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Coronavirus and the end of the global supply chain

Coronavirus and the end of global supply chains
Coffee illustrates how complex supply chains have become ©MAURO PIMENTEL/AFP/Getty Images

Posted by Paul Simpson

Coronavirus has shown how fragile our cost-driven, just-in-time processes really are. With practitioners adapting to survive while planning more resilient systems for the future, will procurement ever be the same?

When the first container ship arriving from China at the port of Vancouver was cancelled in January this year, it didn’t seem particularly significant. By mid-March, when China’s struggle with Covid-19, aka coronavirus, had become so all-consuming that 30 more journeys had been cancelled, Vancouver’s port officials were facing a crisis of historic magnitude.

That consumer goods weren’t being unloaded from China as per the schedule was less of a concern than the fact that Canada, which usually filled those containers with lentils and peas, had two months’ worth of crops stuck in port (historically, roughly a third of Canada’s crops have been exported in containers). Imports were also disrupted: one local food company had to pay a premium for spices from Thailand which arrived a month behind schedule. Brazil’s coffee makers suffered too as the missing containers made it hard for them to ship their products to China.

The problems of countries and companies along just one shipping route indicate why some economists, notably Simon MacAdam at consultancy Capital Economics, are predicting a 20% dip in trade volumes this year. That is significantly worse than the last recession in 2009, when volumes fell by 13%.

The bottlenecks in Vancouver did not grab headlines in the same way as various countries’ difficulties in speeding up production of ventilator kits. But as Professor Tim Benton, research director of the Chatham House think tank’s energy, environment and resources programme, says, they remind us: “We have created a global supply chain that, for all its financial efficiencies, has very little resilience.”

Coffee is a case in point. One industry estimate, cited by The Economist, suggests that 29 companies across 18 countries need to collaborate to make “one humble cup”. That may, Benton observes, work financially for the companies concerned – and for consumers who can buy their favourite brand at a lower cost – but it cannot, in any true sense of the word, be described as efficient. A hurricane, strike or outbreak of coronavirus at any of those 29 companies could severely disrupt the supply chain, and the spread of the virus into Latin America has already led to huge spikes in commodity prices as buyers anticipate lockdowns and shuttered businesses. And that’s without the kind of surge in consumer demand that led to a rise of more than 20% in British supermarket sales during March 2020.

 

p18 Corona Virus map page

All those photographs of empty shelves, explicitly condemning shoppers for panic buying and hoarding, obscure the fact, Benton says, that governments are hoarding too. “Kazakhstan banned exports of wheat flour, Thailand has stopped exporting eggs, Vietnam has suspended rice exports and Russia is talking about limiting grain exports to protect supplies,” he says. “It’s not clear how many more governments will follow suit, but if they keep putting their nation first, the
situation can only get worse.” Protectionist policies, coupled with panic buying, could create a self-perpetuating cycle of rising food prices.

What many analysts referred to as the “hidden costs of globalisation” were becoming visible even before the pandemic struck. “There was a clear sense that we had reached peak globalisation,” says Andrew Missingham, the co-founder of creative management consultancy B+A. “The political shocks of 2016, protectionist trade policies and climate change were already asking fundamental questions about that model.” Some of the foundations which businesses took for granted no longer exist in a pandemic age. “If you look at a business like ours, for example, it was predicated on three factors – the internet, cheap flights and free movement of people – and two of those no longer apply,” says Missingham.

Since the last global economic crisis in 2007-2008, many parts of the procurement profession have performed Herculean labours, protecting profits, companies and jobs by cutting billions of dollars in cost from the world’s supply chains. They did that, primarily, by seeking out places where they could make things at the lowest cost – often in China – and minimising inventory by applying lean manufacturing or ‘just-in-time’ principles.

The result is a global supply chain that is interconnected, intricate and sometimes unfathomable. As Duncan Brock, group director, CIPS, says: “The interwoven nature of modern supply chains means it is almost impossible to say for certain just how reliant we are on China for manufacturing and assembly.” Companies that placed such trust in Chinese suppliers that they used single-sourcing now face severe disruption.

Diverse sourcing strategies

“One key lesson from the pandemic is the importance of spreading the risk,” says Tim Lawrence, supply chain expert at PA Consulting. “Companies should avoid clustering suppliers in one region and around similar supply chains, reconsider whether it makes sense to create isolated supply chains and understand the location risks in every tier of the supply chain. Your supply chain may not be as diverse as you like to think – for example, your alternative suppliers may themselves be reliant on tier 3 or tier 4 suppliers in the same region.”

The obvious, if laborious, way to avoid such problems is to map your supply chain. “It isn’t easy,” admits Lawrence.

“It took Airbus five years to do it with the A320 passenger aircraft. And supply chains change so fast that the map might be out of date on the day you complete it, but digital technologies – especially 5G, data analytics and artificial intelligence – are proving increasingly helpful. They can improve visibility and connectivity, generate early warnings, and help free up supply chain leaders to focus on the strategic issues.”

Strategic questions would include assessing when it makes sense to keep the supply chain within the business. “There are certain components that are so critical to the business that the most secure supply chain might be to vertically integrate them,” says Lawrence.

