A new report by Vertice argues that just 18% of businesses have the budget and mandate to “optimise” their procurement processes.
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Optimising your procurement process could support innovation and reduce time to market. However, just one-in-six businesses are providing the necessary tools, funding, and support to optimise their procurement, according to a new report by procurement SaaS provider Vertice.
“Clear correlation” between procurement maturity and overall commercial performance
Vertice’s study surveyed 300 global procurement leaders, asking them to rate their business’ purchasing processes and also their business performance across 8 key metrics. These ranged from cost control and budgeting to the ability to maintain compliance. According to the report, a clear correlation emerged between businesses with a mature procurement function and those with a healthier overall commercial performance.
Of course, there’s a possibility that a number of other factors that contribute to a business’ success could also be at play, and that those factors could also encourage investment in better procurement processes, rather than better procurement being the root cause. Investment in procurement is not a guarantee of overall business improvement.
The problem is reportedly worse in the US than the UK, where Vertice’s report found that almost half of businesses (44%) are in the lowest maturity levels, in comparison to the UK where two-thirds of businesses (67%) are in the more advanced stages of procurement maturity with more reliance on automation, AI and integrations.
Procurement underappreciated in the “race to innovate”
Just under 40% of procurement leaders blamed their struggles to evolve and improve on the overall business’ “poor perception of procurement’s strategic value.” Vertice’s research identified what they call a “procurement innovation gap”, where companies who have invested the most heavily in advanced procurement capabilities are also the fastest to innovate.
These companies are seizing the competitive advantage by being 32% more able to implement new initiatives and 29% faster in bringing new products and services to market. Not only that, but the more mature a procurement organisation is, the better prepared it is to tackle complexities and disruption.
Businesses with the most mature departments were found to be faster to put innovation into practice than other companies, but only 1 in 6 businesses have reached this level. Meanwhile the remaining 82% of businesses — whose procurement teams rely instead on decentralised, reactive and manual procurement processes — all perform worse. By comparison, companies with the most advanced purchasing were found to experience a 27% jump in efficiency and ease of collaboration, a 22% improvement in budget control, and a 20% increase in an business’ ability to maintain IT and security compliance.
“Procurement is an important catalyst to business innovation; the secret weapon that often goes unnoticed. Quick, intelligent, integrated processes can equip teams faster, with safe and compliant tools, accelerating overall project timelines. But most procurement departments have been unable to mature their outdated, manual processes, throttling the business’ progress and reinforcing an unnecessary negative perception,” said Eldar Tuvey, CEO and founder of Vertice.
Supply chain 4.0 – where preparedness and opportunity meet in the digital supply chain
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Supply chains matter. One break in the link and manufacturers can be left with costly disruptions that bring the entire operation to a standstill – and the problem isn’t going away soon. According to McKinsey research, disruptions lasting a month or longer now happen every 3.7 years on average. Whether it is issues securing raw materials, a steep rise in shipping costs, labour shortages, geopolitical conflicts, or sustainability concerns, the pressure is mounting on manufacturers to diversify their supplier partnerships and introduce more flexible operations. For manufacturers determined to create more resilient supply chains, Andrew Newton, Business Central Consultant at Columbus UK, argues that a digital transformation of supply chains will be integral to the industry’s ongoing survival.
Industry 4.0 has been the main driving force behind recent supply chain transformation with the introduction of IoT technologies such as cloud, data analytics, and AI throughout the manufacturing ecosystem. This includes smart factories that enhance manufacturing with Industry 4.0 tech and smart products offering internet-based services.
It’s now time for the supply chain to step up to the 4.0 digital plate. Market leaders, particularly in the automotive and electronics sectors, have already launched digital transformation initiatives to establish flexible and high-performing supply chains. And manufacturers of all sizes can learn from their example on how to achieve sustainable change.
When disruption is constant, an organisation’s preparation for supply chain changes will provide a significant competitive advantage. From effective data connectivity to reshoring operations, operationalising AI, and implementing a long-term sustainability agenda – successful manufacturers must be able to incorporate these factors into supply chains to drive innovation and redefine how products are created, developed, and delivered to meet evolving consumer demands.
Unearth actionable findings within the data haystack
Many businesses now have extensive data archives spanning several years, including substantial sales orders and operational performance records but the ability to extract maximum value from this data remains a common challenge. Manufacturers want to establish robust connections with shop floor assets to unlock enhanced operational efficiency and make more informed decisions. However, many lack the data-related skills to successfully link their machinery or manage the influx of data streams from sensors.
This is where the introduction of business intelligence dashboards with Supply Chain 4.0 can offer real-time production insights to inform decisions, boost efficiency, cut costs, and refine product quality.
The convergence of operational technology (OT) and information technology (IT) adds to the data challenge, particularly where legacy equipment is still in use. It is important to recognise that the solutions being implemented require tailored approaches due to the unique demands of each manufacturing organisation. Developing applications within a business can be tricky, with not every business having the in-house data skills to do this.
Custom applications that don’t require extensive coding expertise can address this digital skills gap. Versatile solutions that combine low-code services, self-service analytics, and automation for instance, can make it easier for manufacturers to create applications that precisely align with their specific needs, boost efficiency, and innovate in the process. The establishment of a reliable data environment with Supply Chain 4.0 ensures that manufacturers can enhance decision-making and operational efficiency, all while reducing costly errors.
Operationalise AI to stay one step ahead
AI has left a mark on every industry and when it comes to the manufacturing landscape, the story is no different. Already many businesses are using AI tools to process real-time data from shop floor sensors to provide manufacturers with immediate insights and action, especially if quality measures breach thresholds. But the capabilities of AI don’t stop at detection.
Manufacturers must consider many factors in production and delivery, such as demand versus capacity and how much materials cost along the supply chain – and this is where unsupervised AI can be a useful tool for risk identification and market trend forecasting.
For instance, AI can suggest preferred suppliers to purchase from based on their supply chain history or issue alerts for impending weather events affecting supply chains. Social media analytics enabled by AI can also be used to project patterns to better understand where the market is heading but it can’t fully predict the future. Instead, the role of AI with Supply Chain 4.0 is to help manufacturers identify shifting consumer interests and trends, spot market trends relating to offerings or brand, and forecast waning or growing interest in product types.
I want it now! Proximity sourcing can help meet customers’ changing expectations
As supply chain disruptions become part of the new business environment, it’s time for manufacturers to end the reliance on disparate and siloed operations and instead look to nearshoring as the answer.
Customer expectations around delivery times are changing, with 62% of UK consumers now expecting next-day delivery when ordering online – an expectation that traditional offshoring business operational models now struggle to match. Yes, regional or local supply chains can be more expensive and add another level of complexity, but they do allow for greater inventory control and bring the product closer to the end customer, which reduces overall lead times. This reduction with Supply Chain 4.0 ensures that manufacturers can promote higher customer responsiveness and allows for constant improvement and innovation based on consumer feedback.
Nearshoring also provides an opportunity to clamp down on miles covered and will help manufacturers introduce a circular approach to operations. With over 4 in 5 UK adults recognising their role in lessening their environmental footprint, it is clear that the manufacturing industry needs to mirror this popular attitude – and technology will play a key role here. Automation techniques for instance can improve traceability and visibility over the entire product line, highlighting how businesses use and waste materials, along with how they can reuse products for better forecasting and reduce fossil fuel usage and pollution.
Particularly in the food industry, conscious consumers will base their buying behaviour on transport miles and the environmental impact of the product’s journey. If manufacturing businesses are able to clearly share this information with transparent supply chains, they will not only open themselves up to a larger customer pool but will also play a major role in tackling environmental challenges in the industry.
Long-term commitment to sustainability goals
Nearshoring is certainly one way that manufacturers can become more sustainable but with customer sustainability expectations rising, companies now have to show a long-term commitment to creating greener supply chains.
Many businesses are making efforts to report on internal sustainable efforts such as energy consumption but extending reporting down the supply chain poses challenges, such as effectively reporting on a supplier’s energy usage. To achieve a comprehensive sustainability profile, this reporting must span the entire supply chain.
Supply Chain 4.0 brings sustainability reporting tools that provide comprehensive tracking and analysis of environmental and social impacts, which will enable manufacturers to make informed decisions, ensure regulatory compliance, and communicate sustainable practices transparently. Manufacturers are looking to achieve this connectivity, particularly in linking shopfloor equipment usage with sustainability goals.
Leading organisations are pushing for data standardisation among their supply chain suppliers but this brings its own set of pros and cons. Increased standardisation can make the supply chain more efficient and easier to review, potentially reducing a company’s risk. However, there’s more work needed to establish this standardisation.
As public and regulatory interest grows, having a clear view of supply chain processes will become even more important. In the short-term, expect leading companies to keep investing time and effort to better organise their supply chain data.
Supply Chain 4.0 – where preparation and opportunity meet in the digital supply chain
Digital transformation is a long and complex journey but preparedness plays a key role in achieving optimal outcomes. Through the process of transformation, manufacturers can more effectively adapt to ever-shifting business conditions and evolving customer demands with Supply Chain 4.0, all while maintaining a competitive edge.
