As our readers are likely aware, June is turning out to a very active month for both market announcements pertaining to supply chain management technology, and to various technology provider customer conferences now being provided in online formats. The two seem to be intrinsically linked.
While this Editor is currently challenged in managing the ongoing volume of calendar events in addition to delivering client deliverables, I wanted to at least share some event highlights that I felt would be rather interesting as well as insightful to our readership.
Earlier this month we received an invitation to tune-in to a webcast sponsored by supply chain labeling technology provider Loftware. What especially caught our attention was a featured interview with a Harvard Business School faculty member.
This webinar was moderated by Robert O’Connor, President and CEO of Loftware, and featured Dr. Willy Shih, the Robert and Jane Cizik Professor of Management Practice in Business Administration, speaking to ongoing global supply chain management developments. Prior to academia, Dr. Shih had 28 years of industry experience primarily in the high tech and computer industry sector and currently teaches operations management concepts to Harvard students and alum.
In a series of far-reaching questions, Dr. Shih observed:
That the COVID-19 disruption began with a supply disruption shock, primarily in China, and later moved to subsequent added supply and product demand shocks as the pandemic spread to broader regions and countries. The disruption was far reaching with many business and industry implications for months to come. He utilized the analogy that the disruption lowered the level of oceans and exposed the rocks, namely supply, transportation and logistics network exposures and vulnerabilities, which caught the attention of senior business leaders as well as company shareholders.
Dr. Shih went on to relate developments to ongoing global geo-political tensions that invariably impact multi-industry supply chains. To the notions of shifts toward increased domestic or regionalized production, beyond emergency healthcare delivery and other deemed emergency needs, Shih was less optimistic: “If this happens, companies will confront higher costs. The need for higher levels of automation will take more time.” He added that it took China 20 years to build an end-to-end high-tech supply network ecosystem within that country.
Speaking to vulnerabilities and how supply chains responded to unprecedented disruptions, and similar to a prior published Supply Chain Matters commentary, the virus exposed the vulnerability of trying to manage just-in-time inventory flows across global supply chain locations. However, Dr. Shih was able to provide the C-Suite cause and effect implications, namely the financial and shareholder pressures to maintain lean inventories and working capital investments leading to the vulnerability exposure.
Responding to the follow-on question as to how CFO’s feel about supply chain strategies, Shih was direct. He acknowledged that resiliency is now a board room discussion for many companies. However, the challenge are the notions of maintaining value for shareholders while CFO’s tending towards not willing to pay for duplication or resiliency in the supply chain, without a powerful business justification. Conversations then turned toward needs for increased automation as a means to compensate or buffer added costs for agility.
This Editor posed the question of whether added product postponement strategies are an alternative for nearshoring. In his response, Dr. Shih characterized this as a “light customization strategy” similar to that of fast fashion industry supply chain capabilities. He added that such strategies will likely be positively received but biased toward how much can product postponement be accomplished leveraging software and additive manufacturing technologies.
Supply Chain Matters Added Perspectives
We share the above highlights because of the notion that existing and future industry supply chain leaders should know that communicating and linking customer fulfillment and line-of-business strategies to supporting supply chain response strategies is critically important.
If one accepts the premise that HBS faculty educate and advise current and future C-Suite and line-of-business leaders, then Professor Shih’s comments provide meaningful context for the current and post COVID business leadership environment.
On the one hand, the C-Suite and board room attentiveness to the critical importance of the supply chain to business outcomes has reached its peak of recognition and awareness. On the other hand, communicating the tactical and longer-term strategic strategies of where we go from here must take on broader business perspectives:
- How much is tolerable risk, and in what industry, geo-political and unknown dimensions?
- What does added supply chain agility and resiliency equate to customer requirements, and in consequent people, process and advanced technology investments, and how does that translate to required future business outcomes?
- What is the best, most optimistic, or most prudent timelines required?
- How much should we own, contract for or outsource in the post virus business environment of constant uncertainty?
- How does the supply chain sense abnormality faster, provide meaningful business context and risk assessments, and respond quicker to such events.
As this author has often stated: The good news is that supply chains are now recognized as one of the most critical elements of customer, business and agile performance. Supply chain strategies, tactics and response mechanisms absolutely do matter. All of the heroic efforts of multiple supply chain management professionals are being recognized for their business value and contribution.
The not so good news how are you, our current and future supply chain leaders, going to step-up to ensure that any added disruptions will be managed with more agility and responsiveness, while meeting shareholder expectations. That is not to be perceived as above my pay grade, or beyond my function, but rather, how can you do your part to communicate, manage and perform in both the vernacular of end-to-end supply chain needs spanning multiple companies and respective networks, and in the response of the broader business picture.
The most agile and resilient supply chain equates to overcoming functional obstacles that span procurement, planning, customer fulfillment manufacturing and logistics, and how each is integrated with a cohesive framework of agility. It is about providing a broader perspective toward understanding the elements of risk and the needed people, process and technology investments supporting the business needs for being more responsive. We advocate that it requires the ability to educate, inform and counsel horizontally and vertically across business, partners and supporting value-chain ecosystems.
Supply chain management has reached business strategy connotation. Advocate in broader business dimensions and implications. Educate as to tradeoffs, scenarios, and likely outcomes.
Crisis indeed leads to opportunity.
© Copyright 2020, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.