As global supply chains hit bottlenecks many neither envisaged or expected, Missingham predicts: “We will see a lot more decentralisation, regionalisation and localisation.” Some pundits have talked of a ‘great reset’, where reshoring becomes the new norm. In an increasingly automated workplace, labour costs are no longer as critical when locating factories. Last year, multinational toolmaker Stanley Black & Decker shifted production of its Craftsman tools from China to Fort Worth, Texas, without increasing costs.

Brock expects new sourcing strategies to emerge but warns that any ‘reset’ will take time: “This may be the last straw for global sourcing as supply chain managers look local but, to put this in context, 290 of Apple’s 800 suppliers are based in China so such a strategy would take years to implement.”

Diversifying a supplier base is not always straightforward. Companies may be required, Brock says, to form alliances within their sector to develop new sources of supply where choice is limited or existing suppliers are clustered in the same region. Unilever has opted to protect the suppliers it already has, announcing a £420m cashflow relief scheme to expedite payments to SMEs in its network and offering credit to small retailers.

Learning just in time

Just-in-time manufacturing – reducing inventories to 15-30 days of stock or even less – has been a multi-billion-dollar boon for the global economy. Lawrence does not foresee a wholesale rejection of just-in-time or lean, but a reappraisal based on a more realistic assessment of the potential cost to the business: “There will be certain components and materials where you decide that it is more efficient, in the broad sense, to have six to eight weeks’ stock than three or four.”

Popularised by Robert Hall in his 1987 book Zero Inventories, the just-in-time philosophy always sat uncomfortably alongside procurement’s cautious ‘just in case’ approach to buying inventory. Dazzled by the savings, many companies ignored the fact just-in-time made it much harder for procurement to understand how extensive, responsive and opaque supply chains really were. This truth came home in February when a South Carolina hospital ran out of surgical gowns. Its traditional supplier in China had contamination concerns over its stock – not related to coronavirus – but when managers tried to buy replacements, with the pandemic escalating, they struggled.

But in the middle of a crisis this severe, there is also a temptation to overestimate how profoundly our behaviour as individuals, companies and organisations will change. The 2007-2008 depression signalled, as so many people forecast at the time, the end of the road for a certain type of free market capitalism. It seemed a reasonable proposition at the time but it didn’t work out that way. The idea of getting back to ‘business as usual’ can induce a certain complacency.

In this crisis, many managers – not just in procurement – will argue that nobody could have seen this coming. That is true, up to a point. Nobody could have predicted how quickly and radically Covid-19 would change the way we live and work. Yet, for those companies which were paying attention, the signs were there to be interpreted.

The US grocery chain H-E-B began monitoring what was happening in China in the second week of January. After two weeks of analysing various sourcing reports and maintaining close, constant contact with companies in China, the retailer redrafted the disaster plans it had used for the swine flu outbreak in 2009 and Hurricane Harvey in 2017 to confront coronavirus.

As Craig Boyan, H-E-B’s president, told Texas Monthly: “Chinese retailers sent some pretty thorough information about the early days of the outbreak, how that affected grocery retail, how employees were addressing sanitisation and social distancing, how quarantine affected the supply chain, how shopping behaviour changed and what steps they wished they’d taken to get ahead earlier in the cycle.”

Using that information, H-E-B promptly took various steps: forming a remote working committee to coordinate policy and actions, reducing opening hours to give more time to put product on shelves, rationing certain product purchases and paying local beer distributors to bring eggs to its stores. Even so, Boyan admits, they did not resolve every challenge: “We’re still struggling to get eggs and we still have a hard time understanding why toilet rolls were the first things to go out of stock.”

Planning to fail

If the coronavirus is a black swan event, there is an obvious temptation to plan on the basis that it will never happen again – or at least not in our working lives. The call of the next quarter’s targets can often sound more compelling, but Lawrence says supply chain leaders need to change their mindset. “It is easy to focus on the small things that happen often, or may come up in the next three to six months, and plan scenarios for those, but to be honest you could delegate that task to the technology. As this pandemic shows, it would pay companies to look at the really big things that don’t happen very often and run scenarios for those.”

Understanding risk is partly about what supply chain leaders know but also, Missingham says, about what they do with what they know: “People working in supply chains are, in my experience, real experts in the people, challenges and opportunities they face – be that individual components or particular raw materials. The problem is that that knowledge is too narrowly held within organisations. In future, one of the important jobs for supply chain specialists will be to educate a broader part of the business.”

Covid-19 has shed an unforgiving light on every flaw in the world’s supply chain. The pandemic has shut factories, stalled shipments, fuelled labour shortages, closed borders and will, the United Nations estimates, cost the global economy at least $1trn. “In times of crisis and uncertainty, it is hard for businesses to plan but supply chain managers who act now and keep a close eye on such data as the purchasing managers indices as they make plans can mitigate the damage,” says Brock.

Yet in future, when supply chain leaders have the breathing space to think, let alone plan, for the long term, they might conclude that prevention is the best form of mitigation. Companies which neglect the opportunity to fundamentally rethink their supply chains do so at their own peril.

