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| Lee Glendon CBCI Head of Research and Advocacy |
Having identified some of the drivers of complexity in
supply chains in the first part of the roundtable report, how are organisations
dealing with the challenge?
In dealing with the challenge of multiple tiers in the
supply chain, there was common agreement on the need to gain better visibility
but divergence of approach in practice. Some organisations were looking
at better methods to manage tier two supplier relationships, while others
recommended that the best approach was to work with tier one suppliers and get
them to work with their suppliers in turn. In the case of one large
retail organisation, they worked through their supply chains to the source
applying a consistent code of expectation in terms of product quality and
integrity throughout. It was recognised that this was a very resource
intensive process. However, it was an embedded practice, so for them it was not
a case of having to justify the investment each time; an enviable position in the
eyes of most of the roundtable participants.
The discussion moved on to the challenge of managing 10’s of
thousands of suppliers and there was consensus on the need to focus efforts on
key suppliers and key supply chains. It was recommended that filters are applied
to provide focus – these filters should be based around criticality in the
sense of ‘would failure of this supply chain quickly stop my organisation from
being able to carry out its key activities, and how quickly could they be
replaced’ and secondly around risks or threats that might cause disruption,
such as the supplier’s financial profile, the health of the industry in which
they operate, their locations and consequent exposure to risks as diverse as
flooding, earthquakes and geo-political instability. These filters
help generate a ‘shorter-list’ to scrutinise. Another approach favoured
by many at the roundtable was to use procurement ‘category management’ to
breakdown suppliers into common supply groups and then perform risk profiling
on this basis.
For those suppliers identified as key to the organisation,
the favoured approach was to seek to build closer relationships at executive
and operational levels with the objective of improving communication and
co-operation and thereby reduce the number of ‘surprises’. For one
organisation, this took the form of running workshops on business continuity
and running joint exercises. Toolkits were provided free of charge and
their business continuity plans were shared to help get alignment. They
would also recommend that supplier staff joined institutes such as the BCI to
develop capability and drive programme improvement. Interestingly, one of
the unintended consequences of this deepening of the relationship, is the
difficulty of exiting such relationship, as it would mean investing a
considerable amount of time bringing on board a new supplier to get to the same
level of understanding.
Some organisations were concerned about being overly onerous
on their supply network, especially those operating in sectors where there are
a limited number of suppliers. One person noted that they had experienced
suppliers not wanting to do business because the compliance requirements did
not make it worthwhile. In such cases, purchasing organisations are
co-operating to reduce the burden on their suppliers through articulating
common requirements.
Following a good discussion on approaches to deal with the
consequences of increasing supply chain complexity, the ‘wish list’ of
participants included the need to gain a better understanding of ‘what supports
the supply chain’ and mapping out supply chain networks. Others were
looking for a more dynamic set of indicators that would flag signs of
difficulty and an impending risk event in the supply chain. Another felt
that there was a need to consider ‘profit impact’ rather than spend in
identifying key supply chains. While one delegate felt there was a need
for procurement to drive risk conversations with suppliers and ensure due
diligence had happened. In this last respect CIPS is planning to develop
a number of educational and training resources to support development of its
members to meet the challenge.
The final thought from the discussion should go to the
‘what’s the return on investment’ question when it comes to investing in supply
chain resilience. For one major organisation top management
evaluates the value of investment in resilience in terms of how well it
prevented a problem and how well the organisation come out of it.
Quite simple really.
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