The issue remains that each manufacturer faces their own unique scaling challenges that require a calculated approach to processes, planning, and implementation to create a sustainable business model. Often companies have growth ideas but lack a clear path to achieve them. The identification of key supply chain trends will set apart the laggards from the market leaders
Businesses have been forced to navigate and adapt to these challenges to ensure continuity, limit interruption and reduce risk
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From Brexit to the pandemic and the current geopolitical conflict, the supply chain industry has faced a flood of challenges in recent years. This has caused disruption to supply chains. Businesses have been forced to navigate and adapt to these challenges to ensure continuity, limit interruption and reduce risk.
Alice Strevens, Director Human Rights and Social Impact, Mazars
As part of this, it’s increasingly important for businesses to ensure they have robust human rights due diligence processes in place. These processes support companies in their decision-making during crises, and help them identify risks in their supply chains. This ultimately protects them in both stable and unstable times.
Human rights and environmental due diligence provides a basis on which to address environmental, social and governance issues that impact supply chain resilience. Companies that respond to crises with an approach based on due diligence are more likely to protect their relationships with suppliers. Plus, they get to mitigate the impact on workers in their value chain. An example of this is during the Covid-19 pandemic. Many companies saw buyers abruptly cancel orders, request refunds in full and pause orders for months. With many suppliers facing reduced sales at the time, it led to questions as to whether businesses were working alongside suppliers. Or taking advantage of the circumstances to get reduced costs.
It’s important to learn from these lessons to build strong sustainable supply chain strategies. This will help businesses remain resilient both in stable times. And in the face of significant events. There isn’t a perfect formula. However, the concept of double materiality (i.e. considering sustainability matters from both the perspective of the impact on people and the environment, and the perspective of the financial risks and opportunities to the business) is helping businesses to assess sustainability-related risk strategically.
Supplier engagement will ensure long-term success
Building a sustainable supply chain for the long-term requires engagement and collaboration with supply chain partners. Long-term relationships can provide a basis to share challenging risks and impacts transparently. Human rights and environmental due diligence foregrounds the importance of engagement and collaboration to mitigate identified risks and build resilience.
The responsible supply chain strategy should be integrated into the overarching sourcing strategy and supplier engagement approach. Delivery against the strategy should be built into performance targets and incentives. Regular reviews of impacts, targets and KPIs should be conducted at board level. Making use of the latest technological developments, including assessing their risk for social/environmental concerns and measuring and tracking performance. This will help companies stay ahead and be prepared in their processes.
An evolving regulatory landscape calls for preparedness
Another important point to keep in mind is the legislative landscape. This is especially pertinent in the EU, as the rules will make previous voluntary standards now mandatory and will impact large companies. This includes those in their supply chain, including in the UK.
Companies should therefore look to base their strategies on the authoritative voluntary frameworks on conducting human rights and environmental due diligence. Primarily the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. This will set them up for meeting legislative requirements down the line. For example, Mazars and Shift co-wrote the UNGP Reporting Framework, which provides a framework for companies to adopt responsible practices, and manage human rights risks.
The future of supply chain is now
Ultimately, companies and suppliers should work together to ensure collaboration and a robust strategy which takes all parties into consideration. Listening to feedback and promoting good communication between stakeholders will ensure smooth sailing during the business-as-usual times. And the more tumultuous periods.
Implementing long-lasting strategies and creating resilience to risks will increase business’ market access and promote their financial value. Thus ensuring that they deliver quality goods and gain loyalty among suppliers.
Recent research conducted by InterSystems highlights a critical challenge within supply chain organisations in the UK and Ireland
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Recent research conducted by InterSystems highlights a critical challenge within supply chain organisations in the UK and Ireland: nearly half (47%) cite their dependency on manual processes for data collection and analysis as their primary technological hurdle. This reliance not only leads to inaccuracies and delays in accessing data but is also a significant barrier to the adoption of artificial intelligence (AI) and machine learning (ML), which almost one in five (19%) anticipate will be the trend that most impacts their supply chain.
Mark Holmes, Senior Advisor for Supply Chain, InterSystems
For AI and ML adoption to be successful, models must be fed healthy, unified data. This requires supply chain organisations to move away from manual data collection and analysis and adopt a robust data strategy to underpin their efforts. This data strategy will sit at the heart of AI and ML initiatives but will also play a bigger role in the business’ overall operational strategy.
Developing a smart data strategy
A smart data strategy should encapsulate three things: data collection, analysis, and integration into organisational operations. This is where technology like the smart data fabric comes in, helping supply chain businesses to do all three things and bring their data strategy to life.
Built on modern data platform technology, the smart data fabric creates a connective tissue by accessing, transforming, and harmonising data from multiple sources, on demand. In particular, smart data fabric technology allows supply chain businesses to leverage usable, trustworthy data to make faster, more accurate decisions.
With a wide range of analytics capabilities, including data exploration, business intelligence, and machine learning embedded directly into the platform, supply chain businesses will also gain new insights and power intelligent predictive and prescriptive services and applications faster and easier.
Once these solid data foundations are in place, supply chain organisations can begin to unlock the real potential of AI and ML to augment human decision-making.
Applying AI and ML across the supply chain
The use of AI and ML can deliver operational change across supply chain organisations, from improved demand sensing and forecasting, to optimised fulfilment. For instance, SPAR, the world’s largest food retailer consortium, has turned to ML to solve some of the difficulties it was experiencing in streamlining and optimising end-to-end fulfilment processes in stores across Austria.
Operating in the extremely fast moving food and beverage sector, and with more than 600 merchants in Austria, SPAR Austria required a better way to help managers of local stores control their inventory. It consequently deployed ML for real-time sensing of demand shifts to optimise replenishment and strengthen its supply chain network. This has significantly improved on shelf availability (OSA), demand forecasting, productivity, and time to decision. In turn, it also helped SPAR increase revenue and efficiencies.
ML can also be used for production planning optimisation, using different constraints including transportation cost, or component inventory allocation to improve fill rate and optimise product shelf-life, productivity, cost, and revenues. Additionally, with access to AI and ML-driven prescriptive and predictive insights, organisations will be able to reroute or resupply at the drop of a hat, helping to maintain operations, achieve on-time in-full (OTIF) metrics, and ensuring customer satisfaction.
The automation and optimisation of these different processes also has a material impact on those working in supply chain operations. It transforms their work from reactive to proactive efforts. With less time spent on processing, more time is freed up for strategic thinking to improve fill rates and lower transportation costs, for example, making their role more rewarding and value-adding.
A strategic approach to AI-driven transformation
The transformative potential of AI and ML in supply chain management hinges on a smart data strategy that moves beyond manual processes to a seamless integration of robust data collection, analysis, and usage. By adopting smart data fabric technology, supply chain organisations can resolve their primary technological hurdles, transitioning from reliance on inaccurate and delayed data to leveraging real-time, actionable insights that fuel AI and ML initiatives. This strategic shift not only enhances operational efficiency and decision-making but also paves the way for predictive and prescriptive capabilities that dramatically improve demand forecasting, inventory management, and overall supply chain responsiveness.
The success stories of companies like SPAR Austria demonstrate the profound impact of integrating AI and ML into supply chain operations. These technologies both optimise operational tasks and empower employees by shifting their roles from mundane, reactive tasks to strategic, proactive engagements that add significant value to their organisations. By adopting a smart data strategy and embracing these advanced technologies, supply chain businesses will realise benefits that extend beyond operational efficiencies to include improved customer satisfaction, increased revenue, and a stronger competitive edge.
Without a critical supplier, entire operations for an organisation can come to a halt.
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Most modern organisations rely heavily on their supply chain partners to deliver their products and services. In the case of critical suppliers, organisations might not be able to provide most of their products and services without them. Resilience is key!
In some cases, without a critical supplier, entire operations for an organisation can come to a halt. For example, if the point-of-sale (POS) service provider is down at a retailer, they cannot bill their customers. Disruptions can strike unexpectedly, causing significant financial losses, operational challenges, and reputational damage.
Over the last few years, supply chain disruptions have gained much more executive attention due to Covid-19 and geopolitical conflicts, but they have been happening all the time even before.
In this article, Robin Agarwal, Head of Supply Chain and Operations Services at 4C Associates explores the importance of resilience in supply chains and practical strategies to enhance it.
Supply chain disruptions can happen due to many reasons, some of the most common are:
Financial disruption
A critical supplier suddenly going out of business is the biggest nightmare for senior supply chain executives. In most cases, the organisation should have alternate options, but it can take weeks, if not months, to ensure the return to business as usual. I have seen in many of my clients, procurement and supply chain executives spending weeks and weeks of dedicated time to resolve supplier bankruptcy issues while suffering significant disruption in their operations and financial losses.
Even smaller cash flow problems can take a toll on supplier performance, where I have seen suppliers not being able to fulfil the orders as needed as they are not able to pay on time for their operations and supply chain.
Reputational damage
Organisations today face intense scrutiny from the media, customers, and increased ESG regulations. A negative ethical or social incident (child labour, environment violations etc.) within your supply chain, especially when it comes out in public, has a huge reputational impact on the organisation. Executives have to react quickly in such cases and make changes to ensure integrity in their supply chain. During the horsemeat scandal I saw significant resources at my food manufacturing client going into reviewing the supply chain and marketing money going into assuring the customers.
Legal risks
Geopolitical tensions and sanctions can impact suppliers’ ability to deliver goods or risk. Organisations operating with global supply chains need to assess and mitigate these risks. Complex manufacturing organisations saw massive disruptions in their supply chain in the aftermath of Ukraine-Russia war. A major area of focus for organisations today is scrutinising their supply chain for dependency on BRICS nations.