That is especially true, Benton argues, when it comes to defining a more sustainable, healthy and environmentally friendly food production system.

As he says: “The question is not ‘will it happen?’ The question is ‘when will it happen?’ We could have started to create a sustainable, equitable and nutritious food system in 2003, after the outbreak of SARS. It could happen now or it could happen in 10 years’ time when the next crisis occurs, but for the sake of our health, and the health of our planet, it cannot not happen.” What goes for the food industry, you suspect, goes for the other sectors of the global economy.

Article originally published on https://www.cips.org/supply-management/analysis/2020/april/the-end-of-the-global-supply-chain/

Supply chains have been changed, possibly forever

1 - SupplyChain-01

The competition is no longer between brands or even between companies; it is between supply chains (networks). Supply chains in the time of coronavirus have changed, possibly forever. MARZIA STORPIOLI reports.

Supply chain management has been likened to a philosophy, a concept rather than an essential service.

Historically, companies relied on strong brands and good products to win over the consumer. Competitive advantage was gained by the organisation based on the strength of its brands and its reputation for quality products.

But as the COVID-19 pandemic continues its inexorable march across the globe, supply chain management is no longer being considered merely a concept, but rather a life-saving essential service used for the cohesion of all supply chains so that they may work in concert with one another in order to satiate the needs and wants of people and businesses at all times, including times of crises.

It’s useful to remember wars have been won and lost by the implementation and control of either effective and efficient supply chain management, or the lack of using it to its full potential, as was experienced during the Napoleonic Wars and World War ll. There is little doubt that the post-COVID-19 world will be decidedly different to life as we knew it prior to this scourge befalling us.

There’s no doubt most nations were caught unprepared by its rapid advance. In South Africa, consumers – like those across the globe – adapted their buying behaviour to “cope with this rapidly evolving situation”, as Nielsen researchers put it.

Retail outlets – supermarkets, pharmacies and wholesalers – were unable to satisfy consumer demand for sanitiser products, demonstrating the inability of supply chains within South Africa, and globally, to respond to a meteoric increase in demand for hand washes and sanitiser products, household and industrial bleaches and surface cleaning solutions driven by the global crisis.

Just-in-time (JIT) and lean manufacturing, once seen as the pinnacle of achievement in supply chain performance, may no longer be effective. They were implemented across most global supply chains in the face of mounting pressure to reduce supply chain costs – the aim being to continually strive for increasing levels of efficiency while reducing costs overall.

Efficient, but not robust

These supply chains are operating on razor-thin margins, so much so that they are no longer robust and unable to respond to ‘shocks’ in the system, and have limited capacity to respond to disruption in their supply chains. They are efficient, but they are not robust.

If the disruption continues, eventually these supply chains will stall – manufacturing will stop due to a lack of raw materials or spare parts.

Today, companies that achieve a sustained competitive advantage (Zara, 3M and Dell) are those who have invested significantly in developing responsive logistics capabilities. They are demand-driven and designed from the customer backwards (rather than from operational capability forward – forecast driven). Their supply chains are agile and responsive to changes in consumer behaviour.

Talking of consumer behaviour, self-preservation reigned ahead of South Africa’s national lockdown as the ‘haves’ stockpiled goods at the expense of the poor, the needy, the aged and the sick.

Imagine if the world did not have an effective and efficiently run supply chain to constantly channel food, fuel and other essentials to replace those that have been exhausted because of this ‘feeding frenzy’. There would be further chaos, indescribable misery, an uncontrolled mortality rate and above all, a world economic recession that would surpass the 1929 financial crash!

With the pandemic spreading to South Africa a few months after the initial outbreak in China, Nielsen was able to research global markets, delivering insights into how retailers are dealing with challenges brought about by coronavirus.

Turning a crisis into an opportunity

The research shows that retailers are facing three primary challenges: insufficient inventory of some categories, difficulty in logistics and distribution, and inadequate staff to deliver orders.

Those able to organise resources and respond actively to the epidemic and launch measures to “help turn crisis into opportunity” will thrive. These, Nielsen reported, included “flexible co-ordination of participants in the supply chain, ensuring the efficiency of product supply, showing care and concern for employees, rationally deploying staff, adjusting the store’s operating hours, expanding businesses through online channels and in community and strengthening corporate brand marketing to enhance consumers’ trust and creating a favourable impression”.

Nielsen has identified six key consumer behaviour threshold levels that tie directly to “concerns around the novel coronavirus outbreak. These thresholds offer signals of spending patterns, particularly for emergency pantry items and health supplies with these patterns being mirrored across multiple markets”.

SupplyChain 2

As African countries such as South Africa and Kenya announced their country-specific responses to the outbreak, Nielsen found that global consumers were adapting their purchase behaviour to cope with the rapidly evolving situation.

“As patterns begin to emerge in response to news events of this nature, it will be imperative for companies to learn from these scenarios so they can sustain growth even in times where COVID-19 is deeply impacting people’s lives. These patterns will help provide leading and trailing indicators to those trying to understand how people will respond as developments continue to play out at different times in different countries,” said Scott McKenzie, Nielsen’s global intelligence leader, adding that this would be critical to understand as stores worked to maintain supply levels of in-demand items.

