Supply chain managers bask in their extended moment

LONDON: Accustomed to crunch time and performing in a crisis, the world’s supply chain managers are having something of an extended moment in pandemic recovery mode.

Procurement experts were centre stage in the rush to secure alternative sources of household essentials, medical gear, raw materials and components to keep factories running when Covid-19 first struck.

Now chief executive officers are looking to those same managers for more strategic vision and ways to shock-proof supply chains for corporate survival.

From auto makers to food processors, manufacturers that have relied on a strategy of low-cost supplies and minimum inventories are rethinking such an approach given the combination of the pandemic, trade conflicts and harsher natural disasters.

The buzzwords now are flexibility and resilience. “This whole part of the equation has a higher prominence,” Alexander Lacik, CEO of Danish jeweller Pandora Group with about 7,400 outlets, said in an interview. The chief supply chain officer “is not someone I speak to just once a month,” he said.

When the coronavirus hit, it took some companies three to four weeks to understand the ripple effect on areas like procurement and logistics.

Those firms are now in the rebuilding phase, with one eye on what digital tools and other technology they need to stay on top when the the next crisis comes, according to Kristian Park, a risk advisory partner at Deloitte in London.

“There’s been a 50% increase in people coming forward who have realised they didn’t have the information they needed,” Park said. “As always with these things, it takes one seismic shift to change people’s perception of the risks.”

That’s the sweet spot of a chief supply chain officer, who is typically more comfortable with a broad focus spanning procurement, logistics, strategic alliances and managing costs, Park said.

Recent studies support a move to introduce more flexibility. Companies with a resilient supply network grow faster because they better adapt to shifts in demand, potentially boosting their order rate by as much as 40% and customer satisfaction by up to 30%, according to a study by Bain & Co.

Making its own jewellery in Thailand and owning shops across 100 countries means Pandora’s chief supply officer Jeerasage Puranasamriddhi has greater control. Yet the company still relies on air freight and some 200 suppliers. As the pandemic snowballed, the company’s initial response was to push more inventory to its shop premises in case one of the large centralised warehouse facilities went down, Lacik said.

Lacik is now reviewing his company’s setup, from procurement of materials to surging online sales. Where possible, having a single source for an input will be avoided and backup plans put in place.

Online sales are up as much as 300% currently, leading the Danish company to rethink its e-commerce strategy, and whether it could manage online sales internally rather than rely on a third party. It may also look at factories outside of Thailand, Lacik said.

Two decades ago less than 10% of companies had a supply chain director, according to Jan Godsell, a professor of operations and supply chain strategy at the University of Warwick. The number now is closer to 50%, with the role of a chief supply chain officer becoming more common in the past five years. — Bloomberg

“Covid-19 may have been a wake-up call to main boards of the importance of supply chains and hopefully it will accelerate the rise of the chief supply chain officer.” Jan Godsell