Natural disaster
We all know what happened during the Covid-19 pandemic and how it prompted organisations to review their supply chain strategy. However, this is not a new issue. For example I was part of a risk and resilience project for a major automotive original equipment manufacturer (OEM) that was commissioned in the aftermath of Floods in Thailand paralysing their supply chain.
Tier –N supplier disruption
Most of the big suppliers have complex supply chains. Any impact on these Tier 2, 3 suppliers can create a significant impact as well, depending on how mature is your supplier resilience. This is the most common issue I come across. While most organisations consider these as their supplier problem, when happen, they need to bear the impact as well.
The list above is not exhaustive and there are many other complex issues, ranging from cyber disruptions to boats carrying goods stuck in the Suez Canal.
The false sense of security
Many organisations operate under the assumption that supply chain disruptions won’t happen to them. They focus on cost efficiency and day-to-day operations, neglecting proactive risk and resilience management. However, this reactive approach can be detrimental when disruptions occur as there is no framework to deal with such disruptions. In these cases, senior management has to spend a significant amount of their time while incurring higher costs. And longer time to recover than their competition.
Risk monitoring tools: Necessary but insufficient
There are many tools available to supply chain professionals today from getting financial assessments of their suppliers, sanctions watch, to supplier ESG ratings. These risk monitoring tools help identify potential issues, but they often lack real-time predictive capabilities. Organisations receive retrospective alerts, leaving them scrambling to respond. Additionally, false alarms can lead to decision paralysis.
At the time of Carillion’s bankruptcy, none of these tools were able to give any actionable warning to the companies. Also, most organisations have an extensive risk framework for onboarding a new supplier, but they don’t have an effective risk framework once the supplier is in operation. And dependency increases over time with warning signs, if any, ignored.
The case for resilience
Resilience is the antidote to vulnerability. While organisations cannot predict every risk event or control how the events unfold, it is in their gift to build adaptive capacity to withstand shocks and recover swiftly. Here are some of the basics for how organisations can enhance supply chain resilience:
Supply market resilience
Overreliance on a single supplier or a geographic location affects resilience. Organisations should consciously diversify their supplier base, even if it means higher short-term costs. Also, they should know the alternate suppliers that operate in the market and have relationships with them even if they have no immediate plans to change suppliers. It would not only enhance resilience, but also help improve cost.
Know your supplier
Understand the key dependencies with your supplier including within their supply chain. A mature organisation should know the key people to reach out to in case of disruption. And who they should even bring on board if the supplier goes bust.
Contingency Planning
Develop clear contingency plans for various disruption scenarios. These plans should outline roles, responsibilities, and escalation procedures. Ask your suppliers about their contingency plans and how they will ensure business continuity when various risk scenario unfolds.
Operational Resilience
Have Contingency-SOP instructions in place. Capture the specifications and know-how on what suppliers are delivering so alternate options can be switched on swiftly if needed.
However, just having contingency plans written is not enough. Contingency plans must be stress-tested for viability and supply chain and business stakeholders ‘fire-drilled’ through those plans, so they are aligned on key steps when disruption happens, and precious time is not wasted arguing about the next steps. True resilience is an organisational culture and employees at all levels should understand their roles during disruptions.
An ongoing process
As concluded by Christopher Jones, Procurement Director at Alstom, “Resilience planning needs to be an ongoing process, your supply base and requirements are constantly evolving. Having stress tested plans means that when disruption lands your teams are ready to act and deal with the issues.”
Supply chain disruptions are inevitable, but organisations can minimise their impact through resilience. By embracing proactive risk management practices and fostering a resilient culture, organisations can navigate disruptions with confidence and stay ahead of the competition.
While environmental and climate change used to be the main topic of discussion, human rights and supply chains have taken over
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In recent years, supply chains gained momentum as the leading social issue for companies to address. While environmental and climate change used to be the main topic of discussion, human rights and supply chains have taken over. This is partly due to the scandals and allegations of exploitative labour practices from multinational companies. But also due to the increased public awareness of the role companies play in determining the management of their own supply chains.
Social sustainability
The shift to focus on social issues acknowledges the profound impact that supply chains can have on our communities, labour rights, and societal well-being. Progress has been made in greening supply chains, but addressing social sustainability is a complex challenge yet to be achieved. A holistic approach that integrates social responsibility in a meaningful way into every aspect of the supply chain is the way to go. Then businesses can make a difference in the long-term.
Understanding the social issues in supply chains
First and foremost, we need to understand what the risks and impacts are in supply chains. These largely depend on the industry and the part of the world where a given company works. Social sustainability in supply chains encompasses fair labour practices, human rights protection, community engagement, diversity and inclusion, and ethical sourcing. Building social sustainability requires a more thorough look at these issues:
Labour related issues
Labour exploitation
Supply chains often involve complex networks of subcontractors and suppliers. This can lead to challenges in monitoring and ensuring fair labour practices. Exploitative conditions such as low wages, long hours and unsafe working conditions can be prevalent, especially in industries like manufacturing and agriculture.
Worker welfare
Ensuring the well-being of workers throughout the supply chain is essential. This includes addressing issues around child labour, forced labour, discrimination, lack of access to essential benefits like healthcare. Issues around exploitation and worker welfare are especially troubling in the gig economy or in sectors with seasonally contracted workforce.
Labour rights violations
Encompassing the restriction on freedom of association and collective bargaining. I have had several clients whose subcontractors employed workers without employment contracts, completely violating local labour laws.
Human rights risks
Ethical sourcing
Companies face challenges in ensuring that their supply chains are free from human rights abuses, modern slavery, human trafficking and exploitation. Ethical sourcing policies and enhanced due diligence can screen out suppliers who can’t comply with legislation.
Conflict minerals
Sourcing minerals from conflict-affected regions can contribute to human rights abuses and armed conflict. Companies can implement measures to trace the origin of minerals and avoid financing conflict or further contribute to human rights violations.
Indigenous rights
Many supply chains involve land acquisition for resource extraction in areas inhabited by indigenous communities. Respecting Indigenous rights, including land rights and cultural heritage is crucial to avoid access restrictions to natural resources.
Community and land-related aspects
Land displacement
Though, we previously mentioned land issues in relation to indigenous people, supply chains might lead to land grabs from other communities. Proper consultation, compensation and resettlement plans are necessary to mitigate the negative impacts on affected communities.
Community engagement and development
Enterprises have the responsibility to contribute positively to the communities where they operate. In certain developing countries, these manufacturing facilities provide the only ‘good’ jobs and communities rely on them economically. Engaging with the communities and supporting local development through CSR programs is a popular way for companies to build lasting relationships.
Strategies and Tools for Enhancing Social Sustainability
Achieving social sustainability in supply chains requires a multifaceted approach that integrates social considerations into every stage of the supply chain lifecycle. When I work with my clients, I always look at three key pillars: legal requirements, voluntary standards, and management systems.
Legal requirements
The EU’s adoption of the new directives specifically targeting human rights and environmental impacts in supply chains adds to the long list of legal requirements companies need to follow to address modern slavery risks and practice corporate responsibility globally. Most of the legislation is not prescriptive in terms of what needs to be done exactly. But they do require companies to enforce corporate level standards on suppliers. Some companies have started including standard contractual clauses that require suppliers to follow legislation and adhere to the company’s policy on social topics.
Voluntary standards and certifications
There is a wide variety of voluntary standards and certifications that companies can explore on their social sustainability journey beyond legal compliance. Plus, there are certifications on Fair Trade, SA8000, Ethical Trading Initiative (ETI) Base Code and decent work. There are also some more sector specific standards and certifications such as ethical fishing for food producers. It is up to companies to decide if they want to improve their practices by updating systems in line with best practices.
Supplier collaboration
Supplier collaboration through the provision of capacity building and training are great tools to raise awareness on labour rights, health and safety, diversity and inclusion and support suppliers to establish their own traceability systems. Typically, the supplier code of conduct is a legal requirement, but it could be extended to include more detailed expectation. These might include labour standards, human rights, environmental practices and ethical business conduct.
I would consider community investment through CSR programs as a voluntary initiative that allocates resources towards community development. It is ideally driven by the needs of locals and might include a combination of paying for services and providing training or education.
Management systems
Company management systems include the collection of policies, processes and management plans. Most of the policies are legal requirements as per my previous points. However, there can be additional policies focusing on areas where the company is exposed to risks in the supply chain. For example, HR policies typically include minimum age requirements.
Although, if the risk of child labour is relevant to the company, they might decide to have a separate policy on the prohibition of child labour. Following on from this example, a management plan would identify the risk of child labour. Whether it is for direct employees, contractors or subcontractors. This will describe a process to verify, record, audit and report on the age of workers. Supply chain specific management plans might include traceability and mapping, a supplier management plan, a supply chain risk assessment plan etc.
Stakeholder enagagement
The other important aspect of a company’s management system is stakeholder engagement and complaints management. Effective stakeholder engagement can facilitate the feedback mechanism from communities and workers in the supply chain.
Creating socially sustainable supply chains is not just a moral imperative. It is also a strategic business imperative in today’s interconnected world. If we prioritise social responsibility by embedding it into the operations, businesses can mitigate risks, enhance reputation and create value for society. Ultimately, building social sustainability requires a collective effort involving businesses, governments, civil society and other stakeholders.
We need to work together towards common goals to create supply chains. Not only to deliver economic value but also promote social justice, equity and dignity for all.