South Africans entered threshold #5 ‘Restricted Living’ on Friday 27 March 2020. Consumer behaviour at this stage was characterised by severely restricted shopping and constraints due to supply shortages, delivery fulfilment challenges and caps on product quantities, Nielsen reported.

SupplyChain 3

The lessons learned

Of the retailers surveyed by Nielsen on their attitudes towards business for the rest of the year, 67% said they would make efforts to expand online channels and accelerate home-based business / retail warehouse layout.

“Fifty-three [percent] said they would change their product mix according to the shopping habits of consumers and increase the inventory and on-shelf number of health, disinfectant and protection products,” Nielsen reported. “Forty-three percent of the retailers say that they would work on their supply chains, especially those for fresh food, strengthen the ties with various brands and enhance communication efficiency.”

Supply Chain Management during the COVID-19 pandemic

Supply Chain Management during the COVID-19 pandemicThe COVID-19 virus has brought humanity, as we have come to know it, to its knees. Where kindness, sharing and caring once prevailed, now self-preservation reigns in shopping malls throughout the world as the “have’s” stockpile their larders with vitals at the expense of the poor, the needy, the aged and the sick. Shopping trolleys are filled to the brim not because there is a dire and urgent need to satisfy physiological needs but rather the wanton greed to plunder shopping shelves without giving any consideration for the shoppers in the queues behind them.  Imagine if the world did not have an effective and efficiently run supply chain to constantly channel food, fuel and other essentials to replace those that have been exhausted because of the “feeding frenzy” of the uncaring and those who have sufficient funds to purchase what and when they like and the transport to procure such offerings. There would be further chaos, indescribable misery, an uncontrolled mortality rate and above all a world economic recession that would surpass the 1929 financial crash!

Historically, Supply Chain Management (SCM) has been likened to a philosophy… a concept rather than an essential service. As a relatively new mindset, it incorporates thirteen logistics activities and business processes to ensure cohesion amongst supply chain members and a continued flow of products, information and money. Wars have been won and lost by the implementation and control of either effective and efficient Supply Chain Management or the lack of using it to its full potential as was experienced during the Napoleonic Wars and WW2. There is little doubt that the world post-COVID-19 virus will be decidedly different to life as we have come to know prior to this adverse scourge befalling us. Therefore SCM will not be considered merely a concept but rather a life-saving essential service that will be used for the cohesion of all supply chains so that they may work in concert with one another in order to satiate the needs and wants of people and businesses at all times, including times of crises.

Besides the challenges brought upon us by the current pandemic, what other challenges are looming in the years ahead? Some of the key issues (certainly not all) are:

  1. Technology (automation, robotics and the 4th Industrial Revolution). According to Klaus Schwab, the Founder and Executive Chairman of the World Economic Forum (2017), the 4th Industrial Revolution is characterized by “… new technology fusing the physical, digital and biological worlds, thereby impacting on all disciplines”. With the ease of new entrants into the market and capturing it (it took Facebook 6 years to generate $1billion and Google 5 years), new entrants will generate more products, which will need to be warehoused, transported and distributed. This will add an immense amount of pressure on existing global and national supply chains, thereby necessitating a SCM revolution that will be able to cope with such metamorphosis;
  2. Pressure on the reduction of costs and the increased desire for quality. Herein lies the greatest paradox of all as consumers and business customers demand low prices for products and services, yet insist on increased quality. With the ever-escalating price of fuel, vehicles and running costs, supply chain members are going to have to seek ways to maintain and if possible, decrease their cost. This could be achieved by vertical integration, horizontal integration (by buying competitors to enjoy economies of scale) and the use of fuel-efficient and sustainable vehicles and even self-propelled trucks (already being used) to reduce labour and associated costs;
  3. Globalisation and the effective and efficient management of the elongated and complex supply network. Lengthy supply chains are fraught with risk and uncertainty, especially in this turbulent and uncertain world we all currently reside in. Here risk management is going to play an important role in identifying and mitigating risks (supplier risks, supply risks and interest rate risks etc.) so that global business may operate under an umbrella of relative certainty;
  4. Shorter lead time as a result of consumer demand and rapid changes in consumer behaviour. There is no doubt that we live in a world for the need of instant gratification. What we see today is what we buy today, especially as a result of consumers having access to virtually unlimited credit. We therefore buy what we want even though we cannot afford it. The rapid changes that are taking place in consumer behaviour as a result of AI’s impact on the generic consumer behaviour process (desire for products and services are created and not identified as per the process) are also fueling the need for a more agile, responsive, sustainable, customer-centric and cost-efficient supply chains. Where once agility was sufficient to satisfy needs, how much quicker must organisations produce and distribute goods so that they may arrive at the Right place, to the Right person, in the Right condition, at the Right time and at the Right price?
  5. Effective inventory and throughput management in a global context. With a world exploding with over-population and the need for finished goods and services, the question is how much inventory should an organisation carry? It is a well-known fact that carrying too much inventory incurs additional carrying costs whilst carrying an insufficient quantity increases the likelihood of retail outages and escalated order costs. With most forecasting being historically inaccurate, how can organisations prophesize future demand so that capacity can be managed to meet such demand? Some pundits see the solution to be JIT production and distribution whilst other see the answer to be further collaboration and integration, increased information sharing and joint demand forecasting amongst all players in the supply chain. Whatever the solution may be, throughput management needs to be “managed” so that the Rights that are reflected above may be realised otherwise customers will migrate to competitors that can offer quicker response times and miniscule outages; and
  6. Build ‘robustness’. A robust supply chain is one that can withstand ‘shocks’, such as the current disruption caused by the COVID-19 pandemic. In their search for continuous improvement and reduction of costs, what the acclaimed writer Margaret Heffernan calls ‘the myth of infinite efficiency’, supply chains that have adopted Lean or JIT methodologies now find they lack robustness.  They have no ‘extra’, there is no slack that can be used to mitigate the effects of the unexpected.  This essential characteristic has been driven out by the persistent downward pressure on costs.  These businesses operate on razor-thin margins (of time, of money, and of resources generally) and their supply chains are not robust – they are very exposed to disruption.  Supply chains need to build robustness by balancing cost-efficiency with flexibility and resilience.  They need to develop stronger relationships with other chain members instead of focusing on extracting the lowest prices from them.  The future is becoming more difficult to predict and forecasting less effective. Disruptions and unforeseen events are inevitable.  Supply chains have become longer and more complex.  Unless they gain robustness, these supply chains will not be ‘fit’ enough to mitigate the risk of crippling disruptions.

