Sunday, January 29, 2023

Excellent Logistics Leadership Helps Drive Business Performance During an Economic Downturn

For the first time in my 40-year career commenting on logistics and supply chain management issues, they topped the political agenda and very visible on our TV screens at home. Since the first Covid lockdown in March 2020 we have seen empty shelves in supermarkets, queues of trucks on the M20 post Brexit, Evergreen container ship aground in the Suez Canal, and for the last six months the Russian army logistics and supply chain highlighted in Ukraine every day. During the fuel crisis 20 years ago, the Government asked the logistics providers what would happen if fuel ran out This was the conclusion

  • Day One – no newspapers, no just-in-time manufacturing, no fresh produce, no mail services or same day deliveries
  • Day Two – short shelf-life products bread, milk, eggs, run out. Most manufacturing runs out as inventory deliveries stall. Shortage of cash at ATMs, Construction slows down. Operations in hospital rationed as medical gas supplies
  • Day Three – most petrol stations run out of fuel. Fast food outlets run out of stock, busier pubs run out of beer, slaughter of poultry on farms.
  • Day Four – Manufacturing closes down, non-electrical rail services suspended. Bus companies withdraw off-peak services. Gas Water and other utilities disrupted by lack of fuel and spare parts. Ports stop unloading vessels and congestion builds up at the ports
  • Day Five – Half the car fleet is without fuel. 80% of the workforce is laid off. Stocks of grocery products run out. 95% of manufacturing stops. Non-food products depleted in shops. Problems from accumulation of waste

I would put it simply that most of the inflationary pressure in the world’s economy are supply and logistics driven; $20,000 box rates China to Europe, massive hike in fuel prices, shortage of drivers putting wages up by 25%; shortages of key components and commodities and the difficulty of businesses to forecast requirements has led to the unwillingness of businesses to invest in uncertain times.

Supply chain excellence is at the heart of any business. Supply chain management co-ordinates the internal and external networked resources of research and development and sales and marketing to drive VALUE through the business.  The supply chain strategy will complement and enable the overall business strategy to create top line growth.  Fundamentally for a business to succeed, supply chain execution will deliver bottom line results. This means that all the individual supply chain in a business needs to be optimised. The supply chain network must fit in with the strategic objective of the business.  Gone are the days of going to the logistics and supply chain team to solve merchandising and marketing problems. Treating the supply chain professional team as ‘a technical silo’ to solve delivery problems and your business will fail or be sub-optimal at best.

So, what does excellent supply chain management in a business look like? It will drive increased efficiencies and lower costs. In manufacturing this will lead to higher production rates and better inventory control. High street and online retail, smarter use of warehouse space, backed up by latest IT will increase customer and supplier satisfaction. Most importantly of all an improved customer experience.

Why is supply chain management in a business so critical in economic uncertain times? Supply chain management has become increasingly linked with strategic decisions of the business. Less shocks and no surprises. It means a business can more easily align its resources to prevent knee jerk reactions which can create even further damage to profitability down the line. Excellent supply chain management in a business moves it from a value delivery resource to a value creation strategic activity and without a doubt helps business leaders manage risk and develop opportunities in the extended enterprise.