Supply Chain Integrity: Protecting Our Blind Spots
Research on supply chain risk and resilience has focused a lot on accidental disruptions, caused for example by an earthquake or the fire at a supplier’s plant. A sometimes overlooked element of supply chain risk management are disruptions that are caused by malicious intent, for example fraud. Indeed, due to their complexity, modern supply chain systems have become vulnerable to deliberate harm. A recently published report by Zurich Insurance Group and SICPA, titled Supply Chain Integrity: Protecting Companies’ Blind Spots, is focused on such types of risk. The authors argue that “companies can increase their ability to safeguard against deliberate supply-chain ‘infiltration,’ such as that caused by counterfeit or tampered products”. In their study, they “offer numerous recommendations and examples gathered in interviews with government and industry experts, enforcement specialists, risk managers and executives at large corporations”. I believe this report makes an important contribution to widen our understanding of supply chain risk and resilience.
Future Engineering and Manufacturing Supply Chains
According to a new DHL white paper, titled Engineering & Manufacturing 2025+ – Building the World, the Engineering & Manufacturing (E&M) sector is on the brink of change. The E&M sector is expected to transform over the next 10 to 15 years by responding to this change with intelligent and sustainable manufacturing as well as new business and collaboration models. These transformations will have substantial implications for our supply chains. While traditional supply chain goals like quality, efficiency, total cost, or delivery performance will remain important, future E&M supply chain models will (1) reflect a global network of regional supply chains, (2) focus on risk management to create resilience and compliance, (3) take care of emissions and resources to make the world sustainable, (4) implement end-to-end connectedness and integration, and (5) be agile and responsive. And I agree: In this era of volatility and due to the need to create CO2-neutral business models, supply chains need to be adapted and redesigned soon.
Empowering Responsible Value Chains
The Rana Plaza factory collapse in Bangladesh in 2013 has opened the eyes of many supply chain managers: Implementing a socially responsible supply chain has, indeed, become an imperative for global corporations and the supply chain management discipline might be in the middle of a paradigm shift. A World Economic Forum report, Beyond Supply Chains: Empowering Responsible Value Chains (pdf; prepared in collaboration with Accenture), examines how companies strive for what the authors call “the triple supply chain advantage” – realizing societal, environmental and business benefits at the same time – and looks at how they intend to achieve it. The authors present a comprehensive set of 31 practices “that provide guidance for companies looking to codify their own specific portfolio of triple advantage improvement measures”. For each of these practices a detailed value assessment and good practices from companies are provided. This report is a good start when implementing a socially responsible supply chain.
Sustainable Supply Chains: A Country Comparison
The global not-for-profit organization CDP (formerly the Carbon Disclosure Project) has published a report: Supply Chain Sustainability Revealed: A Country Comparison. The report was written by Accenture Strategy. “While climate and water risks are apparent, the implications for businesses and economies reliant on complex supply chain models are less understood”, says Paul Simpson, CEO, CDP. “The good news is that as companies transform their supply chains into digital supply networks they will gain greater end-to-end visibility, traceability and access to information to report on their compliance progress and mitigate climate risks”, adds Gary Hanifan, managing director, Accenture Strategy. The report reveals that suppliers in France, the UK, Spain and Germany are identified as the most sustainable ones, whereas suppliers in China, Italy and the U.S. turn out to be particularly vulnerable. The report also shows that Brazil, Canada and India must do more to encourage suppliers to report emission reduction initiatives.
Supply Management’s Next Evolution
Recent discussions have demonstrated that supply management organizations should not just focus on price but on total cost of ownership. But what is next? A new report, titled Supply Management’s Next Evolution, has now been published by strategy& (formerly Booz & Company). The authors believe that “the next step is for sourcing organizations to move beyond ‘optimizing the buy’ to ‘maximizing value’ for the enterprise” – a transition that could be challenging for many companies, especially if they lack talents that are able to take part in strategic discussions. The authors find that supply management organizations, who successfully manage this transition, follow four common practices: First, they “participate in (re-)architecting product and service designs and contribute to sourcing-related design changes in clear, quantifiable ways”. Second, they “optimize the supply base by tailoring suppliers to the demand profile”. Third, they “segment suppliers to better engage each distinctly”. Finally, they “demonstrate the bottom-line impact”.
Do We Really Need a New Smart Phone Every Two Years?
