to do, whether
it is a smaller vacuum retail product for the home or a larger piece of equipment. In my experience, energy storage technology has come a long way in the last five years, thanks to the ability to store and recycle that energy with shorter intervals for recharge.” As for the future, Tiger’s team at Kärcher North America will be exploring business continuity and risk management, where the supply chain is nimble and broad enough to support the company when changes occur. He concludes, “I went back to university later in my career to get a degree and certification in risk management, so that is where I have been able to provide great benefits, with strategies in place that are able to mitigate potential disruptions, by switching your source of supply, for example. It is an area that has not as yet had a significant amount of attention. By helping our teams to become more focused, when such incidents do occur, we can support the organisation with minimal disruption, not just for Kärcher, but also for our customers.” For further information on Kärcher North America, visit www.kaercher.com 27
RISK MANAGEMENT
The Transported Asset Protection Association (TAPA) business partners from various manufacturing and tran purpose of addressing the emerging security thr Chairman, Tony Lugg, explains how business cont any supply chain complexity including
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is an association of security professionals and related nsportation companies who have come together for the reats that are common to the relevant industries. tinuity and recover plans are essential in managing g the ongoing coronavirus pandemic.
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NEARLY TWO DECADES SEPARATE THE SARS OUTBREAK FROM THE NEW CORONAVIRUS PANDEMIC. IN THAT TIME, CHINA HAS GROWN FROM THE WORLD’S SIXTH-LARGEST ECONOMY TO THE SECOND BIGGEST TODAY BEHIND THE US.
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he country has been a main growth driver worldwide, with the International Monetary Fund estimating that China alone accounted for 39 per cent of global economic expansion in 2019. SARS, which stands for Severe Acute Respiratory Syndrome,
first emerged in China’s Guangdong province before spreading to other countries. CNBC reported that the virus infected about 8,000 people, claimed almost 800 lives worldwide and shaved 0.5 per cent to 1 per cent off China’s growth in 2003, according to various estimates.
SO, WHAT IS DIFFERENT TODAY WITH THE CORONAVIRUS, OR COVID-19, AS IT IS OFFICIALLY REFERRED TO BY THE WORLD HEALTH ORGANISATION? The coronavirus, which was first detected in Wuhan, hit hard at the manufacturing base of China and the centre of the logistics supply chain. Forbes reported that even if
you don’t assemble finished product in China, you might be dependent on a supplier based there for components. Many people have been looking at whether firms have suppliers in
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Hubei Province where Wuhan is located, because they think these will be the supply chains that are impacted first. Following the lockdown of 58 million people and businesses remaining closed after the Chinese New Year holiday, Tony Lugg, Chairman of TAPA APAC, said, “One TAPA member from China wrote to me and in a distressed note. In the note, he stated that ‘the global
manufacturing base is closed for business’.” The Forbes article pointed out that the Chinese manufacturing model of the last three decades has been powered by migrant workers who come from inland provinces like Hubei, Shaanxi, Anhui, Hunan, and others. They are recruited to come to the factories, where they live in dormitories, in an environment that is much like a small city.
“EVEN ALLOWING FOR A MARGIN OF ER IMPORTANT QUESTIONS. ONE THAT COM INVESTMENT ACTUALLY PUT INTO PLAC IN PLACE. THE PAY BACK IN THIS KIND
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In a similar tone, it wasn’t long after that that the Nikkei Asia Review reported, “From food chains to steelmakers, many Chinese companies are staying closed after an extended Lunar New Year holiday due to coronavirus concerns, denting hopes that the epidemic-hit economy would return to normal after the break.” Within a short period of time, OEM’s were reporting shortages
of raw material and other goods manufactured in China. The knock-on effect had already started to impact the supply chains. One Risk Manager of a leading electronics company stated, “Our production team (is) trying to locate raw material to keep the production running. They haven’t had much of a holiday. Most have been working around the clock from home trying to source raw material from alternative suppliers.”
RROR, IT RAISES A NUMBER OF MES TO MIND IS THE AMOUNT OF CE TO ENSURE ROBUST BCRP’S ARE OF CONDITIONS IS SUBSTANTIAL” Tony Lugg, Chairman of TAPA APAC
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A survey completed by AmCham estimated that 48 per cent of companies reported that their global operations were impacted by the shutdown, and that 78 per cent of companies did not have sufficient staff to run full production lines.
Tony Lugg said, “Even allowing for a margin of error, it raises a number of important questions. One that comes to mind is the amount of investment actually put into place to ensure robust BCRP’s are in place. The pay back in this kind of conditions is substantial.�
A study completed by Harvard Business Review predicted that the peak of the impact of Covid-19 on global supply chains would occur in mid-March, forcing thousands of companies to throttle down or temporarily shut assembly and manufacturing plants in the US and Europe.
Forbes reported a growing number of automakers facing stoppages due to supply chain issues as the coronavirus spreads. Nissan has been forced to halt production in several domestic assembly factories, including Tochigi and Fukuoka, due to a shortage of Chinese parts. Whilst companies
It raises the question whether companies were ever prepared or had any contingency plans in place.
had started to ramp their operations, many were still without a sufficient staff, and logistics operators were reporting backlogs in warehouses, ports and lack of capacity of ground transportation.
A survey completed by International Crisis Room 360 (ICR360) showed that a staggering 60 per cent of the respondents had no Business Continuity & Recovery Plans (BCRP) in place for their supply chains in China.