Ildiko Almasi Simsic is a social development specialist and Founder of E&S solutions which has developed the world’s first E&S specific research assistant – myESRA™.
Scope 3 emissions are widely considered as accounting for more than 70% of organisations’ carbon footprint. So, it comes as…
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Scope 3 emissions are widely considered as accounting for more than 70% of organisations’ carbon footprint. So, it comes as no surprise that at the heart of any businesses’ sustainability strategy is a required focus on their operations and supply chain. Choices in sourcing, production and distribution can dramatically impact a businesses’ environmental and carbon footprint.
The UK Retail industry is no different, growing customer awareness of ESG topics is increasing the focus on transparency and placing increasing pressure on businesses to measure, and be able to meaningfully communicate, the sustainable footprint of their products and services. An ability driven from within a businesses’ supply chain.
Despite the undeniable need for focus on sustainability, the effectiveness and advancement of many businesses’ sustainability strategies is unclear. In collaboration with the British Retail Consortium, BearingPoint sought to better understand the maturity of the UK Retail Industry. This provides an insight into how advancements can be achieved.
A structured assessment was conducted with 42 members of the British Retail Consortium across seven different business dimensions. These included Strategy; Supply Chain & Operations; Finance, Regulatory and Risk; Customer and Stakeholder Centricity; Data and Technology and Governance & Organisation. Participants were asked to self-report their maturity level against a 5-point Likert scale.
Indication of supply chain focus
Retailers are advancing sustainability efforts within their operations and supply chain. Comparison of the average maturity level for all BRC assessment participants found that operations and supply chain was the highest scoring dimension (a score of 3.37 out of 5). This indicates UK Retailers have started at the source, recognising that a more sustainable supply chain can drive benefits elsewhere. Benefits including regulatory compliance and enhanced consumer loyalty.
A need for data automation
To drive sustainable improvements, a comprehensive understanding of the as-is position is required. Accurate and reliable Scope 1,2 and 3 emissions data is thus, a critical enabler. BearingPoint found just under half (47%) of BRC survey participants were able to measure Scope 1, 2 and most Scope 3 emissions. However, retailers had not developed the capability to automate the collection of their sustainability data, with 87% reporting they manually collect data.
The challenges of measuring Scope 3 emissions should not be downplayed. Data availability and access across the entire value chain is dependent on the willingness and capability of suppliers to share information. Beyond this, differences in measurement methodologies present challenges of comparability and consistency.
Currently a reliance on industry averages, proxies and other sources address situations where primary data cannot be provided yet. This in turn compounds complexities and issues of data quality.
To best face these challenges automation is required with investment in a technology platform. Manually gathering Scope 3 emissions data in unfeasible, given how resource-intensive such an exercise would be where retailers typically have hundreds, if not thousands of suppliers.
As Retailers look to respond to increasing regulatory pressure, no doubt we will see Retailers reviewing their reporting capabilities to ensure compliance. This may in turn, drive investment in this area.
The power of procurement
Retailers are heavily reliant on their suppliers, requiring that their sustainability focus and practices are equally developed as their own ambitions.
Sustainable sourcing standards, considering social, economic and environmental factors as well as price and quality, should be fully incorporated into decision-making processes. Retailers have started to recognise this; almost 74% of respondents reported the presence of sustainability criteria in their sourcing proceses. Yet only 16% could say such criteria had as much weighting as price and quality.
To advance, equal weighting must be placed on sustainable factors in procurement. Retailers must be confident in ceasing business with those not meeting the criteria, encouraging action throughout their supplier network.
Improved sustainable transparency in the procurement process delivers knock-on benefits, enhancing retailers’ ability to track and communicate the sustainability of their products and services. An area retailers are struggling with as it was found that 44% did not know what percentage of their revenue was from sustainable products. This makes it harder to communicate comprehensive, and trust-worthy, information to consumers.
It’s all about collaboration
Opportunities for cost savings, process optimisation and resource efficiency create a strong case for suppler collaboration. In the face of sustainability issues, aligning goals and combining resources can enable a greater impact than can be achieved individually. Retailers should adopt the mentality that ‘We’re not Net Zero until we’re all Net Zero’. They should develop partnerships to share knowledge around aspects such as origin information for raw materials and detailed sourcing information.
Achieving traceability through supplier collaboration can provide broader business benefits. For example, in the luxury space, traceability from source-to-make can enable product authentication, allowing for greater brand protection. For Retailers operating in the grocery sub-sector, traceability can enhance a ‘farm-to-table’ narrative supporting consumer trust.
Around half (52%) of participating Retailers indicated they are working with suppliers to develop new or alternative products indicating a willingness to invest in innovation. Retailers should build on the trust developed through such initiatives, considering ways to address Scope 3 data challenges. Currently, just 14% of participants stated they collaborate with their suppliers to collect primary data for Scope 3 emissions calculations.
Recognising risk and retaining resilience
Clearly, sustainable sourcing, effective emissions measurement and strong supplier collaboration are key levers to drive sustainability within a businesses’ operations and supply chain. Yet, the reality of operating in the current global environment necessitates above all, a proactive disaster recovery strategy. Without which, retailers risk paralysing delays and shortages.
It is no secret that as average temperatures rise, global climate hazards such as heatwaves, droughts and floods will grow in frequency and severity. This will only increase the need for supply chain resilience. One only must look at recent Black Swan events, to realise how quickly business operations can be affected. Long-term risk mitigation planning combined with data and intelligence is increasingly important for businesses.
An understanding of risk can be effectively developed through an assessment of ESG trends, including global warming, the rise of artificial intelligence, data privacy, and cybersecurity topics. UK Retailers are yet to uniformly adopt such a strategy. Some 43% had not considered the impact of future ESG macro trends within a 10/20/30 year time horizon. While only 26% had performed a horizon scanning exercise.
Half of retailers (51%) have recognised sustainability-related risks and have generic mitigation plans however and such risks have not been quantified or assessed in financial terms. An inability to understand the quantitative impact of these risks limits the ability of any business to prioritise actions based on strong evidence.
Advancing progress
UK Retailers are on the journey towards establishing more sustainable supply chains. Indications are that it’s currently the business area where the most progress has been made. Four key recommendations can be made which will be crucial in accelerating sustainable maturity. All of which, have inextricable links to a businesses’ supply chain.
Retailers should accelerate investment in data and technology capabilities. Establishment of a supplier integrated and automated data platform will become the most effective method of closing the measurement and reporting gap for Scope 3 emissions.
There is a need to recognise the role of employees in driving accountability and transparency. Central to success is a retailer’s ability to cultivate a sustainable culture where individuals throughout the supply chain better understand their role in making sustainable progress. Individuals must feel empowered to lead and deliver sustainable initiatives. They need a clear understanding of how and why such action contributes to the strategic objectives of the business. Supply chain leaders should recognise their role in communicating the strategic priorities to all stakeholders.
Retailers should incorporate long-term risks and ESG macro trends into strategy. By incorporating long-term risks and ESG macro trends into their sustainability strategy retailers can better build resilience.
Finally, collaboration amongst all value chain players is required to advance transparency. Supply chains are only as sustainable as their weakest link.
In the highly complex and interdependent world we live in, an external mindset is critical to advancing sustainable progress. Ultimately this is how UK Retailers can develop greater confidence in their ability to face future supply chain shocks disruptions.
Soqui Calderon, Regional Director of Sustainability for Grupo Modelo and the Middle Americas Zone, reveals how the beverage giant is tackling sustainability from a procurement and supply chain perspective
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Our exclusive cover story this month is with Soqui Calderon, Regional Director of Sustainability for Grupo Modelo and the Middle Americas Zone. She reveals how the beverage giant is tackling sustainability from a procurement and supply chain perspective.
Grupo Modelo is a giant and a leader in the production, distribution and sale of beer in Mexico. Grupo Modelo is part of the Middle America Region (of the AB InBev Group) and boasts 17 national brands. Corona Extra is the most valuable brand in Latin America. Its other brands include: Modelo Especial, Victoria, Pacífico and Negra Modelo. The company also exports eight brands and has a presence in more than 180 countries while operating 11 brewing plants in Mexico.
Through more than nine decades, Grupo Modelo has invested and grown within – and with – Mexico. It has also generated more than 30,000 direct jobs in its breweries and vertical operations throughout the country.
Grupo Modelo, like many forward-thinking companies, is currently focused on a drive towards establishing a truly sustainable business. This endeavour is best exemplified in the Middle Americas Zone (MAZ), where sustainability efforts have been led by for the past five years by Soqui Calderon Aranibar, Regional Sustainability and ESG Director. Ambitious targets have been established for the region, but some remarkable achievements have already been made. As Calderon says: “For our team, sustainability is not just part of our business, it IS our business.”
Sustainability in the MAZ
The Middle Americas Zone is made up of several countries: Mexico, Colombia, Perú, Ecuador, Honduras, El Salvador, Dominican Republic, Panama, Guatemala + other Caribbean islands. Each territory is home to its own brands that are household names in their respective countries. However, Grupo Modelo’s Corona beer, manufactured in Mexico, is one of the top five best-selling beers globally.
Calderon’s regional role means she travels extensively throughout the territories, engaging with all their businesses and collaborating closely with their partners and suppliers. Her job? To effectively outline their sustainability goals…
Elsewhere we have some incredible names imparting expert insights from companies such as Amazon Business, Source Day, DHL and Marriott International and lots, lots more!
