Category Archives: Supply Chain

Supply Chain Problems? Look North for a Solution!

I was thrilled with the results of the recent IACCM worldwide study that found “Canada is ‘Top Dog’ when it comes to World Trade”. It just confirms what I’ve known all along … there’s no one easier to work with than us canucks and no one more eager to help you solve your supply chain problems.

Furthermore, as Tim Cummins notes, with companies and public sector agencies worldwide increasingly concerned about reputation risk, it’s ethics, fairness, integrity that really matter. If there’s one thing us Canadians tend to have in spades (politicians excepted), it’s ethics, fairness, and integrity. The reality is that Canada is the sort of environment that can be trusted and where risks can be managed effectively. So come north. We’ll be glad to help you out!

The Board Room CPO

In addition to offering insights into planning horizons, supply chain strategy drivers, and keys to supply chain success, the recent report on “Supply Chain Strategy in the Board Room” by the Cranfield School of Management and Solving Efeso also discussed what it all meant for supply chain leaders of tomorrow. It’s conclusion was that the CPO of tomorrow needs to fit the following profile:

  • Strong Communicator: gravitas within Leadership teamin many companies, the sourcing / procurement / supply chain leader still doesn’t have a seat at the table, and even when she does, she often reports to the COO, CFO, or another CXO that’s not the CEO
  • Multi-Disciplinary: able to understand corporate & customer service strategywithout this insight, the CPO will never develop a supply chain strategy that complements and enforces the corporate strategy
  • Collaborative: works as a team player, does “external sensing”in modern terms, the CPO must have a high EQ IQ
  • Vision-Led: but practical and pragmaticthe CPO must be able to think long term, but able to adapt to short-term circumstances and fluctuations
  • Fact-Based: but able to deal with “ambiguity and ambition”the CPO must have a solid grasp of true analysis, and apply those skills whenever data are available, but also be able to fill in the gaps with wisdom and experience when data is sparse
  • Culturally-Intelligent: able to deal with a mix of global, regional, and local culture/leadership stylesmodern supply chains are global and they are going to stay that way

In other words, nothing that Sourcing Innovation and other top blogs haven’t been telling you for years, but it’s nice to see more support for the profile.

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Where is Your Company on the Transformation Curve?

A recent article over on strategy+business on why it makes sense to adjust did a great job of outlining why business transformation needs to be a continuous process. Now that operating in a more volatile, less predictable environment has become a way of life, companies must be ready to repeatedly transform themselves. If the company can not respond to new challenges with a broad-based, enduring plan , it may soon be left in the dust by its competitors.

But most companies can’t do this, because they don’t have an adequately proactive road map for transformation. Instead, they attempt change on the fly, reacting to business disruption with equally explosive responses that may not be useful six months down the road or even sooner. On the transformation curve, they are stuck at the bottom in the reactive stage, when they need to be at the top of the curve in the sense-and-adjust stage.

A company that is reactive employs minimal seat-of-the-pants transformation strategies with little cross-company coordination or follow-up. Such strategies are not only limited, but unsustainable.

A company that moves up the curve becomes programmatic and takes more comprehensive approaches when major changes are required and the company has sufficient lead time. These approaches include thought-out widespread change initiatives across the lines of business that are most affected. Such programs — that include tactics, milestones, and executive assignments — can be quite effective in dealing with contained threats, such as new competitors or new rival products, but fall apart when the threats are not contained and well understood in advance.

But a company that reaches the top of the curve is able to sense-and-adjust. This continuous long-term strategy allows a company to constantly and consistently smooth out volatility in areas of business subject to swift and dramatic change. This is important in turbulent times.

And very important if a company is to have a successful supply chain, which not only has to deal with a tumultuous and unpredictable market, but also has to deal with risks of every colour and flavour, which pop into existence when and where they are least expected. Does your company sense and adjust? Is your supply chain ready?

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What’s the Right Planning Horizon for Your Supply Chain?