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It is all about risk management, and if done correctly, we can assess the situation and prepare far in advance. Unfortunately, it appears that companies are trying to create plans from scratch,
Tony Lugg, Chairman of TAPA APAC
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which has delayed their recovery process. Some suppliers are reported as going bust due to cashflow issues. In response to business continuity, Governments offer guidelines of Business Continuity & Recovery Plans (BCRP). However, these are generalisations of the program and invariably do not consider the diverse supplier base, local environment or operational complexity. Tony Lugg said, “In light of the statistics coming out of the survey, back-toback contractual agreements with suppliers must be urgently
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written up, agreed and signed off. There needs to be management buy-in at the highest level. Supplier audit specifically on BCRP, with evaluation of the plans covering the critical assets required for production. This should be outsourced, if possible, to expedite the process and also ensure segregation of duties to prevent any ethical issues. Auditors should be warned in advance of the serious consequences should any evidence be overlooked or otherwise.� Several manufacturers reported in confidence that supplier footprints
are generally not studied and mapped against ongoing environmental, natural or other events. Some manufacturers source using DDP terms, pushing all responsibility onto the supplier, which sounds risk adverse until the same suppler cannot support production. This particularly impacts the manufacturing when dual sourcing was never an option for consideration. The BCRP would have called that issue out to management. Accountability for the BCRP role is a factor in this apparent failure within the supply chain. It appears that, in some cases,
the Crisis Managers roles are delegated to the next line down, which could be three or more layers down from the board. Tony Lugg added, “This is a complete lack of responsibility in my view. We see too many cases where senior management passed the role to a supervisor or mid-level manager who has no empowerment to implement the BCRP. The role of the Crisis Manager must be full engagement across all functions. This is difficult to achieve, particularly in Asian culture when the Crisis Manager needs to be at the same level as other management to obtain their buy-in.�
Source: www.worldometers.info/coronavirus
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BUSINESS INTERVIEW
Partne that Cr Busines Written by Anna McMahon Produced by Jennifer Davies 38
ership reates ss Value We talk speed, flexibility and innovation with Stefan MĂĽhl, VP Strategic Operations, and Ena Ryan, Director Sourcing Non-Product Related Materials and Services, at leading global energy-efficient climate solutions company, Munters Europe AB. 39
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€700m OF NET SALES
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manufacturin plants
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Munters was founded in 1955 by ingenious inventor and entrepreneur, Carl Munters. uilt around his insights into the laws of thermodynamics in combination with an ability to translate that understanding into ground-breaking technology, during his lifetime, Munters applied for more than 1,000 patents, mostly within the areas of dehumidification and evaporative cooling. Today, Munters conducts business operations in two business areas; AirTech and FoodTech. AirTech offers air treatment for industrial and commercial solutions, while FoodTech provides climate control solutions for farming and greenhouses, as well as
software for controlling and optimising the entire food production value chain. Stefan MĂĽhl has recently taken on the role of VP Strategic Operations at Munters, responsible for quality, supply chain, manufacturing, engineering and sourcing. He explains, “Munters is present in 30 countries with net sales of more than EURO 700 million. We have 17 manufacturing plants and a number of assembly hubs. I would describe us as a very entrepreneurial-driven company.â€?
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Welcome to the future of climate control
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Ena Ryan, Director Sourcing Non-Product Related Materials and Services, adds, “We are a global leader in customised energy-efficient air treatment solutions, offering the perfect temperature and humidity control.” Stefan and his team face various challenges in their roles, as he explains, “One of our focuses is to maintain the entrepreneurial freedom for the production sites locally, which means more opportunities and possibilities and less management from HQ (in Sweden), although we provide processes and guidelines centrally and support when needed. We put lots of efforts on localising the manufacturing and supplier base, which is also important from a sustainability perspective.
“In today’s business environment, speed and flexibility are two key components in the supply chain. Due to the coronavirus situation, Munters is stress-testing its risk management abilities. The fact that we have created a list of critical components for each site makes it possible for us to have an overview and take quick actions when needed.” Ena adds, “I have worked in large civil service 43
companies that are not very flexible in their approach. Being agile, we are able to respond quickly to our business needs. What our internal customers want from us is flexibility and the ability to change. We respond very quickly to market changes because of the way we are structured.� Being a global company, Munters has plenty of opportunities to identify synergies and amalgamate spend. However, as Ena explains, the team is lean, so it is crucial that the business employs technology, finds more innovative solutions and works with partners who are able to offer a leading edge. She says, “We need to lean in to partners who offer us an efficient and more innovative way of doing things. It is about taking advantage of all the opportunities with the resources we have.� Digitalisation plays a key role in exploiting the
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Sustainability is part of how we work today. When it comes to sourcing, transportation is extremely important, but there are lots of areas in which we can incorporate it in our work� Ena Ryan,
Director Sourcing Non-Product Related Materials and Services
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opportunities afforded to Munters, but Stefan believes it is not an option to be pursued simply for the sake of it. He explains, “Digitalisation for digitalisation’s sake does not make much sense to me. It is quite obvious that the early adopters in the digital procurement are already benefitting from incremental cost savings, but also improvements in
“We need to lean in to p an efficient and more in things. It is about takin opportunities with th
Ena
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Director Sourcing Non-Produc
terms of quality, innovation, speed and risk management.” Stefan continues, “It won’t be the biggest companies that survive this race, but the most adaptable.” And Stefan takes a similar stance on the role of innovation. He says, “A lot of companies talk about innovation, but, for me, it is not of