Landry Giardina, Sanofi’s Global Head of Clinical Supply Chain Operations Innovation & Technology talks data-driven performance, resilience, agility and operational excellence within the clinical supply chain area…
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It’s a packed issue this month. Here’s a roll call of just some of this month’s exclusive content…
Landry Giardina, Sanofi’s Global Head of Clinical Supply Chain Operations Innovation & Technology talks data-driven performance, resilience, agility and operational excellence within the clinical supply chain area…
Sanofi has a mission: to chase the miracles of science to improve people’s lives, and sometimes that means starting over with Plan B, Plan C, or even Plan Z. To do so means to work across the most complex disciplines to solve problems, to push the boundaries and not be afraid to take smart risks, and to dedicate everything to making life better for people everywhere. None of that happens without continuous and groundbreaking R&D and clinical trials to prove the medicines and vaccines it creates are safe and efficient for millions of people around the world. Which makes Landry Giardina and his colleagues’ jobs absolutely essential.
Werfen: Procurement and supply chain excellence through teamwork
Don Perigny, Director Supply Chain, at Werfen, a Specialised Diagnostics developer, manufacturer and distributor, reveals how a strong work culture can achieve incredible success during challenging times.
“It takes a village to raise a child,’ purports a famous African saying. It’s certainly a phrase that has struck a note with Don Perigny, Director Supply Chain at Werfen. For Perigny, the ‘village’ is Werfen’s supply-chain and procurement team, although he does extend the sentiment to Werfen’s wider network, including its suppliers and partners, who have kept the former professional sportsman busy at the company for over 21 years.
Werfen is a worldwide leader in the area Specialised Diagnostics for Hemostasis, Acute Care, Transfusion, Autoimmunity and Transplant. The Company also has an OEM division, focused on customised diagnostics. Werfen’s annual revenue exceeds $2bn with a worldwide workforce of 7,000, operating in approx. 35 countries and more than 100 territories through its network of distributors.
We join Perigny at his office in Bedford, Massachusetts. He’s just back from a week at Werfen’s San Diego offices, where he spent some quality time with his extended (work) family. And it’s soon clear that the people, the culture and what Werfen does for the world is crucial to Perigny and the wider workforce at the company.
Plus, we have expert-driven analysis on hot topics such as AI in supply chain, tackling global regulations and how to encourage more women into supply chain and procurement.
This month’s exclusive cover story features a fascinating discussion with Dhaval Desai, Principal Group Engineering Manager at Microsoft, regarding a massive and sustainable supply chain transformation at the tech giant…
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This month’s exclusive cover story features a fascinating discussion with Dhaval Desai, Principal Group Engineering Manager at Microsoft, regarding a massive and sustainable supply chain transformation at the tech giant…
In the past four years, Microsoft has gained more than 80,000 productivity hours and avoided hundreds of millions in costs. Did you miss that? That’s probably because these massive improvements took place behind the scenes as the technology giant moved to turn SC management into a major force driving efficiencies, enabling growth, and bringing the company closer to its sustainability goals.
Expect changes and outcomes to continue as Dhaval Desai continues to apply the learnings from the Devices Supply Chain transformation – think Xbox, Surface, VR and PC accessories and cross-industry experiences and another to the fast-growing Cloud supply chain where demand for Azure is surging. As the Principal Group Software Engineering Manager, Desai is part of the Supply Chain Engineering organisation, the global team of architects, managers, and engineers in the US, Europe, and India tasked with developing a platform and capabilities to power supply chains across Microsoft. It’s an exciting time. Desai’s staff has already quadrupled since he joined Microsoft in 2021, and it’s still growing. Within the company, he’s on the cutting edge of technology innovation testing generative AI solutions. “We are actively learning how to improve it and move forward,” he tells us.
We also have some inspiring and informative content from supply chain leaders and experts at Schneider Electric, Smart Cube, Protokol, Red Helix and Astrocast. Plus, expert predictions for 2024 from leading supply chain leaders, as well as a round-up of the best events this year has to offer!
This month’s cover story features Fiona Adams, Director of Client Value Realization at ProcurementIQ, to hear how the market leader in providing sourcing intelligence is changing the very face of procurement…
And below are just some of this month’s exclusives…
ProcurementIQ: Smart sourcing through people power
We speak to Fiona Adams, Director of Client Value Realization at ProcurementIQ, to hear how the market leader in providing sourcing intelligence is changing the very face of procurement…
The industry leader in emboldening procurement practitioners in making intelligent purchases is ProcurementIQ. ProcurementIQ provides its clients with pricing data, supplier intelligence and contract strategies right at their fingertips. Its users are working smarter and more swiftly with trustworthy market intelligence on more than 1,000 categories globally.
Fiona Adams joined ProcurementIQ in August this year as its Director of Client Value Realization. Out of all the companies vying for her attention, it was ProcurementIQ’s focus on ‘people power’ that attracted her, coupled with her positive experience utilising the platform during her time as a consultant.
Although ProcurementIQ remains on the cutting edge of technology, it is a platform driven by the expertise and passion of its people and this appealed greatly to Adams. “I want to expand my own reach and I’m excited to be problem-solving for corporate America across industries, clients and procurement organizations and teams (internal & external). I know ProcurementIQ can make a difference combined with my approach and experience. Because that passion and that drive, powered by knowledge, is where the real magic happens,” she tells us.
ASM Global: Putting people first in change management
Ama F. Erbynn, Vice President of Strategic Sourcing and Procurement at ASM Global, discusses her mission for driving a people-centric approach to change management in procurement…
Ripping up the carpet and starting again when entering a new organisation isn’t a sure-fire way for success.
Effective change management takes time and careful planning. It requires evaluating current processes and questioning why things are done in a certain way. Indeed, not everything needs to be changed, especially not for the sake of it, and employees used to operating in a familiar workflow or silo will naturally be fearful of disruptions to their methods. However, if done in the correct way and with a people-centric mindset, delivering change that drives significant value could hold the key to unleashing transformation.
Ama F. Erbynn, Vice President of Strategic Sourcing and Procurement at ASM Global, aligns herself with that mantra. Her mentality of being agile and responsive to change has proven to be an advantage during a turbulent past few years. For Erbynn, she thrives on leading transformations and leveraging new tools to deliver even better results. “I love change because it allows you to think outside the box,” she discusses. “I have a son and before COVID I used to hear him say, ‘I don’t want to go to school.’ He stayed home for a year and now he begs to go to school, so we adapt and it makes us stronger. COVID was a unique situation but there’s always been adversity and disruptions within supply chain and procurement, so I try and see the silver lining in things.”
SpendHQ: Realising the possible in spend management software
Pierre Laprée, Chief Product Officer at SpendHQ, discusses how customers can benefit from leveraging spend management technology to bring tangible value in procurement today…
Turning vision and strategy into highly effective action. This mantra is behind everything SpendHQ does to empower procurement teams.
The organisation is a leading best-in-class provider of enterprise Spend Intelligence (SI) and Procurement Performance Management (PPM) solutions. These products fill an important gap that has left strategic procurement out of the solution landscape. Through these solutions, customers get actionable spend insights that drive new initiatives, goals, and clear measurements of procurement’s overall value. SpendHQ exists to ultimately help procurement generate and demonstrate better financial and non-financial outcomes.
Spearheading this strategic vision is Pierre Laprée, long-time procurement veteran and SpendHQ’s Chief Product Officer since July 2022. However, despite his deep understanding of procurement teams’ needs, he wasn’t always a procurement professional. Like many in the space, his path into the industry was a complete surprise.
But that’s not all… Earlier this month, we travelled to the Netherlands to cover the first HICX Supplier Experience Live, as well as DPW Amsterdam 2023. Featured inside is our exclusive overview from each event, alongside this edition’s big question – does procurement need a rebrand? Plus, we feature a fascinating interview with Georg Rosch, Vice President Direct Procurement Strategy at JAGGAER, who discusses his organisation’s approach amid significant transformation and evolution.
We look into the need for a supply chain reset amidst inflation concerns, supply uncertainty, geopolitical issues and sustainability drives.
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Today’s supply chains are under pressure like never before.
Amidst inflation concerns, supply uncertainty, geopolitical issues and sustainability drives, the modern supply chain is having to think twice about the way it operates. It means companies are rethinking their supply chain strategy as well as the materials they source and the suppliers they work with. But such significant change doesn’t come easy and isn’t necessarily cheap either. Indeed, these factors have led to the necessity of a great supply chain reset. But this is no easy fix. It impacts the entire business model, from strategy, marketing and design all the way through packaging, storage and transportation.
Supply Chain Revolution
The first part of a supply chain overhaul is rationalising the portfolio. A major review of the product portfolio could reveal what is profitable to make or sell. In many industries, the combined effect of the rising cost of products, logistics, carbon charges for border crossings and frequent supply disruptions is increasing the cost-to-serve, reducing gross margins and making it unprofitable to hold inventory as a buffer.
Leading companies look for ways to improve communications among the supply chain, leadership, sales, and other commercial teams so that supply chain leaders clearly understand the trade-offs required to win in the market. The most successful companies are also involving other key stakeholders in the supply chain balance equation discussion, including finance, R&D, regulatory, sustainability, and procurement. This ensures everyone understands all the implications of the proposed overhaul, particularly what can actually happen.
