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Jerwin Tholen and Johan Smits, Partners at KPMG, explain why traceability and end-to-end transparency are today’s critical trends in supply chain management.
Written by Anna McMahon • Produced by Jennifer Davies
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“We help our customers to create more transparent and sustainable supply chains” Jerwin Tholen, Partner
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Jerwin Tholen a are both partners Netherlands. They supply chain for KPM but from very diffe erwin is part of the sustainability team, while Johan is a partner in strategy and operations. Jerwin explains, “I work with clients on solutions to step up their journey to becoming more sustainable. We help our customers to create more transparent and sustainable supply chains. I also have a role in the international networks of KPMG Impact for what we call ‘ethical’ supply chains. To create ethical supply chains, it is crucial to understand who the people are who work in your supply chain. A proliferation of legislation holds companies increasingly accountable for what they do to eradicate child and forced labour.” Johan says, “I am focused on helping companies on their customer-centric and supply chain strategy, looking at their network design, supply chain cost, the cost to serve, and, of course, 4
and Johan Smits s at KPMG in The each focus on the MG’s corporate clients, erent perspectives. leveraging all the digital change and transformations taking place in supply chains.” One of the current key trends in supply chain management is the role of visibility, traceability and end-to-end transparency, an area that Jerwin and Johan have explored at length. Johan says, “Supply chain transparency is important for many different reasons. For customer-focused and purposebuilt ambitions, the visibility in supply chain response is crucial. If you think about delivering on time a specific batch of a specific product of a specific quality, you need to be able to track it back in the supply chain in the best way possible. If there is a concern about a product or a supplier, you need to be able to track it back in minutes to see very quickly where it will impact you. Above all, they say the supply chain is THE biggest contributor to the customer experience.” 5
According to Jerwin, there are different ways to look at transparency, but, ultimately, it is about having the ability to see and communicate everything going on in the supply chain. If you start with visibility, it is knowing who is supplying products to your customers. This might not be only the supplier with whom you have a contract, but each and every sub-supplier below them in the chain. Jerwin explains, “Visibility is knowing how many steps you have in your supply chain. If you can extract an individual batch of products from the chain for which you created the visibility, that is traceability. Then the transparency is the ability to communicate to your customers the origin, sustainability and food safety of the products.” Johan shares that KPMG has recently done research for a number of industrial and logistics companies. He explains, “We looked at the different stages in which companies make steps to better collaborate internally and externally with each other. We see initially an internal focus on being transparent driven by cost savings. On the other side of the spectrum, it is ultimately going even beyond the external value chain and ecosystem of partners for end-to-end multitiered 6
“If you know how c hit you, you can thin ahead and distrib sourcing areas
Johan Smits, Partner
climate change will nk four or five years bute your ultimate s accordingly”
transparency, highly purpose-led and focused on sustainability.” Up until a few years ago, KPMG concentrated on understanding internal transparency in order to optimise production processes of clients. A shift towards endto-end transparency means companies can now make claims about having no child labour or not supporting deforestation, for example, ensuring compliance and offering a regulatory framework for delving deeper into the supply chain. Jerwin adds, “Customers want to know about the working conditions in your supply chain and from where you have sourced your product. Companies could not answer these questions before when they did not know the answers. That was the start of endto-end transparency. After that, investors began asking similar questions to hold their companies accountable. And in the past few years, we have seen companies forming their own values, so that is yet another driver for this trend.” Speaking of drivers, Covid-19 has acted as an accelerator towards improving operations for many company supply chains. Jerwin explains, “When the pandemic hit, companies were confronted 7
with disruptions in their supply chains. When China locked down, goods failed to arrive in time. The companies that understood how this would affect them in a few months’ time reallocated their sourcing routes so as to not have any disruptions in their chains. There was an increased awareness that companies needed better visibility in their supply chains, and customers started to become more critical about where their products came from – they wanted their food to come from local sources to fulfil a
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basic human need of feeling safe. The world was a crazy place, but the companies that were successful were the ones that realised they needed to move forwards with these trends.” Johan reiterates that the real winners from a supply chain point of view were the ones which were most responsive and resilient when the disruption happened. He says, “Driven by Covid, companies simulated the impact of decisions on their supply chains to make
sure they could still deliver to their customers, and quickly switched to e-commerce channels. Those that were successful already had predictive control towers giving them visibility over their goods, and the knowledge of how they could supply through alternative routes to mitigate for the disruptions. These scenario tools for supply chain management can also be used for modelling the longer-term impact!” “How does the world change and how well am I prepared to
understand what that does in my supply chain?” That is the question on Jerwin’s lips as he tackles the issue of climate change. He explains, “If you know how climate change will hit you, you can think four or five years ahead and distribute your ultimate sourcing areas accordingly. It might not be your direct supplier that needs to be from another part of the world, but perhaps they need to change their sourcing area. You also need to have other suppliers lined up for when the change happens, and you can only do this if