partners who offer us nnovative way of doing ng advantage of all the he resources we have”
a Ryan,
ct Related Materials and Services
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interest unless it creates value on the table. At the end of the day, innovation must bring value to our customers.� Munters runs more than 10 innovation workshops each year with its partners, providing the opportunity to discuss improvements, in order to create winwin solutions with profit sharing. The company has longstanding relationships with a number of partners, each bringing something extra that adds value to the business. Stefan says, “We have, for example, worked with Digital Procurement, who provide a digital way to negotiate. Digital Procurement have enabled monumental cost savings, with few resources, no travel and very little interaction from my team. That is how innovation can create value for both the company and our internal stakeholders. In addition, a number of suppliers have expressed positive feedback about Digital Procurement. We are assessing possibilities to 50
Your Perfect Climate
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We have taken decisions to use trains as the preferred method of transportation when feasible. In addition, some factories are using green energy supply� Stefan Mühl,
VP Strategic Operations
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deploy Digital Procurement in additional areas.” Ena adds, “We have always used a control tower in Sweden, but we switched provider in November. Our previous solution relied on manual intervention and there were some delays in communication. Our current solution from vChain is automated, with very limited manual intervention. It eliminates waste and inefficiencies, and is extremely strong on exception management. If a shipment is delayed, we will know before our customers. The next phase is optimising our routes and our freight. vChain will analyse our database after three to six months, and with their knowledge in this area, they will be able to identify and drive improvements in our supply chain.” In the US, Munters integrated a web-based supplier portal in 2016, eSP, to maximise efficiencies, reducing the amount of time buyers spend on nonvalue added activities. Ena explains, “It is automated and allows buyers to 54
Today a procurement organisation leaves 25-50 per cent of its spend un-negotiated. The reason is that this spend is spread out over hundreds or thousands of suppliers. We supplement the procurement organisation by running digital negotiations with these suppliers. Through our digital platform DigiProc scalable, efficient and smart negotiations are achieved without geographic or industry specific restrictions. We negotiate digitally with an unlimited number of your existing suppliers in a week. Only 20 hours of your time are required for a complete project from start to finish. And of course, no software integration or similar is required.
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“Try out & secure extra supplier savings! Digitally” Stefan Måhl VP Global Sourcing, Munters
Meet Your New Supplier Portal Digitally transform your supply chain with eSP 2020! Increase your Visibility, Velocity and Agility across your global supply chain. Automate the supply chain worldwide Promote real-time supplier collaboration Streamline internal operations Reduce procurement cost and inventory investment
Since the installation of the eSP® Portal Solution, we have seen improvements in costs and speed. We now: have lower administrative costs can reply to customer’s orders and changes much faster have better quality due to decreased administrative errors L.B., Project Manager, Billion Dollar Industrial Equipment Manufacturer
www.e-ventus.com
winwin@e-ventus.com
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spend more time on value-added activities, eliminating waste and inefficiencies while maximising our working capital. It ensures the right materials arrive at the right place at the right time.� Munters has partnered with Office Management for video conferencing since 2007. Stefan says, “Office Management provides top-quality video conferencing. We still run about 10,000 video calls a year. Video conferencing is the selected system for connecting with people in different regions, both locally and globally. The beauty of Office Management is that they provide 56
Data Center cooling system
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cost-beneficial solutions, and they understand our needs. They are also located a short stroll from our office in Sweden, so if we need anything, they can be here in five minutes. It is good to have them around the corner.” In addition, IFS is Munters’ selected ERP (Enterprise Resource Planning) system partner, having been in partnership for about 20 years. Stefan adds, “ERP is the heart of the company. The reason why we have been with IFS for so many years is that it is easy to reach out to them, it is easy to discuss any issues, and you get quick responses. They are unique because they have the ability to understand our business needs that they can rapidly adopt into improved system updates.”
As for the future of Munters, Stefan and his team are excited by the growing importance of digitalisation” 58
As for the future of Munters, Stefan and his team are excited by the growing importance of sustainability. Stefan concludes, “Every decision we make, we will be thinking about sustainability as part of our business. More and more customers are seeking energy-efficient air treatment and climate solutions. As a consequence of this, we have taken decisions to use trains as the preferred method of transportation when feasible. In addition, some factories are using green energy supply. “The Munters Code of Conduct for suppliers and partners is based on the principles of the UN Global Compact. It is crucial that all suppliers and partners are in compliance. If a supplier does not sign our code of conduct, we will exit that relationship.” Ena has the final word; “Sustainability is part of how we work today. When it comes to sourcing, transportation is extremely important, but there are lots of areas in which we can incorporate it in our work.” For further information on Munters, visit www.munters.com
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RESILIENCE
Written by Neil Coole 62
Neil Coole, Director of Food & Retail Supply Chain at BSI Americas, says there are solutions available to logistics and supply chain organisations to overcome the various challenges they face.
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As modern-day supply chain networks increasingly span continents and become more complex, the ability to quantify and mitigate supply chain risks throughout the procurement, manufacturing, transportation and sales lifecycle is paramount. rganisations need to identify the critical risks to minimise disruption and help protect global operational, financial and reputational exposures. Today, the logistics and supply chain industry is facing some of the biggest challenges in its history.
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From higher tariffs affecting the bottom line and challenging organisations to remain economically sustainable, to the challenges presented by the ‘Last Mile’, and not to mention the higher expectations of consumers who have come to expect goods to be delivered to their door in shorter times and in a more sustainable manner.
