It has been two years since a surge in shipping delays and freight costs rocked the global economy and the waves are still being felt. So economic headwinds remain, challenging supply chains and increasing inflationary pressures and sourcing goods. In response, businesses must be agile, and develop robust resilience strategies.
Malcolm Harrison has over 35 years of expertise across the food and drink supply chain, including leading roles in Mars Confectionary, Pedigree Petfoods, Bass Brewers and Britvic. The key messages from his session include the need to understand supply chain bottlenecks, focus on resilient supply chains and increase collaboration even amongst competitors to tackle the biggest challenges.
1. Understand your bottlenecks
Understanding your weaknesses can help you to mitigate your risk. PwC’s 2021 Global Crisis Survey revealed 95% of business leaders reported that their crisis management capabilities needed improvement.
Organisations can reduce their exposure to the effects of risks by embedding innovative solutions across all business practices. Digital processes and technology can help find the single points of failure in supply chains which is vital to understanding where particular risks are embedded. This could include a focus on early intervention to help business to be more proactive and minimise the effects of disruption. Examples of this could be predictive analysis through the use of data, real-time operational intelligence or looking at alternative sourcing options for components.
Understanding potential points of failure is only possible with the right skills. Malcolm refers to ‘skills fit for the future’ including category management, contract management, negotiating and supplier relationships. The CBI continues to call for the UK Government to create a skills system that is responsive to economic need, allowing firms to upskill current and returning employees, and provide the skills needed to manage new technologies and innovations.
2. Focus on resilient supply chains over lower-cost supply chains
In a high cost pressure environment, prioritising the resilience of supply chains has never been more vital. Resilience, defined as the ability to anticipate, prepare for, respond and adapt to either incremental or sudden change, will ensure future productivity and growth. You will never buy a more expensive item than the one that fails to turn up.
CIPS research with Deloitte found ways in which business can shore up their supply chain resilience. Examples include:
- Moving away from single to dual or multiple source, or diversification of supply and production
- Outsourcing or insourcing operations
- Restructuring procurement and supply chain operations
- Increasing procurement and supply chain visibility and transparency
Diversification is one example of a resilience mechanism. By diversifying their sourcing, UK organisations can take steps to re-orient the international profile of their supply networks. This helps them to become more competitive, increase their range of offerings to customers and reduce their reliability on specific sourcing streams. CBI economic surveys reveal that businesses continue to favour supply chain diversification and higher stock levels in response to ongoing supply chain disruption.
While measures towards resilience may not always be lower-cost, delivering value must be the priority. Value is not just about cost, but quality and on-time delivery, as well as social value where supply chain choices can contribute to economies and communities.
3. Increase collaboration to tackle the biggest challenges
Dealing with society’s biggest challenges, including the threat of cybersecurity, the net zero challenge and geopolitical tensions, cannot be solved by organisations acting alone. Use the expertise of others and lean on their guidance and support to reduce risk through collaborative networks.
Malcolm’s message on this was clear: Get started on building partnerships and strong relationships now and small, incremental change can make a difference.
Given that SMEs account for 99.9% of UK business and play a vital role in the supply chain ecosystem, collaboration means larger firms can engage with local SMEs on a number of levels. Paying promptly ensures the survival of smaller businesses and develops strong relationships between buyers and suppliers which benefits both sides. Buyers become ‘customers of choice’ when times are tough.
Also, companies tackling Scope 3 emissions by working together can work across large supply chains and help each other to identify and reduce these emissions. If organisations engage with suppliers, creating a roadmap of engagement to assess capabilities and risks, they can pinpoint where innovation can make a difference.
The CBI’s supply chain toolkit, led by the expertise of CBI members, includes advice and guidance to support future growth and international competitiveness.
Fit to Grow, one of the CBI’s headline projects, has resilience at the centre of its mission. Fit to Grow will support members dealing with ongoing uncertainty and economic headwinds in a constantly changing environment. It will bring together practical support and solutions, as well as best practice examples to navigate the current business environment.
For more information on Fit to Grow, contact Hannah.