Globalisation is starting to produce economic and political pressures – unemployment, social problems, sustainability dilemmas and so on – that will have an impact on supply chains in the years ahead.
When the World Economic Forum met in Davos, Switzerland, last month [January 2012], the big issue which had the world’s business A-list scratching their well-groomed heads was how to reshape their companies for an uncertain future.
Naturally, the topic of globalisation was being talked about – but with a new twist. The West’s original model of globalisation – outsource manufacturing and cheap clerical work to the developing world and import cheap goods from it – may not work quite so smoothly in the future. Globalisation is starting to produce economic and political pressures – unemployment, social problems, sustainability dilemmas and so on – which mean that the old model may need some reshaping if it is to deliver business benefits into the future.
But there are two very good reasons why supply chain professionals should start to do their own thinking about the big issues raised at the WEF. The first is that the WEF often initiates trends that ripple down into businesses over the years. The WEF’s rather grandiose objective is to “improve the state of the world” but it does act as a nursery for new ideas and start important debates.
It does no harm and plenty of good for supply chain professionals to step aside from the daily grind occasionally and think more deeply about the forces which are shaping the social and economic environment of the business they serve. You often find that the companies which achieve the enviable aim of “getting ahead of the curve” are the ones with thoughtful management trendspotters on their teams.
The second reason why supply chain professionals should focus on the big issues about reshaping globalisation is that they need to be more proactive in the debate, less reactive. That means supply chain having more of a voice in strategy making, even in those businesses where supply chain has traditionally been looked on as a support, rather than strategic, function.
And where there is management resistance to that happening, logistics pros can point out that they can bring fresh and vital insights to issues, such as sustainability and engaging diverse stakeholders, which are rising up many management agendas.
But there is nothing better for getting the board interested in supply chain’s contribution to the big debates as delivering practical solutions to pressing problems. And for many organisations, two of the most pressing are to cut costs in the face of a continuing economic downturn and to find new markets as old ones shrink or disappear (often in response to cost cutting by customers).
I’ve recently been looking at examples which address both of those issues. Take the question of cost cutting. An unlikely exemplar here is the UK’s National Health Service which is under instructions to slice £20bn from its vast budget by 2015. One target has been procurement.
In north London, a shared procurement service used by six NHS organisations cut £2.7m from costs in the first year by harnessing new technology to a more centralised buying strategy. The NHS Camden Shared Procurement Service moved 1,400 requisitioners in 200 locations from a paper-based to an IT system.
There are lessons here for other large organisations where subsidiary MDs or department heads jealously defend their own procurement territory. More focused control can consolidate demand and provide opportunities to manage suppliers better. But it can also devolve sensible choices to front-line staff about the products they choose to order. In the case of the Camden service, requisitioners had choices from 227 catalogues of items sourced by the procurement department.
But companies don’t only face the challenge of cutting costs. Because so many are cutting costs – including consumers who account for around 70 per cent of GDP in the advanced western Europe economies – businesses also need to find ways to seek new customers when old ones reduce their spend or drop by the wayside.
Pop-up supply chains
At the other end of the supply chain from procurement – at the retail interface with the customer – there is also growing innovation. Take the case of the “pop-up shop” phenomenon. As high streets have seen chains close – a clutch of new names in Britain’s high streets already this year – others are taking their place by opening temporary outlets to take advantage of seasonal or regional demand.
The approach calls for a new level of flexibility in the supply chain – the ability to respond to unexpected shifts in demand for products from one location to another. (Interestingly for supply chain professionals, one of the first “pop-up shopping malls”, Boxpark in east London, consists of retail units housed in old shipping containers.)
The central point in the broader reshaping debate is that the strategic shift in globalisation which is taking place will call for inventive and practical responses from the supply chain profession. The Davos thinkers may be the ones scratching their heads but it could be the supply chain profession that relieves some of the itches.
Peter Bartram is a business writer, journalist and author of 20 books.