‘Last Mile Delivery’ is defined as the movement of goods from a transportation hub to the final delivery destination The good news for organisations throughout the supply chain industry, and for those leading these organisations, is that there are well-established, trusted and proven industry solutions partners, such as BSI, one of the oldest certified bodies in the world and a leader in the development of some of the most recognised and used standards, to support organisations 66
with the improvement, standardisation and simplification of materials, products and processes that are essential to their business. The logistics and supply chain industry uses a variety of internationally recognised standards, in most cases, without knowing it, from the standards used to manufacture the trucks and vans, and even the cargo containers they transport, that carry the commodities the world relies on, through to the test methodology for truck tyres in wet conditions, quite literally where the rubber meets the road. The logistics and supply chain industry is the ‘lifeblood’ of our global economy, carrying essential goods for consumers, businesses and governments. So, what does this mean to today’s supply chain and logistics organisations? Quite simply, it means that no matter what challenge you or your supply chain peers are facing, there are solutions available to you in the form of industry 67
best practice guidance and formal standards. For example, we have already touched on two key challenges for logistics and supply chain organisations; the first is the ability for an organisation to remain resilient and economically stable, and the second is around the variety of challenges from today’s e-commerce industry and the pressures this places on logistics organisations to deliver on the ‘Last Mile’. So, what are the solutions for organisations? The first comes in the form of a standard, which covers the essential prerequisites for a resilient organisation (BS 65000 – Guidance on Organizational Resilience),
“BSI has d a standa transportation parcels for transfer (P 68
which covers the three core pillars of resilience:
Operational Resilience –
which focuses on the core fundamentals of a successful business, built around strong leadership, financial management, horizon scanning, governance and accountability
Information Resilience –
which focuses on the need to adopt information securityminded practices that enable stakeholders to gather, store, access and use information securely and effectively
Supply Chain Resilience
– which is the ability to identify, quantify and mitigate supply chain risks throughout the procurement, manufacturing and transportation.
developed ard for the n of refrigerated r immediate PAS 1018)” 69
In the first half of 2019, more logistics companies closed down their businesses than the entirety of 2018, the result of which is a rapid decline in the number of organisations surviving. To provide context, a study was conducted in the 1960s to assess the ‘average life expectancy’ of a business at that time, across all industry sectors from every major stock exchange in the world. The study concluded that the average life expectancy of a business in 1960 was 62 years. However, when the same study was conducted in 2015, the average life expectancy of a business had dropped dramatically from 62 years to 15 years. The result of these studies, and this comparison, is that organisations today
are not as resilient as they once were. For the supply chain specifically, it shows that organisations are further challenged because of the rate at which changes take place in technology and it has never moved faster than it moves today. The second example mentioned was that of the ‘Last Mile’, which is a challenging and exciting area of the modern-day supply chain, supporting the ever-evolving world of e-commerce, with logistics and supply chain organisations working hard to transport and supply goods for today’s instant consumerism. However, there are several risks present in the ‘Last Mile’, and a clear
“There are several risks present in the ‘Last Mile’, and a clear lack of standardised guidance and distilled industry best practice is exposing brands and consumers to higher levels of risk” 70
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“No matter what challenge your organisation is dealing with today, or what strategy you are developing for the future of your business, there are solutions available to support you and your organisation moving forward” lack of standardised guidance and distilled industry best practice is exposing brands and consumers to higher levels of risk, damaging reputations and affecting the bottom line. BSI has developed a standard for the transportation of refrigerated parcels for immediate transfer (PAS 1018), which has been developed in partnership with global supply chain organisations to address these issues, whilst helping organisations to improve the quality and consistency of their services, improving customer confidence and trust in ‘Last Mile’ businesses, and helping consumers to make informed decisions about which provider to use moving forward.
No matter what challenge your organisation is dealing with today, or what strategy you are developing for the future of your business, there are solutions available to support you and your organisation moving forward. From digital transformational strategies with IoT enabled distribution centres, through to autonomous vehicles, or the growing demand for consumer traceability of the goods they purchase online, standards exist to support the logistics and supply chain industry with current and future challenges, and continue to support and facilitate international trade. 73
Written by Carl Ralph
METHODOLOGY
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Carl Ralph, Sr. Director, Suppl AT Sierra-Cedar and author of Th is essential to apply lean thinki
ly Chain Engineering Services, he Supply Chain Engineer, says it ing to supply chain engineering. 75
Since what we in supply chain management and s to meet the needs of our employers, clients, an our approach on established lean operations pr to the tools and approaches we use and dev attention to the fiv
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Define value from the customer's perspective
Iden the v stre
4 Pull from the customer back
Let’s take a moment and look at each of these fro 76
supply chain engineering do is develop solutions nd their industries, it only makes sense to build rinciples. Lean thinking should be foundational velop. In particular, we need to pay constant ve Lean Principles.
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value According to James P. Womack and Daniel T. Jones, authors of the book, Lean Thinking: Banish Waste and Create Wealth in Your Corporation, understanding value is the critical starting point for lean thinking. But what that value is is not set by us, or by our bosses, or the Executive Committee. Value is set by the end customer, and only the end customer. Put slightly differently, value is the specific goods and/ or services that meet a specific customer need at a specific time and for which the customer is willing to pay. Anything that does not fit into that description is not value. In lean parlance, it is ‘muda’, or waste! According to the authors, “Lean thinking therefore must start with a conscious attempt to precisely define value in terms of specific products (or services or other solutions) with specific capabilities offered at specific prices through a dialogue with specific customers. The way to do this is to ignore existing assets and technologies and to rethink firms on a product-line basis with strong, dedicated product teams.”