The industries that are most at risk are:

  1. The transport industry as it will be faced with ensuring that the above Rs are implemented and controlled. As a result of AI, it is estimated that by 2025 thousands of motorcars and trucks will be driverless. The negatives from a trucking perspective includes job losses, less ownership and the possibility of hacking and cyber-attacks. In the summer of 2015 (the year Tesla was launched), two hackers demonstrated their ability to hack a moving car; controlling its dashboard functions, steering, brakes etc. all via the vehicle’s entertainment system (Schwab, 2017). It is believed that all modes of transport (especially road) will be faced with shorter lead times, which will certainly burden transportation and the rest of the logistics functions;
  2. Manufacturing as it depends on raw materials, components and spare parts to produce goods and services via the transformation process. As markets expand exponentially and as 3D printing becomes more of a reality than a rarity, product design and production could be performed at a consumer’s home. Eventually it could even become an office or even a home appliance. If this is the case then the demand for logistics services such as transportation, warehousing and demand management could even decrease in line with the reduction in production; and
  3. The services industry. It is estimated that 85% of all jobs in the USA are service oriented. As there is such a wide spectrum of service providers ranging from hotels, hairdressers, hospitals etc., the growth of services and service providers will increase exponentially with an associated decline in manufacturing (as a result of 3D, robotics, and outsourcing etc.), This will put a burden on the supply chain as it will have to keep up with such growth in the service industry.

New degree for a new world: IMM Graduate School launches vital Bachelor of Commerce degree in International Supply Chain Management

New degree for a new world web

In today’s ever-changing world, built on technology, e-commerce and global trade, supply chain management is increasingly becoming a pivotal personal competence, and a key competitive advantage for many businesses. This trend is manifesting in a worldwide shortage of supply chain management (SCM) skills and, in particular, a critical skills shortage in Sub-Saharan Africa. Hence the need for comprehensive and relevant SCM education and training.

The IMM Graduate School is answering this challenge with the introduction of a brand-new degree, the Bachelor of Commerce International Supply Chain Management, which is the first of its kind, for the 2020 academic year.

Where marketing determines what offerings customers want and need, SCM ensures that the inputs that are needed to produce these offerings are available to the organisation when they are needed to be converted into finished goods and services. Thereafter, SCM plays a critical role in getting the product or service to the end-user.

Programme description and purpose

The Bachelor of Commerce in International Supply Chain Management comprises a number of modules all of which have been deliberately synergised to provide students with a world-class SCM and business qualification.

Consisting of three independent streams (Transport and Logistics, Procurement and Public Procurement), the degree has been designed to provide students with a content-rich and application-oriented learning experience with the emphasis on employability and tangible value-add to companies. The best-in-class content has been benchmarked and validated by subject matter experts across various sectors and disciplines for use in this programme.

This three-year degree covers a variety of both business and supply chain related subjects. The content is structured to introduce foundational theory and to also focus on practical implementation through a variety of projects using topical local and international case studies. The degree includes a module offered in partnership with a leading global ERP company, to prepare students for the practical realities of a supply chain role. This project-based module provides students with an additional external certification that will differentiate IMM graduates from other students.

Completion of the qualification will position graduates for management roles within the areas of inventory and materials management, procurement, logistics, and supply chain management.

Mode of delivery

The IMM Graduate School offers its qualifications primarily in an online format, augmented by a variety of additional content. The core material is available in a compelling digital presentation, complete with pacers, self-assessment opportunities, links to further material, articles of interest, and more. This digital portal also serves as the primary point of contact and communication on academic and administrative matters with a dedicated team to respond to student queries.

