Monday, 25 March 2013

What’s driving supply chain complexity? Part One

Lee Glendon CBCI
Head of Research and Advocacy
In the BCI’s report Horizon Scan 2013, one of the key trends of concern identified by Business Continuity professionals was “increasing supply chain complexity”.  So on Tuesday 19th March, the BCI and the Chartered Institute of Purchasing & Supply (CIPS) convened a roundtable of senior supply chain, risk and business continuity practitioners from sectors as diverse as retail, manufacturing, energy, housing, construction and telecommunications to share experiences and discuss how they were dealing with the challenge.
If folk were hoping that complexity is something that will stop or slowly unwind, then they would not have got much comfort from the discussion.  

BCAW Roundtable Discussion 2013
Perhaps, the most important driver of complexity is the customer and the desire of businesses to develop the right supply chain to meet the needs of the customer.  For example, the supply chain required to be able to sell a product as “made in Italy” sets its own restrictions and risks that need to be managed.  
Many of the drivers of complexity have come about through conscious business decisions.  A number of organisations had decided to consolidate their tier one suppliers – while this simplifies the number of interfaces at tier one, what is has done has created many more tiers below the immediate supplier, reducing visibility.  Participants noted that they were now experiencing disruption originating at tiers five and even six!  
Another issue raised by a number of people was around the illusion of diversity that dual-sourcing can bring.  While many had introduced dual-sourcing in terms of immediate suppliers, some had found to their cost that at tier two or three they were reliant on a single supplier again.  This point opened up a wider discussion about how difficult it was to understand interdependencies between suppliers and that the term supply chain should perhaps be replaced by ‘supply chain networks’.
Some sectors were suffering from lack of communication around changes in their extended supply chain.  More than one participant commented that their suppliers would change the location of production or the people providing a service without informing them, so organisations would be caught out in finding that an event, for example industrial action, in one country affected them, even though they didn’t think they had any exposure to the event.
Representatives from the public sector provided an interesting contrast to their colleagues in the private sector.  Their driver of complexity was government policy which was requiring not supplier consolidation but increasing their spend with small and medium sized businesses, while this was sometimes managed through a large tier one supplier, there was a need to monitor the success of this policy and provide extensive training and development support for small businesses to work with government entities.
The consequences of redrawing the boundaries of organisations over many years through outsourcing were also flagged as creating challenges in that the suppliers often had more knowledge and expertise than the client. Some felt that too much intellectual power had been outsourced and one organisation stated that they were now bringing back in-house some of the higher skilled activities.
In concluding this part of the roundtable discussion, it’s much clearer why complexity is such a taxing trend for Business Continuity professionals and why it is so important to find an approach to manage it effectively. 
In Part 2 of this roundtable report, we’ll look at some of the techniques that are being used to manage complexity.

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