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But, value is a constantly evolving concept. Often, the solution for today’s issue changes into tomorrow’s pain point. Over the years, we have seen several examples of this. Consider the need of the local business units within a large corporation. The procurement of their goods and services were, at one time, the exclusive domain of Corporate Purchasing. But this meant that the unique requirements of the individual business unit were often overlooked in the name of greater order consolidation and cost reduction. And then came along the ‘centre-led’ procurement organisation. In this model, the local unit would purchase most items through a company-wide purchasing agreement negotiated by Corporate Procurement. But when certain unique requirements arose or when significant cost savings could be demonstrated, the local purchasing department would arrange blanket orders or local contracts with their vendor of choice. Now, all in all, this is really a pretty good model. But like most exception-based practices, the exceptions gradually become the rule. So, over time, you end up with buying agreements from multiple locations, resulting in
multiple vendor records for the same item being stored in the corporation’s ERP systems. Consequently, employees might not know which vendor is the one that they should use for a given order. In the end, the centre-led approach has, in many instances, led to confusion and waste. And so, in these cases at least, a new value proposition has evolved. Each company will identify and prioritise the elements differently, but, generally, these companies now need to simplify the ordering process and related master data management while
meeting the unique procurement needs of the local business unit, and simultaneously minimising the overall procurement cost to the enterprise. Lean Thinking requires the supply chain manager and the supply chain engineer to discover what their customers believe satisfies their specific needs at a specific time. But they must also recognise that this is a continuous improvement process, and not a ‘once-anddone’ approach, since problems and requirements change over time.
Lean thinking must start with a conscious attempt to precisely define value in terms of specific products (or services or other solutions) with specific capabilities offered at specific prices through a dialogue with specific customers
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Identify the Value Stream The value stream can be defined as the various activities that are required for the three critical business processes we must go through to deliver a solution to our customers, either internal or external. These three processes are: • The problem-solving task – this includes the design, engineering and production of our solution • The information management task – the process of receiving demand, scheduling and planning delivery of the solution • The transformation task – creating and delivering the solution to our customer. But, it is when we look at all three of these together as a system that we define the value stream. Since this stream crosses departmental (and often company) boundaries, it necessarily requires crossfunctional collaboration of
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stakeholders from all the affected areas. And this is where we almost inevitably find huge amounts of waste or muda. Muda comes in two forms. Type 1 muda is the action that adds no value in itself, but is unavoidable, such as the physical inspection of items upon receipt at the loading dock. Type 2 muda adds no value and can be avoided without damage, such as a poorly laid-out stockroom that requires considerable backtracking and wasted time in filling orders. Back to our center-led procurement example, if we had identified all the stakeholders, Corporate Procurement, local purchasing, the end users of the items ordered, the suppliers, both corporate and local, and together we had mapped the entire value stream, looking for problems and waste, would we have eliminated the issues we discussed? Probably not, exception-based solutions almost always devolve. But those companies that did take this more holistic approach tend to have more robust and durable centreled organisations.
The problem-solving task includes the design, engineering and production of our solution
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Ignore boundaries between companies, departments and individual roles with the goal of ‘removing all impediments to the continuous flow of the specific solution’
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Make Value Flow So now we have removed all the avoidable (Type 2) muda in the value stream, there is another, totally counter-intuitive task before us. We must make the value-added steps work together continuously (no waiting, stopping or rework). That sound simple, but that’s not really the way our brains are wired. It seems to us that doing things in batches will be most efficient. Paint all the blue things, then all the white ones, followed by all the green ones. But this results in a series of ‘batch and wait’ steps. We are, in effect, creating our own bullwhip effect within our organisations. Let’s go back in time to the early 20th century and stop by the River Rouge Plant of the Ford Motor Company. Here, we see a very early example of flow processing versus the traditional batch process. Ford didn’t make all the doors, then all the fenders, then assemble them to make all the chassis. Instead, he set up conveyors that continuously moved the cars down the line – a flow. And each car ‘grew’ in an exact and repeatable process,
starting with a bare frame and ending with a complete automobile at the other end. And it was this flow process that allowed Ford to assemble over two million Model T’s around the world. The same approach should be taken in supply chain engineering. There are several aspects to consider: • Eliminate specialised departments • Focus on the end-solution itself and what is required to complete a single solution • Ignore boundaries between companies, departments and individual roles with the goal of ‘removing all impediments to the continuous flow of the specific solution’ • Redesign processes so operation of the solution can flow continuously
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Pull from the Customer Back Another feature of lean thinking is the concept of ‘pull’. The goal is to deliver only what your clients or customers want and when they want it. A common flaw in system design is guessing when and what the customers might want and pushing products out. But within supply chain management, in particular, we see where this aspect of lean thinking can result in rigidity and a lack of resilience. Kanban is an excellent example. A Kanban system, whether single bin or dual, provides a just-in-time supply of inventory,
with the minimum of excess overhead. But the cost of that is a certain inflexibility. If, for example, there is a sudden variation in either supply or demand, you may find yourself without sufficient inventory. And if there is any significant disruption to the supply chain, you have no buffer to mitigate the situation. For that reason, it is prudent to maintain a certain centralised safety stock of critical items. But, at the customer end, pull still remains the key. For example, “No one upstream should produce a good or service until the customer downstream asks for it.” It is these real-time signals that indicate to upstream activities when more is needed.
