Supply Chain Frontiers Issue #25. Read all articles in this issue
Ten years is a long time in the life of supply chain – whether in the past or the future. We asked two leading professionals, Jake Barr, Director, Manufacturing, Planning & Logistics, The Procter & Gamble Company (P&G), and Kevin Smith, Senior Vice President, Supply Chain and Logistics, CVS/pharmacy, to take a retrospective look at the supply chain field and the big challenges that lie ahead. They also offer some pointers on what it takes to carve out a successful career in supply chain. Both P&G and CVS are MIT-CTL strategic partners.
Looking back over the last decade, are there any notable developments or trends that supply chain professionals underestimated or did not expect?
BARR: Without question the shortening of product and related technology life cycles caught most supply chain professionals off guard. This trend used to be confined to high-tech industries but has now found its way into every corner of the commercial world, including the way companies offer services.
The effects can be seen on a number of fronts. For example, even in a globalized economy our responsiveness to markets has changed dramatically. Take our ability to create different manufacturing configurations. We can now build technical platforms that are better and cheaper than they were 10 years ago and with higher quality output – and we can put them anywhere in the world. I call it production on a skid. The shrinking of product life cycles is also driving the need to increase the skill sets of supply chain professionals, but more on that later.
SMITH: Security issues and business continuity have really come to the forefront over the last decade. These include the relatively remote threat of acts of terrorism, and a whole range of everyday disruptions such as labor stoppages and infrastructure problems, as well as weather events. There is also the impact of runaway energy costs which has been underrated for the past decade even though we got a taste of it in the seventies and eighties.
Another notable development we have under-leveraged is collaboration, which has taken off in the last 10 years. By that I mean service providers, suppliers, retailers, and distributors working together. I don’t think that we really appreciate how important supply chain collaboration has become.
Two other things I would like to mention are regulation and data synchronization. Attempts to regulate specific portions of the supply chain have been prevalent over the last 10 years. This is driven in part by today’s political climate, which at times fosters unrealistic expectations about what regulation can achieve. Data synchronization is one of the most underrated supply chain developments over the last 10 years. The industry initially underestimated how hard it would be to implement data synchronization. While there is still work to do in adopting the standards associated with data synchronization, I am optimistic that we will get there.
Looking ahead over the next 10 years, what important developments or trends might shape the future of supply chain management and in what way?
BARR: There is one fundamental that is going to shape the next 5 to 10 years-plus in supply chain: energy. In fact, I think energy considerations will rewrite business models around the world. Companies are going to question whether they can afford to provide product in certain markets with oil at $100 or more per barrel and with manufacturing hubs that are 2,000 miles away.
The second major development, which is related to the first, is the factoring of sustainability into supply chains. Companies will have to learn how to innovate differently; how to deliver the benefit the consumer is looking for and package, produce, and distribute product in ways that will be substantially different from what was acceptable five years ago.
Established strategies like just-in-time or produce-to-demand will still work, but they will be supported and managed in different ways. Companies will have to leverage capabilities, like the production and/or technology skills I described earlier, that can deliver product more efficiently at one-tenth the capital cost compared to a decade ago.
They will have to determine ways to maintain JIT delivery frequencies and still meet their objectives around the carbon footprint. They will also need to work with partners to accomplish these goals. I think we will see an explosion in distribution network design changes, and companies working with partners to develop more efficient manufacturing platforms. This will be good business for service providers such as FedEx, Ryder and UPS that have mastered the art of efficiently delivering scale through consolidation for optimizing frequency to market.
SMITH: The idea of business continuity mentioned earlier will become even more important in the coming years. So many things can go wrong; and not just high-profile incidents like terrorist attacks. There are countless, smaller business continuity issues as well as large-scale systems failures that can disrupt supply chains. For instance, the media is paying more attention to impending shortages of properly trained air traffic controllers. If that system breaks down, it will ripple through supply chains and cause major problems. Both small and large companies must stay on top of these potential issues and have plans in place to address disruptions.
The other major influence on supply chains will be the environment. Green efforts within the supply chain will present opportunities to do right by the environment while still allowing companies to be profitable. Up until now the prevailing attitude has been that companies can only be good environmental stewards by spending more dollars at the expense of their bottom lines, but this view is short-sighted.
A lot of the onus for a more responsible approach to the environment is going to be placed on supply chain management. This is where so much energy is consumed and so much real estate is tied up. CVS drives 45 million miles in order to make 364,000 store deliveries a year– and we’re just one company. In the short-term, we are coping with inadequate solutions such as low-sulfur emission diesel engines that put less carbon dioxide and nitrous oxide into the air but cost more and yield lower fuel efficiency. We can’t sustain such solutions for very long, but we will find better ways. Companies are going to look to supply chain leaders to spearhead environmental change.
Given all these changes and the challenges to come, what advice can you offer someone who has just entered the supply chain profession that could help him or her to lay the groundwork for a successful career?
BARR: Many don’t come prepared to act as a business manager as well as a consultant to the business leader. Today, a supply chain manager has to be a well-rounded business manager, because he or she faces so many different challenges. Here are three important ones: the shrinking of innovation and product lifecycles, the criticality of the supply chain to the success of the company’s business model, and the need to penetrate new markets and channels. A lot of people working in supply chain today are technically proficient but may not be able to lead, conduct, or consult to a president’s work team on what the right strategic choices are under particular circumstances. Mastering the technological component of supply chain blocking and tackling is no longer good enough. It’s not just about running the transactional supply chain, it’s about running a supply network that enables market penetration level of X, over a tightly defined period of Y, to make Z amount of money – and then to be able to efficiently transition into the next business.
There are a number of ways in which we can fill these skills gaps. I would counsel that one of the first is for the profession to gain a better understanding of the pipeline of talent that we all recruit from. We need to make sure that aspiring graduates are exposed to a diversified menu of courses. This includes non-technical skills such as financial acumen, options and trade-off analysis, as well as team building or collaboration across disciplines – while they are concurrently acquiring technical skills. In addition, new entrants need more options for improving these skills at a professional level.
SMITH: People entering this business need to think more about the big picture. People tend to get bogged down in their functional jobs and forget to look upstream and downstream at what they are doing and how that actually contributes positive value to the enterprise. In the final analysis, supply chain management is about the customer and not how efficiently one aspect of the job is completed.
The educational system has helped to raise awareness of supply chain as a profession. We now have schools that specialize in supply chain programs. Twenty years ago, most people, me included, became supply chain managers by accident. It was a job, not a career. At that time, industry conferences were functionally focused on themes such as how to lay out a warehouse. This is not the case today. I would advise new supply chain professionals to get a broad education, but to also remember that there’s nothing like on-the-job experience to get an accurate idea of what supply chain management is really about.