Back to the Future

Like many of you, I subscribe to a number of newsletters to help me stay abreast of what is happening and provide me with alternative views on topics.

I received one from Dean Robinson, who is both a very good mate and an excellent consultant, the morning I am writing this. His topic was how COVID-19 has changed the way people are viewing their business. He gave two examples of where different clients, who had taken a financial hit during the lockdown (and surprisingly many have not experienced this hit), had found it was in fact the best thing that happened to them because both had made positive changes to their businesses. These changes were both in strategic direction and process changes to meet the “New Normal”.

His newsletter combined with the fact supply chain resilience under COVID-19 has received a lot of press recently, got me thinking…

Firstly, are the changes Dean’s clients made radically new? Is it conceivable these changes were only possible because of the virus crisis? My contention is no, actually many of the changes were ones prudent businesses that consistently review and challenge their practices, do every day. Well not every day but every review cycle, I’m sure you get my point. It is my contention all businesses should be conducting such strategic and tactical reviews often. So this supports my view that we really are not experiencing a new normal, but a situation where everything that was old, is new again.

Regular readers will know that I espouse that this is particularly relevant when executives are considering an ERP system replacement. It likewise applies to the next topic I was thinking about: Supply Chain.

You may recall in an earlier newsletter I spoke about the insights into human behaviour the current COVID-19 pandemic has brought to the surface. Specifically the panic buying of toilet paper and other products, and the fact this resulted in many products being (seemingly) out of stock for some extended period. This has seen a large increase in journalists writing articles in various press outlets espousing how supply chains are broken, how we need to do things in new ways, and how things have to change in the new normal. 

I wasn’t aware we were able to create so many new experts on supply chain so quickly. 

An article in The Australian (on the day I am writing this) headlined “Supply Chain models go under the microscope”, is a classic example of this. The article relied on advice from one of the major consulting firms but as you will see in my critique below, it really didn’t cover anything new. A summary of the article’s points are:

1. Supply chains would now be driven by customer needs. My argument on this would be that every company should be focusing on what the customer needs. Anyone who wasn’t is missing the point. It was Peter Drucker who created the definition of a business, “The purpose of business is to create and keep a customer”. Again this is not a new concept, but an example of something old that is new again.
2. We are seeing the emergence of demand driven supply chains. I cannot say that business has ever been anything but demand driven. Again, if executives are managing a business in such a way that they are not customer demand driven, then they are missing the point.
3. There would be a shift from capital intensive fixed asset driven supply chains to ones that are an ecosystem of modular capabilities delivered through a network of trusted third parties. This comment does have some validity in that the 3PL or contractor model, while it has been around a long time, it is gaining favour with more companies recently. Supply chains however have always been a network of third parties, they have never been linear. Trust has always been a key component in supply chain performance. Again nothing really revolutionary here.
4. There will be more analysis of what products can travel together. While there has always been a component of this in supply chain work, specifically in the warehousing space (pardon the pun) when there is a risk of storing certain products, especially chemicals, together in the same space. This has come to a high prominence in recent during COVID-19 times, because of the growing scarcity of airfreight slots and shipping containers in recent times. People are trying to maximise consolidation opportunities, even more than usual.

So essentially it is my contention that if there is anything new to all of this, it is how we can best leverage technical changes to better support and enhance the performance of some old basic fundamental principles… not reinvent supply chain and call it the new normal.

For example what that article missed, in my opinion, was:

• The importance of sourcing strategies. Smart supply chain managers have always incorporated alternative sources of supply into their strategies. The lack of this was particularly obvious in medicines. Unfortunately we are highly reliant on API’s (Active Pharmaceutical Ingredients) coming from China and India. We have little to no sources of our own. So when the pandemic hit, the source countries implemented their “home country first” policies and we had to wait. 
• The role technology plays. Those of you who looked at the 5V supply chain model I spoke about in my last newsletter will know that technology is a foundational component.  But more importantly than that, it is the interoperability of the different systems each individual company uses, that provides the secret sauce to a high performing supply chain. Again this is not new but newer technologies have made these connections between systems easier to achieve. What is key of course is corporate will – now that is something that is often missing. Which leads me to my next point… 
• The role company culture plays. Again if you looked at my 5V model, you will notice the most foundational enabler of all is corporate culture. Again more importantly how aligned those cultures are amongst the different supply chain participants. If there is little alignment then the ability to improve any of the 5Vs becomes that much more difficult. 

Again, none of these points are anything new. So what can you as an executive or business owner do in light of this discussion in the current COVID-19 environment? I would suggest the following:

• Review what changes you have had to make to maintain your business under these circumstances. Look at what has worked for you and what has not. There is a lot of talk about how well video conferencing and people working from home has worked. Review this and adopt what worked well, discard or adapt what didn’t work so well. There are key learnings in that for you.
• I would review some of the old business basics, like making sure you understand what it is your customers really want. What they want now might be quite different from what they wanted just four months ago. If you are not sure – go ask them.
• Go back to other business basics like sound supply chain management principles. I am still gobsmacked by the number of companies that have poor inventory management skills. When was the last time, for example, you conducted a pareto analysis of your inventory? Do you have dual sourcing capabilities for your A products?

If this has triggered any thoughts for you around your business, please reach out and say hello. I really enjoy having a chat about these things.

In closing, if you or anyone you know is looking:

• To improve the way their business operates;
• To improve the way they leverage their current ERP system;
• To replace their ERP system;

give me a call for a confidential discussion on the best way to achieve this.

Until next month …

Sincerely,

David

© David Ogilvie