COVID-19 disruptions pushed companies to reorient their supply chains around resilience. According to Bain & Company, management at one global apparel firm recognised early on that this would require a transformation that would have ripple effects across other parts of the business. In order to make the correct decision, it pulled together a cross-functional strategy team that included the heads of supply chain, finance, sustainability, consumer insights, and the product’s business unit. The team saw the supply chain redesign as an opening to not only boost resilience but also responsiveness and sustainability. It found reducing reliance on any one location would provide insulation from supply disruptions, and making its products closer to customers would speed up delivery and shrink the supply chain’s carbon footprint.
Design to delivery and beyond
Taking a detailed view of the entire product journey, from design to delivery and beyond, can also help to simplify sourcing, by standardising as many elements as possible, reducing the range and specification of materials used for production and packaging. This means fewer suppliers and components, which lowers the exposure to disruption. Companies should investigate whether it’s possible to use less material and/or more recycled content, and whether this can reduce total cost of manufacture.
Today, chief supply chain officers balance multiple conflicting needs of cost, service, sustainability, agility and resilience. As a result of increasingly international trade complexity and the need to manage a widening range of risks, it’s difficult to determine where products should be manufactured and sold. While the onshoring versus offshoring versus friendshoring debate remains, it is further complicated by issues such as sustainability, trade wars, agility and, increasingly, visibility.
In the era of mass offshoring, manufacturers have enjoyed the huge scale efficiencies of large manufacturing centres in low-wage countries. For a wide range of products, there is a now a considerable and visible shift to get closer to the end customer, to ensure a faster response to changing consumer demands, while avoiding tariffs, cutting logistics costs and reducing carbon footprint.
Looking ahead, supply chain has little choice. It can’t stand still and wait for the next black swan event to unfold – companies must be more resilient and fluid. A great supply chain reset may not just be a “nice to have” anymore.
We look into the supply chain production process of Easter Eggs and the journey to their final destinations in supermarkets
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Chocolate is arguably the world’s most popular sweet treat. Depending on who you ask, of course.
After, perhaps Christmas, it is the most common time for people to indulge in chocolate if they don’t do so anyway throughout the year.
And synonymous with Easter are the eggs themselves which are loved by children and adults alike all over the world.
The journey to Easter Eggs
The supply chain process is split into eight stages of production: cultivating, harvesting, splitting, fermentation, drying, winnowing, roasting and grinding. Following production, the supply chain process is extended further with logistics which is the final step to providing customers with their favourite seasonal sweet treat.
The journey actually begins with cocoa tree plantations being established which is done by scattering young cocoa trees amongst new shade trees or by planting the cocoa trees between established trees. These are planted in humid tropical climates, with temperatures between 21 and 23 degrees Celsius. This is consistent rainfall periods and a short dry season because these conditions provide good quality cocoa.
Each tree produces 20-30 cocoa pods a year which grows straight from the tree’s trunk and main branches. With this tree also yielding fruit, the crop is carefully pruned, and as a result, it is easier to harvest the cocoa pods. The next step is the labour-intensive task of harvesting the crop.
The harvest is a whole community affair on small West African farms. Large knives are then used to detach the pods from the trees and placed in large baskets on workers’ heads. The pods are then manually split open to remove the beans so they are ready for the two-step curing process. Each pod consists of between 20-40 purple cocoa beans.
The curing process consists of fermenting and drying the beans to develop the chocolate flavour. There are several fermentation methods but the most traditional is the heap method. This requires placing mounds of wet cocoa beans in between layers of banana leaves on the ground for between five to six days. Following this, the drying stage begins. This involves the wet bunch of beans being spread out in the sun or using a more advanced method of special dying equipment.
From plant to factory
Often, a lot of large chocolate brands then buy the cocoa through intermediaries. The beans are then packed into sacks ready to be exported to the brands processing facilities in other locations globally.
After arrival, the beans are cleaned and quality inspected before the winnowing stage takes place. The dried beans are cracked to separate the shell from the nib which is where the small chunks are used to produce chocolate. Afterwards, the roasting phase begins in which the nibs are baked at high temperatures reaching 120 degrees Celsius in special ovens. This is where the colour and flavour is acquired.
Subsequently, the next stage is grinding which creates the basis of all chocolate products. The roasted nibs are grounded in stone mills until a thick liquid chocolate consistency is achieved.
Chocolate to egg
The final step is creating the chocolate egg masterpiece by using highly efficient computer-operated technology which has been used since the mid-20th century. The molten chocolate is placed in heated egg molds which are rotated so there is an even thickness. Following this, the eggs are left to cool and then removed from the molds. Once cooled, the eggs are wrapped in coloured foil and packaged into individual boxes before being sent out for retail. The transportation and exportation throughout the various supply chain stages is vital being a seasonal product. This means they are heavily relied upon for their timings to deliver to large supermarkets and independent stores.
The second issue of SupplyChain Strategy is live! Features exclusive articles on TTI and McPherson’s
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Our exclusive cover story this month sees us speaking to Heath Nunnemacher, VP of Global Electronics Sourcing at TTI, who details the streamlining of its procurement function into a more efficient and effective value-unlocking enabler of business.
Techtronic Industries (TTI) is among the world’s largest manufacturers of mostly cordless power tools, outdoor power equipment, and floorcare products for both professional users and do-it-yourself (DIY) consumers.
TTI’s growth has been extraordinary – 13 years of consecutive double-digit gross margin improvement, in fact. In 2021 the company set a new revenue growth record just shy of 35%, more than twice that of its closest global competitor.
A significant driver of that growth is a strategic focus on disrupting industries through leadership in cordless technology. To do so, it requires advanced electronics and collaboration with the most innovative and biggest players in the industry. But with the chip shortage crisis looming on the horizon in late 2020, the organisation found itself challenged by a severe lack of visibility in the electronics procurement function. Enter Heath Nunnemacher, the man charged with transforming electronics procurement for the overall betterment of the business.
Not only that, but we also have a fascinating discussion with McPherson’s Supply Chain Director Mark Brady. The health, wellness, and beauty giant McPherson’s has a rich history of agile procurement through resilience and collaboration and Brady reveals its secret sauce.
Plus, we detail the important supply chain trends to look out for in 2023 as well as five top supply chain events coming up!
How can businesses cope with persistent, global supply chain issues and what are the concerns looming on the horizon?
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The Digital Insight speaks to Nirav Patel, CEO of Bristlecone (a supply chain company of the $19bn Mahindra group), who discusses how businesses can cope with persistent, global supply chain issues – and outlines the concerns looming on the horizon.
Our aim is to bring you the latest actionable insights into every issue relating to supply chain management from the world’s leading exponents. Each issue will lift the lid on the supply chain transformations taking place, right now, at enterprises across every sector and territory.
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Our cover story this month, features Thiago Braga, Director of Supply Chain Management at the City of Edmonton, Canada who discusses how improved operations are keeping the City healthy amid a range of challenges…
When Braga accepted his current role with the City of Edmonton in January 2019, a supply chain transformation program was envisioned that would evolve, and streamline, operations, while bringing in leading practices, standard practices, and best practices.
Upon his appointment, the workplace culture and environment were decentralised, more fragmented and so Braga got to work on creating a more unified approach. “Basically, my role is to support City operations,” Braga reveals. “My job is to keep buses and trains running as well as other rolling assets, like police or fire truck vehicles. Keeping the operations running and adding value while doing so would be the core.”
We also hook up with Karon Evanoff, Vice President, Global Supply Chain at QSC, to discuss supply chain transformation at the audio manufacturer. “I don’t think anyone – especially when you get to the senior management level – wants to sit in an office and just do spreadsheets every day,” Karon Evanoff says, when describing why continual learning is the number one driver for her.”
Elsewhere, we look at sustainability in the supply chain and why third-party risk should be a number one priority for businesses and chief supply chain officers.
We hope you enjoy the issue and tell your friends and colleagues!
The right time to digitalise the supply chain and reap the multiple benefits is now.
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As the global components shortage continues to challenge businesses, the value of a digitalised supply chain becomes increasingly clear. As the return to normal supply levels is still some way off and the situation is not expected to recover until 2023, the time to digitalise the supply chain and reap the multiple benefits is now. Whereas once supply chain digitalisation provided a competitive edge, it has since become an industry standard required to keep pace in an evolving industry with unpredictable challenges.
The benefits of digitalisation
Make no mistake, digitalising a business’ supply chain is not an easy task and is by no means a quick fix. It takes extensive research and planning before any updates can be made and once the transformation is underway, businesses are constantly learning and improving their operations based on feedback and data collected.
However, the business benefits of a digitalised supply chain validate the time and effort required to undergo a digital transformation of supply chain management.
Improved accuracy and efficiency are two of the most impactful factors of supply chain digitalisation. With real-time tracking and the removal of human error through software-led processes, businesses gain complete transparency of operations at every stage of the supply chain.
Software-led processes and the introduction of automation can also result in reduced processing time, greater operational productivity and maximised ROI. If the old saying rings true and ‘time is money’, then improved efficiency with greater accuracy can only be a good thing for business.
Greater flexibility and agility in responding to change is another valuable benefit brought by a digitalised supply chain. As many businesses have already experienced, supply and demand fluctuations can be rapid and circumstances outside of a business’ control can also affect supply chain management.
Though there will always be some element of the unexpected, technology such as automated stock management and predictive analytics support in the identification and handling of upcoming challenges. Armed with both big data and data specifics at a more granular level, businesses can make better-informed decisions, manage a crisis more effectively and identify areas of improvement and opportunity, at all times.