No one upstream should produce a good or service until the customer downstream asks for it 84
Strive for Perfection And finally, the improvement of processes never ends. You must always strive to design, develop, make and deliver a better solution while improving efficiency. Think once more about our centre-led scenario. In the cases where this has degenerated into confusion and disarray, was a continuous improvement mindset used? Most likely not, for if it had, the problems would have been identified and addressed long ago. To continuously improve: • “Form a vision, select the two or three most important steps to
get you there, and defer the other steps until later.” • Don’t settle for just being better than your competitors or even your current business practices; if you’re not moving forward, you’re moving backward. You can’t stand still. • Observe your outcomes. Analyse the results. And constantly look across the entire value stream to discover new opportunities for improvement. Lean thinking can make your organisation’s supply chain more effective, more efficient and more nimble. And it can also make you a better supply chain engineer.
Lean thinking can make your organisation’s supply chain more effective, more efficient and more nimble 85
D I G I TA L I S AT I O N
The next-generation digital supply chain is more efficient, agile and customer-focused, according to a report by management consulting firm, McKinsey.
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Over the 30 years, logistics has undergone a tremendous change, from a purely operational function that reported to sales or manufacturing and focused on ensuring the supply of production lines and the delivery to customers, to an independent supply chain management function that, in some companies, is led by a Chief Supply Chain Officer (CSO).
everal trends have had a heavy influence on supply chain management. To cope with the changed requirements, supply chains have had to become much faster, more granular, and much more
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precise. The digitisation of the supply chain enables companies to address the new requirements of the customers, the challenges on the supply side, as well as the remaining expectations in efficiency improvement. Digitisation brings about a Supply Chain 4.0, which is
defined by McKinsey as “the application of the Internet of Things, the use of advanced robotics, and the application of advanced analytics of big data in supply chain management.� By placing sensors in everything, creating networks everywhere, automating
anything and analysing everything, performance and customer satisfaction will be significantly improved. Supply Chain 4.0 creates a disruption and requires companies to rethink the way they design their supply chain as the technologies
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alter traditional ways of working. Besides the need to adapt, supply chains also have the opportunity to reach the next horizon of operational effectiveness by transforming the company into a digital supply chain. The result? A faster, more flexible, more granular, more accurate and more efficient supply chain, impacting all areas in supply chain management, from planning and logistics, through to performance and order management. And in the end, the improvements enable a step change in service, cost, capital and agility. According to McKinsey, the potential impact of Supply Chain 4.0 is huge – up to 30 per cent lower operational costs and a reduction of 75 per cent in lost sales while decreasing inventories by up to 75 per cent, and increasing the agility of the supply chains significantly. McKinsey reports that potential can be unlocked across the following categories:
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Lost sales By significantly improving the way we interact with the customer, by leveraging all available POS data/market intelligence, improving the forecast quality significantly, and applying methods of demand shaping in combination with demand sensing to account for systematic changes/trends, the service level will increase dramatically, and with this, lost sales will decrease significantly.
Supply chain costs Driven by transportation, warehouse, and the setup of the overall network, supply chain costs can be reduced. A large proportion of this improvement can be reached by applying advanced methods to calculate the clean sheet (bottom-up calculation of the ‘true’ costs of the service), costs of transport 91
and warehousing, and by optimising the network. The goal should always be to have minimal touch points and minimal kilometres driven, still meeting the required service level of the customer. In combination with smart automation and productivity improvement in warehousing and on-board units in transportation, for example, greater savings potential can be achieved, as well as leveraging the potential of dynamic routing, autonomous vehicles and 3D printing.
Supply chain planning The planning tasks such as demand planning, preparation of S&OP process, aggregated production planning and supply planning are often time-intensive and conducted mainly manually. With advanced 92
system support, 80 to 90 per cent of all planning tasks can be automated and still ensure better quality compared to tasks conducted manually.
Inventory Inventory is used to decouple demand and supply, to buffer variability in demand and supply. By implementing new planning algorithms, the uncertainty will be reduced significantly, making safety stock unnecessary. The other important variables to drive inventory are the replenishment of lead time and long transport time, which will also be reduced significantly. Capturing the value is a journey that can be started right away. The starting point will depend on the digital maturity of the current supply chain. By leveraging Supply Chain
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4.0 tools to shape the road map for digitisation, organisations will be able to utilise all available data for improved, faster and more granular support of decision making. McKinsey concludes that the transformation into a digital supply chain requires two key enablers – capabilities
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and environment. Capabilities regarding digitisation need to be built in the organisation but typically also require targeted recruiting of specialist profiles. The second key prerequisite is the implementation of a two-speed architecture/ organisation. This means that while the organisation and IT landscape are
established, an innovation environment with a startup culture has to be created. This ‘incubator’ needs to provide a high degree of organisational freedom and flexibility, as well as state-of-the-art IT systems (two-speed architecture independent of existing legacy systems) to enable rapid cycles of development, testing and implementation of
solutions. Fast realisation of pilots is essential to get immediate business feedback on suitability and impact of the solutions, to create excitement and trust in innovations, and to steer next development cycles. The ‘incubator’ is therefore the seed of Supply Chain 4.0 in the organisation – fast, flexible, and efficient. 95
B U S I N E S S I N T E RV I E W