The recent report on “Supply Chain Strategy in the Board Room” by the Cranfield School of Management and Solving Efeso had some interesting and surprising statistics on the frequency of supply chain strategy review and the supply chain planning horizon. Namely, while the frequency of review was all over the place and ranged from less than a year at some companies to over 3 years at others, with an average of approximately 1.25 years for the electronics industry and 2.70 years for the heavy machinery industry, with the exception of APAC, the average planning horizon was between 3 and 4 years, and with the exception of the automative industry (which had an average planning horizon of 5 years), the average planning horizon was almost exactly 4 years across all of the other industries. That’s right, the average planning horizon for construction, heavy industry, electronics, consumer goods, chemicals, textiles, pharma, retail & distribution, and food & beverage was 4 years.

If empirical evidence is to be taken as truth, than this would suggest that 4 years is the right planning horizon for your supply chain. But is it? While the organization does need flexibility and the ability to change direction quickly if the market shifts, does that mean the entire supply chain needs to be reinvented every 4 years?

Product life-cycles are shorter than they used to be, but will the organization be producing completely different products in only 4 years? Or simply bigger, better, badder versions of the current product. At an industry level, most product categories have lifespans of decades … or longer. The basics offerings in any electronics category don’t change that often. CRT TVs lasted decades. Cell phones were primarily analog for about a decade. Than they were primarily digital for another before the modern smartphone came along, which will probably not change much (except with respect to the feature/function/performance classifications) for another decade. The technology for packaging food and making clothes changes very little from decade to decade. Even if the products themselves change rapidly, the production technologies change slowly and the dominant suppliers tend to retain dominance for years and relevance for over a decade, if not two. If a supply chain is properly designed, there’s no reason to think that the fundamentals will have to change every few years.

Furthermore, isn’t a long term strategic planning supposed to look forward five to ten years into the future? Maybe 4 is the new 5, but deeper thought would seem to suggest that this is a very-shortsighted view that will prevent the company from ever realizing all of the efficiencies and economies of scale that are available. This insight from one of the more forwarding thinking interviewees (who’s viewpoint was shared by about 10% of the respondents, who could be considered the leaders) sums it up best:

The review is continuous but the planning horizon is 7 years because the results couldn’t be reached in a shorter period.

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What Will The New Brazilian Consumer Mean to Your Supply Chain?

In supply chain, we are continually talking about how the BRIC: Brazil, Russia, India, and China, are going to revolutionize our supply chain by substantially decreasing our costs and, thus, increasing the overall value the supply chain organization brings to the business. For the most part, it hasn’t happened yet (as management costs, tariffs, delays, and expedited shipping costs usually serve to eat up most of the projected savings), although many companies, who took their time and did it right, did see enough savings and enough improvements to make it worthwhile. The real opportunities are going to come when the middle class in these countries reaches a point where the market is just as lucrative, if not more lucrative, then our home markets. Just like Japan, with its focus on electronics, achieved a rapid transformation over the last few decades to become the second largest consumer economy in the world until it was overtaken by China this month, the BRIC is on track to create a new middle class larger than the current global middle class in the next 15 – 25 years.

And while much has been written about the China and India Opportunity (as the 2.5 Billion people the countries contain are expected to contribute another 500 Million to 750 Million people to the global middle class), I haven’t seen much written about Brazil, which is still very respectable in size with it’s 8.5 Million square kilometers and 192 Million people. Plus, it’s current middle class, which is approximately 25% of the population, already earn between $1,000 and $3,250 US, which is on par with what the average middle class income in India (which is as low as $3,000 to $5,000 US by some estimates) and most of China.

Brazil, like any other country, poses a distinct market. As per The Brazilian Consumer: Opportunities and Challenges, Brazilians favour quality over low price, status over indifference, and interaction vs. seclusion in their way of life. The companies that have successfully reached the emerging middle class to date have focussed on quality, distinction, small stores (in lieu of hyper-centers), and exclusive distribution networks — all of which will have an impact on your Brazilian supply chains. But will the emerging Brazilian consumer have any impact on your supply chains for those of you sourcing from, but not selling to, Brazil? Probably not. But if anyone has any differing opinions, I’d love to hear them!

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