The content delivery is supported by regular webinars recorder and posted by lectures as well as regular weekly scheduled consultation sessions.

Completion of the qualification will position graduates for management roles within the areas of inventory and materials management, procurement, logistics, and supply chain management.

Circular Supply chain

Circular Supply chain

Out with the old and in with the new – circular supply chain might just save the environment

Good news! Businesses can now increase their profits and reduce their carbon footprint at the same time.

As it stands, the supply chain industry follows the traditional linear supply chain methodology (source, create, and discard) but with our already limited resources and the expected rise in the global population (10 billion citizens by the year 2050), this idea of “input equals output” is an overall economic dead-end and environmental threat.

The linear model has been left relatively untouched since the 1980s since a linear economy promotes financial growth by sourcing large amounts of affordable, easily accessible resources.

With the increased focus on reducing our carbon footprint, this is being replaced by the

circular supply chain model.  

Linear Supply Chain

Circular Supply chain B

The linear supply chain model. Source: ResearchGate.net

Circular Supply Chain

Circular Supply chain C

Circular Supply Chain. Source: supplychain247.com

The principles of circular supply chain

Waste equals affordable resources: Biodegradable materials such as cardboard boxes and tissue paper are returned to nature and non-biodegradable products are stripped down to its raw form.

Reuse: Certain products, or parts of products that are still functional, can be used to create new merchandise.

Repair: Faulty products can be repaired and resold

Recycle: Discarded material can be restored.

Energy from renewable resources: Circular supply chain aims to eliminate the use of fossil fuels in the supply chain.

What we can expect in a circular economy

The circular supply chain methodology is becoming more and more popular as production costs continue to rise. Whereas the linear supply chain model ends when a product is sold and ultimately discarded, supply chains become circular when a connection is made between the beginning and end of the chain.

Instead of producing “disposable” products, businesses are choosing to “upcycle” certain used parts to revert them back to their raw material form to be used again. The product is used for as long as possible to get the most value during its life cycle.

From an organisational standpoint, here’s how businesses can benefit from the circular model:

  • It creates new profit opportunities
  • Production costs are lowered
  • Businesses can enjoy a good public reputation for their role in preserving the environment.

But unfortunately, there is a downside.

  • Prolonging the life cycle of a product will negatively influence the sale of replacement products.
  • Product quality may suffer. Certain materials such as plastic are designed with a limited life cycle in mind. In time, these materials become brittle, especially if it’s used too many times.

Here’s how we as consumers will benefit from a circular economy –

  • Greenhouse gas emissions will be reduced by 2 – 4% per year.
  • Adding an extra link to the supply chain will encourage job creation
  • Consumers will enjoy more durable products, therefore saving them money in the long run.
  • The use of land, soil, and water will be managed more effectively.
  • Products will be more affordable if materials are recycled and reused rather than sourced from scratch.
  • It will put an end to the global resource scarcity
  • By paying less for products, consumers can enjoy an increased disposable income

These countries have already started using the circular model to reduce their carbon footprint. 

The European Union (EU): In 2001, it was announced that all countries within the EU will be required to recycle at least 50% of all their packaging waste.

Japan: As the most efficient country when it comes to recycling, Japanese businesses and households must follow strict recycling laws and ensure that all packaging materials are recycled and reused.

The United Kingdom (UK): As of 2007, all UK-based organisations are obligated to recycle or treat their own waste, regardless of its size.

Luckily, the linear supply chain method is likely to be phased out entirely which means we’ll be a step closer to a waste-free planet.

Be part of the change and register for one of IMM’s Supply Chain programmes or online short courses. Start your career, or if you’re already working, boost your career with an internationally recognised qualification from the IMM Graduate School. Applications for 2020 are now open! https://imm.ac.za/

Business Day Dialogues in partnership with IMM Graduate School: Supply Chain – The next frontier

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Join a Business Day Dialogue on the on-demand economy and supply chain management

Flux Trends founder Dion Chang will be delivering the keynote presentation at the Business Day Dialogue on October 24 2019. Picture: SUPPLIED/FLUX TRENDS

Business Day and IMM Graduate School, the leading online higher education institution for marketing, supply chain and business disciplines in Africa, will provide a bespoke said-leadership opportunity at the next Business Day Dialogue breakfast.

The morning will start with a keynote presentation by Dion Chang on how the on-demand economy is changing supply chain management; how and where value chains have been disrupted as a result of this change; and the mindset needed to map the journey ahead.

Chang’s talk will address the process of digitisation, which has had an unexpected ripple effect across industries. We are only now adjusting to that digitisation process, which spawned new economies and business models. One of these new economies to emerge was the on-demand economy: a new era where customers want products and processes faster, seamlessly and customised. Retailers are struggling to adapt, and the impact has been felt in logistics and supply chains. The route to market and the last mile of the customer journey have created a new landscape.

The presentation will be followed by an in-depth discussion on “The next frontier of supply chain”, hosted by Dominic Gaobepe.