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Marko Väisänen, CPO (Chief Procurement Officer) at Eltel Networks Finland, details his roadmap for the digitalisation of the company’s procurement and logistics function. Written by Anna McMahon Produced by Jennifer Davies
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ELTEL NETWORKS IS A LEADING NORTHERN EUROPEAN PROVIDER OF TECHNICAL SERVICES FOR POWER AND COMMUNICATION NETWORKS, DELIVERING A COMPREHENSIVE RANGE OF SOLUTIONS, FROM MAINTENANCE AND UPGRADE SERVICES, TO PROJECT DELIVERY. ith operations in Finland, Denmark, Germany, Lithuania, Norway, Poland and Sweden, CPO, Marko Väisänen, is responsible for the company’s procurement function across Finland. He explains, “The group was founded in 2001. In 2018, the net sales were EURO 1.2billion, with a total of around 7,200 employees. We have two major business lines at group level – power and communications. Our customers include the main electric companies, so when they are building networks, we act as contractor, while also maintaining the networks, operating across both mobile and fixed networks. Our customers are the biggest
service providers here in the Nordics.” In Finland itself, there are two further business lines – build (handling all big projects for both power and communications) and smart solutions (including solar panels, electric car chargers and street lights). There are 1,500 employees working in over 60 locations across the whole of the country. Marko says, “We are present everywhere in Finland, as it is our responsibility to maintain the networks. We have to be there in order to give the best service to our customers.” As CPO of Eltel Networks Finland, Marko says the company has very little group-level function
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“DIGITALISATION OF PROCUREMENT HAS BEEN THE DRIVING FACTOR IN ENSURING CONTRACT-LEVEL SPECIFICATIONS AND DETAILS, AS AGREED WITH SUPPLIERS, ARE ACCURATE”
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because the business is local by definition. He explains, “We have what we would describe as local organisations in all countries. I am responsible for the procurement function here in Finland, but I have colleagues doing the same thing in Sweden, Norway and Denmark.” When it comes to procurement, the organisation is centralised, however. Marko says, “As a centralised function, we are giving this service to all business lines. Of course, we try to provide value, by, for example, combining suppliers for different business lines. In this way, we can generate more revenue, increase volume for purchases and reduce unit prices. If we are lowering costs, this, in turn, is good for the business lines.” By having locations all over Finland, this presents a challenge
for Marko and his team. He explains, “We have a small to mid-enterprise function for procurement. This means we are not present in every location. To service each and every one of them is therefore challenging. The centralised procurement function is in its early stages, so the business lines are still learning how to use it. Without this, if an agreement with a local supplier has been made, how do you get it centrally to see what has been agreed and that it is valid?” Digitalisation of procurement has been the driving factor in ensuring contract-level specifications and details, as agreed with suppliers, are accurate. Marko adds, “Digitalisation is one of my favourite topics. I started in 2019 at Eltel. What I found when I came here is that there was very little digitalisation of procurement. In the planning phase, agreements 101
MARKO SET ABOUT DE FOR THE DIGITALISATIO AND LOGISTICS AT ELT
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were stored in an archive. Knowing where to store them was part of phase one. Having digitalised agreements in one place so you can see what has been agreed is very important.”
It is also easy to store them and makes the process so much faster. We did our calculations and the estimated employee time savings are 15 minutes per document.”
In addition, Eltel implemented Adobe e-signature platform Adobe Sign last year for the first time. Marko explains, “Being across many different locations, we had the problem of how to get signatures for contracts. We tested e-signatures for six months last year and found that is suits us very well. It is the simplest way of getting a signature for an agreement without having to copy, scan and send documents by email.
But, the path has not been plain-sailing. Marko says, “The work is ongoing. When I was creating the roadmap, the challenge was to see what we have and what kind of digital services and information we really need. We have to convince business lines that it is a good idea to have a solution as they are usually funding it, so we have to be sure that the applications or services add value.”
ELTEL IMPLEMENTED ADOBE E-SIGNATURE PLATFORM ADOBE SIGN LAST YEAR FOR THE FIRST TIME
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For supplier management, Marko plans to combine Eltel’s internal data with external data to offer one clear view. He says, “If you can see that a supplier is losing revenue and not making a profit anymore, but we are still buying from them, it should ring a bell that something is going wrong. We can then act and react
beforehand, not after the business has collapsed. These insights can help to protect the business. We are building the supplier dashboard to have one view of how our suppliers are doing.” And in terms of a timetable for the roadmap, Marko says he is taking a step-by-step approach.
“SUSTAINABILITY IS EXTREMELY IMPORTANT. IN SECURING THE OPERATION OF POWER AND COMMUNICATION NETWORKS FOR A MORE SUSTAINABLE AND CONNECTED WORLD TODAY FOR FUTURE GENERATIONS, WE CAN MAKE A BIG IMPACT IN OUR BUSINESS”
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“TALKING ABOUT ELECTRIC CAR CHARGERS, THERE IS NO POINT IN HAVING ELECTRIC CARS WITHOUT CHARGERS. WE ARE TAKING STEPS AT SOCIETAL LEVEL, AS WELL AS LOOKING AT THE PRODUCTION CARS IN OUR OWN BUSINESS” Marko Väisänen, CPO
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The contract management part is in ready phase, so he is now moving towards the spend and supplier management phases. Marko explains, “For the procurement side, we are starting e-purchasing for installation material. We already have e-purchasing for indirect material, but we are now starting the planning and implementation for our projects and direct material. We hope we will fully implement this during Q3-Q4 2020.” As for the future, automation is a potential topic of
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conversation for Eltel Networks Finland. Marko says, “Everybody is talking about AI. If there is something we can use that will absolutely add value, only then are we interested. That is the next step for us.” Eltel Networks is partnering with ProSave for the e-purchasing of installation material, but when it comes to Eltel’s supplier management and dashboard, that is something they are building themselves. Marko adds, “One big reason for building it internally is we are utilising the software we are
ELTEL NETWORKS IS PARTNERING WITH PROSAVE FOR THE E-PURCHASING OF INSTALLATION MATERIAL
Streamline procurement in construction Want to reduce spend and improve procurement operations? ProSave streamlines procurement in construction by connecting field employees, back-office managers, suppliers and your ERP system. We look forward to serving you.