Making it happen
Every digital transformation requires a strategy and there are multiple achievements to celebrate on the way to reaching the end goal of holistic supply chain digitalisation. Identifying the areas which need priority attention will help structure your strategy. Your digitalisation plan should be a series of incremental improvements, as opposed to a sudden and radical change.
Auditing your existing supply chain is a sensible starting point for discovering opportunities for improvement, establishing strengths and weaknesses, and honing in on risk factors and threats to your operations.
Using the knowledge and expertise of IT professionals within your business and operations management staff who are familiar with the everyday running of each stage of the supply chain is the best way to gain a clear insight into which aspects of the chain are strong and which are letting you down.
Your operation management team will also be the ones using your new digitalised supply chain so gaining their insight, expertise and buy-in from the start of the project is highly valuable for future success.
Software Implementation
Software is at the heart of supply chain digitalisation and businesses are spoilt for choice when it comes to selecting digital logistics and supply-chain-management software (SCMS) that can oversee transactions, manage relationships with suppliers and streamline your processes.
There is a challenge however when it comes to deciding whether to build or buy your software solution.
Though ready-made software is the quicker and more simple option, out-of-the-box solutions may not meet the exact needs of your business and customised plugins or add-ons may be required to tailor your solution exactly as you require.
The alternative would be to build your own software in-house, which takes a huge chunk of existing resources, adding pressure to already busy teams.
Arguably outsourcing a custom-built solution from a reputable partner, who fully understands your pain points, risk factors and overall transformation strategy is the best way to gain a tailor-made software solution whilst keeping everyday operations running smoothly.
Harnessing the power of real-time data, automation and AI
Real-time data should be gathered at numerous points in the supply chain and can be gathered through a range of methods. From IoT devices to Radio Frequency Identification (RFID) and GPS, the data gathered by these technologies improves your supply chain connectivity at every step.
This data also facilitates increased visibility, improved security, cost analysis insights and accountability. From production to distribution to retail, IoT, RFID and GPS provide efficiency, transparency and data-driven insights to help businesses maximize ROI and continue to improve operations.
Automation and AI also support in the processing of payments, the rapid sharing of information, inventory updates, tracking information, omnichannel retail sales, email automation and setting new cost goals.
Although these technologies will never entirely replace the human touch, they can assist with repetitive, manual tasks and be the first point of contact for customers which can direct customers to the correct individual or department.
SCMS systems can integrate real-time data, automation and AI into supply chains on each level, streamlining processes to be more efficient, making more accurate predictions and protecting a business should something unforeseeable occur.
Realising Industry 4.0
Ultimately, digitalising the supply chain, however, your business chooses to do so is the realisation of the Industry 4.0 vision which hinges on leveraging digital technology without siloed data, processes and systems.
The pillars of Industry 4.0 namely IoT, big data and data analytics are the main aspects to be updated in any supply chain digitalisation and taking a comprehensive approach to digitalising the supply chain means data is no longer siloed and useless but is integrated into every business decision, under any circumstance.
A supply chain digital twin is also a helpful tool which provides a detailed simulation of an actual supply chain using real-time data and snapshots to forecast supply chain dynamics. From this, businesses can understand their supply chain’s behaviour, predict abnormal situations, and work out an action plan. The most effective supply chain management sees digitalisation throughout and can also call upon the use of digital twins to simulate the supply chain and enable the whole ecosystem to enjoy the same level of visibility and forecasting to inform every stage of the supply chain.
Though investment in time and money, the benefits of digitalisation are evident not only in reacting to unexpected challenges but also in the day-to-day running of a business which wants to keep pace and remain competitive in the digital age.
Author: Rasheed Mohamad, Executive Vice President of Global Operations and Business Technology, Alcatel-Lucent Enterprise
The list of drivers to better understand global supply chains grows every day.
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The list of drivers to better understand global supply chains grows every day. Motivations range from increasing operational efficiencies, the ability to better respond to supply chain shocks, managing potential reputational risks through the exposure of unexpected issues with suppliers, as well as preparing for the wave of in-coming supply chain legislation.
So how can better quality supply chain data help with these challenges?
At Open Supply Hub, we begin our work from a clear starting point: if there’s no shared understanding of where global facilities are located, there’s certainly no understanding of the environmental or social conditions at those facilities. Historically, supply chain data has been hidden behind a lock and key which has benefited very few. In addition to this, at even as basic a level as name and address information for global production facilities, the quality of data has been surprisingly poor. What this means is that bad practices can lurk in the shadows undetected – practices which contribute to some of the fundamental issues of our time, such as deforestation, child and forced labour and the impacts of climate change.
To break it down, supply chains today have:
Untrustworthy data: where data does exist, it’s riddled with errors and duplications and is not standardised. To put it bluntly: it’s a mess.
Inaccessible information: as alluded to above, data is locked away in private databases, instead of being made available to all. This presents a huge hurdle to collaboration.
Fee-based facility IDs: without freely available facility IDs, access to information is inequitable, which prevents truly seamless exchange between systems and stakeholders.
Gaps in coverage: when data lives in silos like this, it creates difficulties in gaining a clear understanding of global supply chains.
The key to addressing this is high-quality, open supply chain data. This term “open data” is a precise one, with a technical definition: according to the Open Knowledge Foundation, “Open data is data that can be freely used, shared and built on by anyone, anywhere, for any purpose”. There are two key elements to openness:
Legal openness: you must be allowed to get the data legally, to build on it and to share it
Technical openness: there should be no technical barriers to using that data.
Through this seemingly simple mechanism of opening up supply chain data, many of the challenges described above are quickly addressed. Launching in late 2022, Open Supply Hub will be an accessible, collaborative, supply chain mapping platform, used and populated by stakeholders across sectors and supply chains.
It will provide:
One common registry: cross-sector supply chain data collected in a single place, accessible to all.
Reliable, current data: all data contributed to the platform will be cleaned and deduplicated by a matching algorithm, with each facility assigned an industry-standard ID. Continuously gathering and refreshing data from industry has the added benefit of keeping that data current which, in turn, leads to…
Global collaboration: the user-generated dataset gives visibility into which organisations are connected to which facilities, accelerating collaboration.
We know this approach works from our experience of building the Open Apparel Registry (OAR). One compelling example of how the dataset has been used to highlight risks to investors came in the immediate aftermath of global production reopening after the pandemic lockdowns.
As India sought to re-open its economy and kickstart production, many labour laws were relaxed in the state of Uttar Pradesh, removing basic protections for workers relating to mandatory overtime, work breaks and more. Investors with holdings in major global fashion brands were able to run combination searches in the OAR to understand their exposure to risk in this area and adjust their investment strategies accordingly. Without access to this open data set, the ability to understand and divest from this investment risk would have been much more challenging during a time when global supply chains were in a constant state of flux.
As we look ahead to the raft of in-coming supply chain disclosure legislation, uncertainty remains high about what exact format these various reporting requirements will take. However, one thing that will not change is that data format and standardisation will be key to ensuring that the data being gathered and shared is of practical use to create change. If data is locked away in PDFs, tables embedded in websites or scattered between disparate databases, it becomes totally impractical to work with. The power of a centralised, open data repository lies in making data comparable, actionable and usable. That’s where creating change begins.
Author: Katie Shaw, Chief Programme Officer of Open Supply Hub
We list five vital books in procurement and supply chain strategy that are reshaping the way we work.
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We list 5 essential procurement/supply chain management books that are reshaping the way we work today.
Trade Wars, Pandemics and Chaos
How digital procurement enables business success in a disordered world
Dr. Elouise Epstein
Foreword by Len DeCandia
In our conversation with procurement leaders, this book comes up time and time again. Dr. Epstein is a digital futurist and Kearney partner with over two decades of experience working as a trusted adviser with major clients to develop digital procurement and supply chain strategies.
An in-depth look at how to strategise, evaluate and approach the fast-changing realm of digital procurement, Epstein’s book identifies how, more than any other enterprise function, procurement has grown from back-office cost control to strategic business partner. Of course, today’s procurement practitioners are also at the forefront of innovation, sustainability, and social responsibility, and so making changes by directing where and how enterprises spend their money is proving increasingly vital.
This book is a hugely trusted partner in establishing a blueprint for approaching the complexities of modern procurement and how and where to make smart technology investments.
Sustainability, Innovation and Procurement
Edited by Sachin Kumar Mangla and Sunil Luthra
The world is in a constant state of unprecedented change with rising inflation and costs, geo-political and energy crises plus the effect of climate change upon our lives and businesses. Sustainable procurement is the hot topic right now. Indeed, the pursuit of sustainable objectives through the purchasing and supply process, while balancing environmental, social, and economic objectives is a common challenge facing procurement and supply chain leaders. But worry not, as this book will help readers develop new contemporary knowledge about frameworks, innovative tools and techniques to achieve sustainability in public as well as private procurement practices. The book will enable scholars and practitioners working in the domain of sustainable procurement to improve the overall performance of the supply chain and further achieve UN SDGs, by making various decisionsat the planning and strategic phase of the business.