We all know about natural resource scarcity. However, as brand companies make consumers believe they need a new smart phone every two years, today’s global supply chains are responsible for incredibly large amounts of electronic waste. A new United Nations University report, titled The Global E-waste Monitor – 2014, details e-waste generation by region. The total amount of e-waste generated in 2014 is 41.8 million metric tonnes (Mt) and it is forecasted to increase to 50 Mt in 2018. This e-waste comprises 12.8 Mt of small equipment (e.g., toasters, video cameras), 11.8 Mt of large equipment (e.g., washing machines, photovoltaic panels), 7.0 Mt of cooling and freezing equipment, 6.3 Mt of screens, 3.0 Mt of small IT (e.g., mobile phones, computers), and 1.0 Mt of lamps. With 32% of the world’s total, the United States (7.1 Mt) and China (6.0 Mt) are responsible for most of the e-waste overall. The top per capita producers, however, are Norway (28.3 kg), Switzerland, Iceland, Denmark, and the United Kingdom.
Baldé, C.P., Wang, F., Kuehr, R., Huisman, J. (2015). The Global E-waste Monitor – 2014. United Nations University, IAS – SCYCLE, Bonn, Germany
Eight Technologies Redefining the Future of Supply Chains
The 2015 MHI Annual Industry Report is out now. It was published by MHI, a U.S. material handling, logistics and supply chain association, in collaboration with Deloitte. The authors argue that “companies that continue to rely on traditional supply chain models will likely find it increasingly difficult to stay competitive and meet customer expectations for orders that are complete, accurate and on-time”. Based on survey data, the study, thus, analyzes technologies and innovations that are transforming supply chains around the world. Particularly, the following sets of technologies are covered by the study: (1) maturing technologies (inventory and network optimization, sensors and automatic identification, cloud computing and storage, robotics and automation), (2) growth technologies (predictive analytics, wearable and mobile technology), and (3) emerging technologies (3D printing, driverless vehicles and drones). The authors believe that “the innovations and technologies highlighted in this report have the potential to provide step-change improvements in both cost and service”.
Supply Chain 2015
Last week, a well-made special report by Raconteur, titled Supply Chain 2015 (pdf), was distributed in The Times of London. I very much enjoyed reading it. The authors make clear that “contracting has to be far more agile than a traditional long-term sourcing process and relationship” and they discover that “many companies are unprepared for increased complexity”. The report also discusses five megatrends, each having implications for supply chain management: (1) shift in global economic power; (2) demographic and social change; (3) technological breakthroughs; (4) climate change and resource scarcity; and (5) rapid urbanization. Other topics covered by the report are, among others, strategic procurement, top technologies, demand prediction, sustainable supply chains and cross-border delivery. The report also contains an analysis of three selected sectors (retail, construction and pharmaceutical) and additional case studies, including a case study on the 2013 Rana Plaza tragedy in Bangladesh. More information can be found on the homepage of Raconteur’s Supply Chain 2015 report.
Are your Supply Chains Tiger and Orang-Utan Friendly?
Accounting for roughly 40% of vegetable oil production, palm oil is the most important vegetable oil worldwide. As a key commodity, it is an ingredient of a large range of products, including processed food, cosmetics, shampoo, and soap. A recent Greenpeace report reveals how palm oil supply chains are pushing Sumatran tigers and orang-utans closer to extinction (pdf). It becomes evident “that the palm oil sector is currently the greatest single driver of deforestation in Indonesia, accounting for about a quarter of all forest loss”. The report demonstrates that palm oil supply chains “are aiding and abetting the clearance of the Bornean orang-utan’s rainforest habitat and that of the even scarcer, critically endangered Sumatran tiger” and that “[t]hey have also been complicit in peatland destruction and depriving communities of their land and livelihoods”. How can research in the field of supply chain management help to recognize the true costs of palm oil production?
Rethinking Corporate Social Compliance in the Supply Chain
Managers are increasingly under pressure to ensure that their products bear attributes like “fair”, “ethical”, “green”, or “social”. Hereby, it becomes clear that solutions cannot just be found in the manager’s company, but in the company’s end-to-end supply chain. This has led companies to audit every company along their global supply chains against the own standards, which resulted in a large volume of auditing. The Rana Plaza building collapse, however, tragically showed that this top-down approach seems to fail. Departing from this observation, a new EY report, Human Rights and Professional Wrongs (pdf), provides an excellent summary of the problem and a set of recommendations for improvement. For example, the authors recommend to use third-party certifiers and auditors more strategically, to prevent orders from factories that have not had their status assessed, and to maintain longer relationships with a smaller number of suppliers. These recommendations could help to sharpen a blunt sword.
