A new research report, provided by Mighty Earth, argues that “[deforestation] is the result of a long supply chain that starts on the South American frontier and ends on European plates”. The report is titled The Avoidable Crisis. It reveals that a small group of companies controls the global agricultural trade: “These companies collectively control the majority of global grain trade […]. In addition to their role in trade, these companies also play a more direct role in driving ecosystem conversion by providing plantation owners with financing, fertilizer, infrastructure, and other incentives for new deforestation to expand their supply base. Given their outsized role, these companies have the power to insist that suppliers protect native ecosystems and land rights. But so far, these companies have prioritized reckless expansion over even easy conservation wins.” The authors argue that “[the] EU must send a strong signal to the market by requiring that companies implement measures for transparency and traceability into their supply chains”.
Are business success and sustainability contradictory? A new white paper by Schmidpeter & Bungard, sponsored by DHL, is rather optimistic and argues that both goals can instead be mutually beneficial. The paper is titled Unlock the True Value of Your Supply Chain: Business Success through Sustainable Supply Chain Management. The authors state: “Sustainable Supply Chain Management (SSCM) can help drive positive business change by helping companies save costs, strengthen ‘license to operate’ and generate additional revenue streams.” But the authors also acknowledge that “[a]lthough there are good tools and best practices available for integrating sustainability into your business, there is no silver bullet that will let you realize the benefits of SSCM overnight”. They also acknowledge that the Sustainability department should not do it alone: “The topic of sustainability should be on the agenda for every leader and employee within a company”. The white paper might partly be quite optimistic, but it provides several good practices from business reality.
Today I present my personal predictions for supply chain management in 2018. Sustainability and digitization will certainly top the SCM agenda! First, much more action is needed to combat global warming. SCM could play a key role to cope with this challenge, as a “supply chain” rather than “company” perspective helps to understand that upstream greenhouse gas emissions may occur anywhere in the world. Unfortunately, time is slowly running out! New technologies like blockchain, ID systems like bluenumber and standards like ISO 24000 could help us make a breakthrough. Second, we might see increased momentum to move beyond the machine learning hype. Machine learning could soon be integrated in all kinds of value-creating processes. But while IT giants like Google, Amazon and SAP highlight the strengths and opportunities of such technologies, we should also take the weaknesses and threats into consideration: Will robots take our children’s jobs? And what does all this mean for SCM? 2018 will bring some more questions and hopefully even more answers.
It is widely known that the term “supply chain management” was popularized by Keith Oliver, among others, in the early 1980s. Interestingly, in a 2003 strategy+business article, Oliver has revealed that, looking for a catchy phrase, his consulting team originally proposed the term “integrated inventory management” (I2M). While, in our modern understanding, SCM is focused not only on intra- but also inter-organizational coordination and typically takes a more strategic perspective, “I2M” already focused on “tearing down the functional silos that separated production, marketing, distribution, sales, and finance to generate a step-function reduction in inventory and a simultaneous improvement in customer service”. Later, at a key steering committee meeting, Oliver’s team introduced “I2M” but “the phrase failed to resonate with participants”. One of the managers, a Mr. Van ’t Hoff, challenged Oliver to explain what he meant by “I2M”. I am not sure whether Mr. Van ’t Hoff is aware of it, but this moment marked the birth of the term “supply chain management”:
Among the best ways to teach supply chain management is by discussing different types of real-world supply chains. In their interesting report, Enabling Trade: From Valuation to Action, the World Economic Forum (in collaboration with Bain & Company) present several supply chains that could be discussed. The introdution makes one point clear: “The overall benefits to nations, producers and consumers are clear. However, making it happen is not as simple – particularly because supply chains cut across multiple stakeholders, requiring collaboration and leadership that goes beyond local constituents and borders.” This is where the report delves deeper into examples of practical application. Among the examples presented in the report is the avocado supply chain. This example demonstrated how “a number of supply chain improvements have enabled Kenyan avocados to be profitably exported to high-value markets in the European Union”. It illustrates that supply chains “must be able to react to changes in market dynamics in order to maintain a virtuous cycle”.
Impact of the Fourth Industrial Revolution on Supply Chains (Guest Post by Wolfgang Lehmacher, Forum)
My guest post today comes from Wolfgang Lehmacher, who presents a white paper prepared by the World Economic Forum in collaboration with BVL International.