Nick Hoffman, COO at Line Booker, and Nachi Mendelow, vice-president, business development Africa at Wisetech, will address matters such as:

  • how traditional markets are being redefined;
  • what customer expectations have evolved into;
  • how daily tasks in supply chain have been transformed;
  • how to effectively align physical supply-chain capabilities and assets with new and innovative digital strategies; and
  • how to compete and grow in this challenging new era.

If you are in the supply chain and logistics field, join the Business Day Dialogue in partnership with IMM Graduate School.

The details

Date: October 24 2019
Time: 7.30am to 10.30am
Venue: Houghton, Johannesburg
RSVP: Visit the Tiso Blackstar Group Blackstar Events website to register to attend. Venue details will be supplied on confirmation of attendance.

Five reasons to prioritise sustainability in your brand’s playbook

Five reasons to prioritise sustainability in your brand’s playbook

By Julia Wilson 

Increasingly consumers are becoming more sophisticated in their ability to discern between true commitment to sustainability and action taken just for show. And they’re not afraid to call out that lack of authenticity on social media, in conversations with friends, or in any other channel.

This has made some brands hesitant – afraid of the brutal consumer backlash against well-intentioned efforts. Others are still sustainability sceptics. In our work with clients, I often hear, “Yes, consumers say they want sustainability, but will this actually boost my bottom line?”

There is a wealth of evidence that proves sustainability can boost the bottom line. In fact, when sustainability initiatives are integrated thoughtfully into the strategic plan, it can do everything from streamlining the supply chain to unlocking a new level of consumer love and loyalty. In our recent report, What’s Sustainability Got To Do With It?, we took a look at three categories: chocolate, coffee, and bath products, and found that sustainability boosted sales and units sold across the board.

Whether you’re well on your way or just starting to incorporate sustainability into your strategy, our latest global sustainability report, Consumers Buy the Change they Wish to See in the World, underscores these five reasons for doubling down:

Sustainability encourages a culture of innovation, pushing you to embrace new methods, technologies and ideas. Sustainability is a way to build authenticity, creating more transparency in your supply chain. Sustainability is a consumer-centric strategy. It requires you to understand and empathise with the concerns your consumers have, and how your brand can be a solution to help make their lives better.

Sustainability drives greater efficiency. For example, many companies set commitments to move towards manufacturing processes that reduce waste, requiring investment in research and development and sometimes the overhaul of supply chains. That upfront investment can pay off as your business benefits from a more efficient process and enhanced reputation.

The positive effects of sustainability are good for us, and they make us feel good too. That goodwill can cut across your employees, consumers, and other stakeholder groups.

Incorporating sustainability

One of the major challenges we hear companies express is knowing that sustainability is important, but not having a strategic plan for incorporating it into their brand or across the full product portfolio. The word ‘sustainability’ has increasingly become a catch-all term that, depending on the context, can encompass everything from environmental conservation to employee relations, and much more. Thus, for any company, it can seem daunting to incorporate all of these factors into their overall business strategy, and figure out

how it fits into their consumer marketing approach.

Create a sustainability strategy that’s authentic for you and your consumer

To do it right, companies need to invest in truly understanding their consumers and embed sustainability into their brand’s foundation. Authenticity comes through the end-to-end integration of sustainability into your processes and complete transparency with consumers along the way. That means pushing beyond feel-good marketing and labels on packaging to a fully integrated, interdepartmental execution. It requires collaboration across many teams, from sourcing and sustainability, to category managers and marketing leaders. Winning requires that sustainability be part of your short- and long-term strategic planning from start to finish.

Investing in sustainability is undoubtedly an individual journey for brands that can be impacted by industry, geography, product portfolio, community commitments and other factors. We’ve seen success when companies take a tailored approach consisting of multi-stakeholder engagement, cross-functional accountability and transparency along the way. For many brands, this approach will enable consumers to take note at the shelf, and in turn reward the brand along their path to purchase.

Six important tips for effective logistics management

The IMM Graduate School | Six important tips for effective logistics management webWhat do you think about when you hear the word “logistics”? If you think it’s the transport of goods from point A to point B, you’re half way there.

What does Logistics mean?

Logistics is the detailed organisation and implementation of a complex operation. A supply chain comprises all the activities associated with the flow and transformation of goods, from the raw materials stage through to the final consumer. It’s a sequence of events intended to satisfy a customer or end user, and it’s made up of various core elements or processes, including manufacturing, distribution, transport, warehousing, inventory control, materials handling and procurement. With so many elements and processes involved, logistics is a little bit like juggling… When the system’s working properly and you’re in a good rhythm, everything slots into place. But when one balls drops, the entire thing can come crashing down. The key to any effective supply chain is setting up systems that ensure a smooth process from manufacture to distribution.

Logistics is a complex business function.

The more steps there are in your logistics plan, the more efficient your entire process needs to be. If several different materials need to be supplied to a certain location at different times, your supply chain not only needs to be efficient, but also able to quickly respond to problems as they arise. The larger your operation, the more difficult this becomes, and the more prepared your business needs to be. To help your supply chain run as smoothly as possible, here’s our top five tips for effectively managing your logistics.