E-Logistics – Managing Digital Supply Chains For Competitive Advantage
Edited by Yingli Wang and Stephen Pettit
Unlocking value and streamlining processes is proving to be a driver for supply chain professionals with E-Logistics fast becoming a burgeoning function. Serving as the central nervous system for the whole supply chain enabling smooth information flow within, and between, organisations, E-Logistics offers myriad benefits and value. This new and updated edition provides the latest and most comprehensive coverage on digitalisation in logistics and supply chain and covers all transport modes, plus the role of ICT in supporting an integrated freight and supply chain network.
Buying technology is easy. Buying the right technology is much harder. While buying the wrong technology can be disastrous. With the rise of cloud services and the digitisation of all business units, procurement managers need to understand how to buy technology services in order to generate revenue, drive innovation and retain customers. The Technology Procurement Handbook provides a structured and logical view of the digital buying process, including invaluable advice on how to manage digital demand, prepare sourcing strategies, analyse the cost and benefits of proposed solutions and negotiate and implement comprehensive agreements.
The Technology Procurement Handbook examines the multiple streams of data that feed into the technology procurement process and includes case studies and extensive practical advice based on the authors experience from recent procurement projects.
Disruptive Procurement Winning in a Digital World
Edited by Michael F. Strohmer, Stephen Easton, Martin Eisenhut, Dr. Elouise Epstein, Robert Kromoser, Erik R. Peterson, Enrico Rizzon
There is no doubt that procurement has undergone a major revolution in recent years and one of the most fascinating off-shoots from this change has been Disruptive Procurement; a radical new approach to creating value and innovation by challenging the status quo in the entire product and service line. It requires going far beyond conventional desktop procurement to understand the value the company brings to its customers as well as the value that suppliers bring to the company. Disruptive Procurement Winning in a Digital World boasts a strong raft of contributors, with a wealth of experience across the procurement sphere.
To move toward Disruptive Procurement, companies need a holistic view and a complete new set of capabilities for staff in marketing, sales, R&D, manufacturing, innovation, and, of course, procurement. This will only happen if procurement is fully backed by the Chief Executive Officer and companies embrace digital tools that will help make procurement slimmer and smarter.
Disruption and uncertainty mean a myriad challenges face organisations ad the weakest link in the supply chain can appear quickly and unexpectedly.
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We live in unprecedented times and such disruption and uncertainty mean myriad challenges facing organisations. And the weakest link in the supply chain can appear quickly and unexpectedly.
Over the last two years, supply chain professionals have been hit by an unprecedented raft of disruptions. As we fast forward into the future, this trend shows no sign of abating. The chaos caused by the lockdown of the world’s busiest port – Shanghai – shows that the impact of COVID on global supply chains is far from a thing of the past. The Suez Canal blockage in March 2021 and the ongoing crisis in semiconductor availability are two other examples of how macroeconomic events can impact supply chains. Now, the Russian invasion of Ukraine and the sanctions it has triggered, have caused further major global trade disruptions. High global fuel prices and accessibility of other components are also affecting production and transport in many industries.
In Germany, Porsche, Volkswagen and BMW have all reduced output due to problems with the supply of wire harnesses from Ukraine, which are vital to the manufacture of cars. Russia is also an important source of many metals used in the aerospace industry and others in hi-tech and electronics.
Given all this disruption, it is little surprise that the concept of VUCA – which stands for Volatility, Uncertainty, Complexity and Ambiguity – has rocketed up the agenda for businesses determined to ensure products arrive with customers in the right place at the right time.
This is no trivial matter. The interruption of Ukrainian agricultural processes, for example, threatens the supply of wheat to several countries, and the production lines of many consumer goods companies. In extreme cases with political consequences.
Planning and execution
The myriad challenges facing organisations means that the weakest link in the supply chain can appear quickly and from unexpected areas. This gives organisations precious little time to pivot and build a blend of resilience and agility. It makes the need to shrink the time between planning and execution crucial as volatility continues, particularly in order to meet relentlessly high consumer expectations.
This is where supporting technologies come into play. As they look to strengthen their supply chains and make them more resilient, businesses should consider solutions using artificial intelligence (AI) to improve forecasting. AI can look at patterns across huge datasets that go far beyond human capability to write intelligent algorithms or analytics. Organisations are then able to proactively identify gaps or issues with more accurate demand forecasts, sales orders, material, capacity, shipments, and other elements of supply; with automatic alerts for any exceptions. This can then augment human expertise to help plan for the unexpected.
Organisations can go a stage further and better identify any weak or potentially weak links in supply by creating a digital twin of their end-to-end business flow. This is a virtual model that accurately represents the lifecycle of a physical supply chain using live and up-to-date data. Within a virtual environment where numerous scenarios and changes can be simulated without consequence, organisations are able to strengthen the physical supply chain’s agility and speed with tried and tested improvements.
The supply chain links at greatest risk of disruption are not the only ones that should be considered potentially weak and in need of attention.
Linear supply chain models need to give way to circularity, which allows for waste reduction and reusing and recycling of resources.
Putting sustainability at the centre of supply chain planning and decision making will add further resilience across all links, but also reduce reliance on hard-to-access and more scarcely available raw materials. It is a complex issue. However, ensuring sustainable practices would provide the resilience needed to help navigate all the challenges past, present and future.
Addressing weak spots
Supply chains are today going through major transformational change, which has been driven by a range of external challenges and emerging trends. There’s little doubt that 2022 and the years beyond will bring further hurdles. Organisations need to take action now to be best prepared for the unexpected. Particularly when you consider the increasingly interconnected nature of 21st century supply chains.
As circumstances change around organisations, they need to ensure that their supply chains continue to provide the goods and services to the end consumers that rely on them. Applying supporting technologies can enable them to shine a light on any weak spots and move quickly to rectify these, keeping the flow of products moving. Organisations can then ensure that every link is as strong as the other, future-proofing supply chain operations.
For CEOs, the importance of supply chains to their business has never been clearer. They are a key engine to business, so it is critical that they remain well-funded and at the top of the business agenda.
It’s an open secret: enterprises that want to effectively reduce their CO2 emissions need to first and foremost address their supply chain.
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It’s an open secret: enterprises that want to effectively reduce their CO2 emissions need to first and foremost address their supply chain. Up to 90% of a company’s greenhouse gas emissions originate from here. A new software-driven approach to tackle these emissions is developed in cooperation of O2 Telefónica and the startup The Climate Choice – with first results and breakthrough learnings.
It’s an open secret: enterprises that want to effectively reduce their CO2 emissions need to first and foremost address their supply chain. Up to 90% of a company’s greenhouse gas emissions originate from here. A new software-driven approach to tackle these emissions is developed in cooperation of O2 Telefónica and the startup The Climate Choice – with first results and breakthrough learnings.
O2 Telefónica aims to be net CO2 neutral by 2025 at the latest. The company has already reduced the CO2 emitted directly, in Scope 1, and indirectly through electricity purchases, in Scope 2, by 97 % since 2015. Now, the aim is to discover climate-related risks and find potential solutions in collaboration with their suppliers. This leads to the biggest corporate challenge of today: a structured climate transformation process along the supply chain needs structured climate data management. However, obtaining climate-relevant data along the supply chain and successfully engaging suppliers in decarbonisation efforts is not easy. Many questions arise: what are the challenges and risks, best practices, and opportunities to collect, validate and report this data?
A pioneering collaboration to collect climate-relevant data
To find an answer to all these questions, O2 Telefónica and climate tech startup The Climate Choice have set out to launch a joint climate data program. For this purpose, the telecommunications provider uses The Climate Choice’s software platform, to facilitate the efficient and effortless collection of climate-focused data from around 1,000 suppliers. The top 40 suppliers are also invited to carry out a software-driven climate rating in order to uncover potential for decarbonisation and to identify tailor-made fields of action. The qualitative and quantitative data resulting from this serves as the basis for a Scope 3 decarbonisation strategy for O2 Telefónica. The collaboration preceded a pilot project in which the individual climate maturity of selected suppliers was recorded and validated.
Using The Climate Choice’s new solution approach and software tool, O2 Telefónica was able to develop a transparent, scalable process for collecting comparable data on the climate maturity of its suppliers.
This data fuels The Climate Choice’s intelligent data platform and allows to obtain supply chain specific benchmarks, year-to-year comparisons and actionable reporting through dashboards, which ensures ongoing control of engagement results, core KPIs and aggregated metrics. This way one can shed light on the status of its supply chain decarbonisation journey. Find in the following our exclusive insights on this process.
From past performance to forward-looking metrics
To fully understand the decarbonisation processes of companies such as O2 Telefónica in Scope 3, we must first take a look at the data that companies need in order to fully align suppliers with their climate strategy. Typically, if you think about climate KPIs and metrics for climate action, you might think of CO2 emissions. Of course, this is not wrong, since the carbon footprint is among the most important indicators for measuring a company’s climate impact. However, its exclusive use for supplier decarbonisation is problematic for three reasons:
Availability is very limited.
Comparability is hard due to a lack of calculation standards.
Measured CO2 emissions are backward looking, so-called lagging KPIs, and only indicate what happened last year.
That is why it is crucial to look at forward-looking metrics, so-called leading KPIs. These metrics draw a picture of the direction the company will move towards over the next few years. Thus, they reveal if a company’s climate transformation is already happening and if yes, to what degree. It is therefore important to look at whether climate targets of your suppliers are being seriously pursued and if they are compatible with your own goals. Furthermore, you must know what governance processes are in place within the company, whether the company is managing climate-related risks and opportunities, and what data is already disclosed supporting this.
Author: Lara Obst, Chief Climate Office, The Climate Choice