The report, titled Impact of the Fourth Industrial Revolution on Supply Chains, provides preliminary considerations for Fourth Industrial Revolution-driven supply chains. Based on the impact on supply chains of advanced technologies, in particular the Internet of Things, artificial intelligence, advanced robotics, enterprise wearables and additive manufacturing, the report highlights seven areas of focus for business and government: new roles and responsibilities, supply chain performance, agile organizations, ecosystem for skilling, support for SMEs, leadership and neutral platforms. The Fourth Industrial Revolution changes the way in which we produce and manage the supply chain, and paves the way for the creation of new value chains. The following developments are expected to play a major role in this process going forward: Open innovation, i.e. greater openness of companies towards involving both other companies and their customers in innovation and development processes, distributed manufacturing as an approach to the comprehensive decentralization of production structures and the elimination of classic manufacturing paradigms, and new collaboration models between companies, primarily horizontally, but also vertically.
Wolfgang Lehmacher is Head of Supply Chain and Transport Industries at the World Economic Forum. During his career he was Partner and Managing Director (China and India) at the global strategy firm CVA and President and CEO of GeoPost Intercontinental. He is member of the IATA Air Cargo Innovation Awards Jury and the Logistikweisen, a think tank under the patronage of the German Federal Ministry BMVI. He is FT, Forbes, Fortune, BI contributor and author of books, including The Global Supply Chain – 2017 and How Logistics Shapes Our Lives – 2013 (German).
My guest post today comes from Kai Hoberg from the Kühne Logistics University (KLU) in Hamburg. Together with his co-authors, Alan McKinnon and Christoph Flöthmann, he has just published a new report, which is commissioned by the World Bank and analyzes the shortage of qualified logistics personnel.
Qualified logistics personnel is in short supply worldwide. This is the conclusion of our new report, titled Logistics Competencies, Skills, and Training: A Global Overview. While there are too few well-trained executives in the logistics sector in emerging countries, there is an acute shortage of qualified staff at the operational level in developed economies. We argue that this skills shortage is likely to worsen in the absence of new initiatives. There are two aspects that deserve further elaboration: First, physically, there are too few people available to cover vacant position in the logistics sector. Second, the currently employed workforce is partially lacking the skills demanded for their job. Based on an empirical analysis, we derive multiple recommendations for relevant stakeholders, i.e. companies, governmental institutions and logistics associations. The proposed measures include innovative training methods like logistics-related business games that can be employed without requiring high upfront investments or long implementation lead-times.
Kai Hoberg is Associate Professor of Supply Chain & Operations Strategy at KLU. In his academic career he was a visiting scholar at Cornell University, Israel Institute of Technology, University of Oxford and National University of Singapore. He is on the scientific advisory board of the German Logistics Association (BVL) and has been working with companies like Procter & Gamble, McKinsey & Company, Jungheinrich and Zalando on supply chain innovation projects.
Today’s economy is a plastics economy, as most of our global supply chains contain plastics. A report, published by the Ellen MacArthur Foundation, is titled The New Plastics Economy: Rethinking the Future of Plastics. Herein it becomes evident that linear supply chains need to become circular: “The circular economy is gaining growing attention as a potential way for our society to increase prosperity, while reducing demands on finite raw materials and minimising negative externalities. Such a transition requires a systemic approach, which entails moving beyond incremental improvements to the existing model as well as developing new collaboration mechanisms.” The report “explores the intersection of these two themes, for plastics and plastic packaging in particular: how can collaboration along the extended global plastic packaging production and after-use value chain, as well as with governments and NGOs, achieve systemic change to overcome stalemates in today’s plastics economy in order to move to a more circular model?”
“Slicing and dicing the supply chain to service ever more diverse and demanding customers has become the core challenge for Chief Supply Chain Officers. But simply expanding the number of supply chain configurations and maintaining separate organizations to manage them—the approach followed by most organizations—is driving too much complexity and wasting potential synergies.” This is how a new report by Accenture starts. It is titled: Can Your Supply Chain Avoid Extinction? The authors recommend three strategies to move toward a differentiated supply chain: First, companies should focus on supply chain configurations that drive value, as this will serve customers best. Second, companies should choose the right digital technologies for each configuration, hereby applying only those capabilities that enable them to deliver the right supply chain response. Third, companies should find the right structure and governance; this includes embedding innovation thinking at the heart of the organization. Have a look at the full report.