The manta for logistics and supply chain that many logistics managers around the world live by is the ‘7-rights’:

  1. Move the right materials/products
  2. In the right quantity
  3. In the right condition
  4. At the right time
  5. To the right place
  6. At the right cost
  7. To the right customers, associates, suppliers or stockholders

Cerasis.com share six important tips for effective logistics management and network optimisation. We have summarised them for you:

Proper Planning – The first step to accomplishing a task is planning. Now, planning encapsulates various factors. It involves procuring the goods, storage facilities, and delivery of products to the exact location.

Adopt Automation – In the age of automation, technology plays a major role in increasing the efficiency of an organisation. Automation has a vital role in the business process optimisation. Business process software can be integrated that provides timely updates regarding the movement of goods.

Value Relations – The team is an essential aspect of an organisation, especially in the supply chain function. Whether it’s the delivery guy or the warehouse manager, everyone should be perfect in their respective field of work. For this, you need to invest in proper training of the employees. Regular training workshops keep the employees updated with the latest trends in the logistics industry. This helps in increased efficiency and satisfaction of the clients.

Warehouse Management – Effective logistics management is incomplete without proper warehouse management. Warehouse operations are considerably dependent on the type of goods. The logistics firm should aim at developing the warehouse inventory so that there is minimum wastage of goods. Moreover, maximise the storage capacity of the warehouse. Usage of vertical storage columns is recommended.

Efficient Transportation – Transportation department can be analysed to decrease the expenses of the logistics firm and at the same time, it can be revamped for faster delivery of the products. Following factors should be considered for efficient transportation:

  • Determining the best delivery route.
  • Cost-effective packaging that ensures low investment and safety of goods as well.

Measure and Improvise – Logistics network optimization is incomplete without integrating measurement, analysis, and feedbacks. When you deploy new strategies in the system, you need to measure the output. This is important as it intimates the success or failure of the strategy.

The impact of the product lifecycle on business logistics

According to Jooste (2014), marketing is defined as “… the process by which organisations satisfy the needs of consumers by creating, communicating and delivering value for customers in the form of ideas, goods and services to facilitate satisfying exchange relationships, in ways that benefit both organisations and customers”.

Pienaar and Vogt (2012) posit that business logistics is “…concerned with the inbound movement of materials and supplies and the outbound movement of finished products. The goal is the delivery of the finished products required by the marketing department to the point where they are needed and when they are needed in the most economic fashion.”

So, in terms of Pienaar and Vogt’s definition, logistics’ key function is to convey inputs into the organisation in the form of materials and components etcetera and then deliver the end-goods that were developed by means of the transformation process (operations) to consumers at the right time, the right place and price to the right person in the right condition and quantity. The relationship between the two functions is that of co-dependence; marketing cannot survive without logistics and logistics has no place in the economy without the need-satisfying offerings that are uncovered and designed under the umbrella of the marketing effort.

Essentially, marketing is focused on four key elements known as the four Ps: product, price, promotion and place (distribution), whereas business logistics is made up of several activities such as demand forecasting, site selection and facility design, procurement, materials handling, packaging, warehouse management, inventory management, order processing, logistics communication, transportation, reverse logistics and customer service.

Addressing needs and wants

Every logistics activity, as mentioned above, is required by marketing to convey inputs into the organisation and to deliver the outputs that have been developed by operations for targeted customers in such a way that the needs and wants of such customers may be satisfied in a cost-efficient manner.

All products have a lifecycle; some are of long duration, like Coca Cola, and others extremely short (e.g. a fad). The traditional product lifecycle (PLC) has four stages; the introduction stage where new products are introduced in the market, the growth stage which is characterised by robust sales and profits, the maturation stage where sales have peaked and finally the decline stage where the demand for the offering starts to diminish as the market becomes saturated with the organisation’s goods and those of competitors.  In order to elongate the life expectancy of the product or service, marketing utilises the marketing mix variables (4Ps) to try to generate sales but like anything in life, the product will experience an eventual sad demise.

Although the traditional PLC as reflected above is an accurate indication of a product’s lifecycle, which starts at market entry and ends at the death of the offering, it is not a true reflection of the entire process because it is void of one of the most important stages; the product conceptualisation and development phase. It is this important juncture (when the product is perceived, conceived and born), that triggers the commercialisation of the offering and its ultimate absorption into the marketplace.

 An organisation that is well-versed in product life cycle management will have the ability and skills to optimise logistics and SCM to benefit its bottom line. Product lifecycle logistics is an approach to treating the supply chain as a continuous network or circle and, in the process, to improve customer service, lower supply chain costs, and where possible, bring in an additional income stream if the form of investment recovery by means of the disposing of dead stock and effective waste management.

The key to realising these savings as well as exceeding customer expectations is to recognise the relationship between the supply chain, business logistics, marketing and the PLC. This will provide a better understanding of the business and if used correctly, it can be used in combat with business adversaries as a result of a competitive advantage.

In the same way, lead time management, in the form of order-to-delivery cycle and the cash-to-cash cycle, will reduce the time it takes to satisfy customer needs and likewise the time it takes an organisation to convert an order into cash. Both forms of lead time management will provide the organisation, compared with slower rivals, with a competitive advantage.