prosave.dk | +45 41 150 150 | sales@prosave.dk
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“THERE ARE LOTS OF SUSTAINABLE ACTIONS WE ARE TAKING HERE AT ELTEL IN ANSWER TO OUR CUSTOMERS’ REQUIREMENTS”
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already using in other reporting. We are not bringing in any new reporting software.” As a final point, Marko is keen to stress Eltel Networks’ strong focus on sustainability. He concludes, “Sustainability is extremely important. In securing the operation of power and communication networks for a more sustainable and connected world today for future generations, we can make a big impact in our business. Talking about electric car chargers, there is no point in having electric cars without chargers. We are taking steps at societal level, as well as looking at the production cars in our own business. There are lots of sustainable actions we are taking here at Eltel in answer to our customers’ requirements.” For further information on Eltel Networks, visit www.eltelgroup.com
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procurement
The Chartere Procurement & Sup their key procurem out for th
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ed Institute of pply (CIPS) shares ment trends to look his year.
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Ongoing tariff wars between the US and China and the impact of Brexit mean uncertainty is likely to stick around in 2020. Uncertainty reigns supreme The CIPS survey found one in 10 UK firms believed they would go out of business if they were unable to receive supplies from the EU. Meanwhile, a separate survey by commercial insurance provider, CNA Hardy, found that fewer than a third (30 per cent) of UK transport and logistics businesses expected to feel confident in their ability to grow and prosper in 2020, with political risk cited as the primary reason.
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Alex Saric, Chief Marketing Officer at Ivalua, said, “Uncertainty such as tariff changes presents a unique challenge for businesses, as any rise can affect the cost structure for products, potentially making certain supply chains untenable. “This means prices could be caught in a state of flux and cause temporary dips in production if organisations look to change suppliers to avoid being impacted by tariff changes. For procurement teams, the challenge is about ensuring they have visibility into the impact of tariff scenarios on their overall supply chain and viable alternatives.” Bernadette Bulacan, Chief Evangelist at software firm, Icertis, added, “Even if Britain and the EU come to terms around Brexit, there will continue to be significant business disruption into 2020. Businesses trading between Britain and the EU will need to spend significant time realigning their business relationships to address the new trading environment. “This will include a major effort to audit and amend their contracts throughout early 2020, both those in the pipeline and legacy agreements already in place.”
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Technology enables speed Brexit preparations led to an increase in stockpiling in 2019, which, in turn, impacted warehousing. In July 2019, the UK Warehousing Association reported UK warehouses were full. However, the new year could bring a greater migration towards smart warehouse adoption, with employees using mobile devices for picking and scanning, and ‘mobile warehouses’ stocked with commonly ordered items to enable same-hour deliveries. Mel Tymm, Industry Principle at e-commerce firm, Maginus, believes the year will also see a move towards the adoption of automation and collaborative robots (cobots) to work alongside employees and assist with heavy lifting and repetitive tasks. She said, “A by-product of this trend is that we are also likely to see a reduction in the cost of implementing smart warehouse technology over the next year, a cost that has traditionally been restrictive. Whilst still in the early adoption 118 118
phase, cobots are becoming smaller and cheaper, making them a more feasible choice. Add this to the fact that they’re becoming easier to integrate into a warehouse – physically and technically – and it’s easy to see why adoption is increasing.” Tom Kieley, CEO at software firm, SourceDay, added that consumer demand for instant gratification fuelled by disruptors such as Amazon will mean supply chains will have to operate faster and more efficiently if they want to compete in 2020. He said, “To do this, businesses will need to eliminate data silos that create costly waste; waste that drains revenue and resources, often resulting from bad ERP data. They also need to put themselves in the position to be able to reach and manage real-time change before the change impacts their ability to meet customer demand. This type of transformation is only possible if supply chain and procurement organisations are committed to replacing outdated processes in favour of increased automation.” 119
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Customers demand transparency Global climate strikes saw millions of people take to the streets to protest a lack of action by governments to combat climate change in 2019. Sustainability – both environmental and social – is going to become a crucial aspect of procurement. Padmini Ranganathan, Global VP, Risk and Sustainability at SAP Ariba, added, “Consumers will vote with their dollars, and because of this, companies are leveraging their impact on issues such as climate impact, forced labour and impact on livelihood and job opportunities as part of their brand promise.
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“To be credible, the smart ones will shift from focusing just on cost savings and compliance to true value creation and avoid greenwashing. Squeezing suppliers on cost just doesn’t cut it anymore. Buyers and suppliers are coming together to create value for their mutual customer, and where else can this happen but from the beginning of the procurement process when sellers come calling with their business card or buyers scan the globe for the best suppliers?” 121
Procurement must avoid returning to the ‘dark ages’ While there is plenty of promise on the horizon, geopolitical factors could lead to global recessions and see organisations refocus on the bottom line and cutting costs, Saric warned. He said, “Procurement has progressed in leaps and bounds over the last few years, going from being a price slasher, to a department that adds strategic value through risk management, supplier collaboration and building relationships that benefit both parties in the long run. “A recession risks setting back this progress with a renewed emphasis on costs above other objectives. At a time when businesses are more reliant than ever on suppliers, such a procurement relapse would be difficult to manage and damage the progress made, stifling innovation.”
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