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you have deep analysis based on end-to-end visibility of the supply chain.” Thinking ahead to the future, Johan suggests that perhaps the pandemic has reinforced our supply chains’ reliance on China, and we may need to ask ourselves whether that is what we want going forward if we are to fulfil our green ambitions, e.g. is re-shoring an option? By taking a value-driven approach, KPMG is able to view the transparency not just from a cost perspective, but by considering all the different dimensions of the business case. The value supply chain transparency brings is therefore not only associated with direct financial return, but it also supports risk and compliance, operational excellence and consumer/ investor expectations. Jerwin adds, “Suddenly, you have another reason for the urgency in getting started!” In doing so, KPMG prides itself on its collaborative mindset in finding solutions that fit its customers best. Jerwin says, “We need to make sure that everyone in the supply chain is willing and able to work together. Not everyone benefits from sharing their data unless it is designed very well. It is a puzzle to map the 10
“If a company has done hundreds of supply chain models, they will have a library of solutions available. You can then choose a model that is already configured, moving quickly and at scale. There are some really sophisticated platforms like ChainPoint”
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supply chain and share the information flows we need in a way that everyone benefits.” Johan compares this to the prisoner’s dilemma. He explains, “If two prisoners want to get out of prison and they both have information to share, the only way they will both get out is if they do it together.” KPMG employs a proliferation of technologies in improving supply chain visibility, traceability and end-toend transparency. There is a growing number of tech companies entering into this field, providing track and trace information to make the flow of information as easy as possible, as well as providing the capability to pull out the data and represent the outcome in control towers. Other companies follow a generic supply chain model that is less granular and has to evolve over time. There are also technologies that prepare for a world without blockchain and the cloud. As soon as we are able to scan products at scale to determine their exact components and origins by using DNA tracers, the traceability game radically changes. Jerwin states, “We do not believe that there is one system that will create the entire transparency for everyone.” 12
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Johan adds, ‘When in the cloud, the key is to unlock the data with advanced analytics and AI, as well as unlocking new use cases combined with big data and meaningful insights.” KPMG has moved from managing changes based on legacy technologies to an end-to-end cloud approach (‘The Powered Supply Chain’), entering into partnerships with tech providers offering targeted operating models for specific operations, specially designed for the new era. Jerwin continues, “If you know the right solution, you don’t need to spend a lot of time thinking how to design it. If a company has done hundreds of supply chain models, they will have a library of solutions available. You can then choose a model that is already configured, moving quickly and at scale. There are some really sophisticated platforms like ChainPoint. I also like the blockchain platform, KPMG Origins, for very specific cases where measuring the temperature for the optimum conditions for transportation and other quality markers, customs clearance and digital payment arrangements are needed alongside traceability and sustainability of the ingredients. If you want to do 13
“You need to show results quickly, and it helps if you can use reference models that have already been proven and validated. This is exactly the approach we take with KPMG Powered, a set of pre-defined best-in-class processes and technologies for, amongst others, procurement and supply chain management” 14
something at scale, the more predefined solutions work better.”
direction. This is an important transformation principle.”
Johan agrees that agility comes from running at scale with best practice solutions. He adds, “You need to show results quickly, and it helps if you can use reference models that have already been proven and validated. This is exactly the approach we take with KPMG Powered, a set of predefined best-in-class processes and technologies for, amongst others, procurement and supply chain management.
On a final note, Jerwin talks about KPMG’s business functions, arguing that the better their alignment, the easier the journey to accommodate the different business drivers. He explains, “If you start with only sustainability in mind, you will get stuck because the operational and logistical consequences are not thought through from the beginning. And if you only look from a food safety perspective, you will lose out on opportunities to collect more information along your supply chain. So, the better you know the needs of your company and customers, the better you can combine them, pull the resources to do so, and get commercial buyin. If you know exactly what your customer is looking for, you can build that in to your supply chain from the start.”
KPMG does partner with a selection of leading IT techproviders, so there are no expectations to design a type of software capable of solving everything. Jerwin says, “It is a journey. You need to have the end goal in sight and you cannot build it all in one day. You have to think about your priorities and the intermediate stages needed to get to the end goal. If you avoid that, it becomes too much of a journey. The key is to edit the solutions over time without randomly dropping pilots, as that will make you run into inefficiencies.” Johan provides a further analogy about building a plane. He says, “We can build the plane during the flight, but we already know the destination and we know it has to fly. Then you need good guidance and controls to fly in the right
Johan concludes, “For me, an overall focus on supply chain cost reductions should remain, to unlock funds to invest in the opportunity areas we have just discussed. And all the simple things we can do to have more efficient logistics, higher safety and less waste on the manufacturing side need to continue.” For further information on KPMG, visit www.home.kpmg/nl/ supplychain 15
www.home.kpmg/nl/supplychain
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