“We’re just losing confidence that they’re actually going to deliver,” said Cummins CEO and chairman, Tom Linebarger recently about Cummins’ suppliers as he was commenting on recent financials. He continued: “With some of the shutdowns in China, we may not see as much positive impact in the second half as we hoped.”
Apple predicted that it expected supply chain disruptions to cause a decrease of $4 billion to $8 billion in sales in its April to June quarter.
Former DocuSign CEO, Keith Krach, and now United States Under Secretary of State for Economic Growth, Energy, and the Environment, suggested recently that all boards demand a China contingency strategy be presented for review.
Today, supply chain is not only a C-suite issue, but also most definitely a boardroom concern. Several things happened to take supply chain from relative obscurity to being the focus of flaming spotlights:
- Disruptions had serious impact on top and bottom lines
- It is becoming increasingly clear, as I have discussed in the past, that disruptions are not just Covid-related but also structural with many disparate issues combining to create the “whack-a-mole” supply chain landscape. These issues relate to technology, physical infrastructure, collaboration, regulations, and complexity
- The need for heightened risk management in supply chains is becoming apparent. Some companies have learned the hard way that supply chain failures can have tremendous impact
We are seeing an increasing amount of interest in supply chain strategy, as the supply chain malady turns chronic. Boards and executives must ask critical questions.
- Is our long-term supply chain strategy supporting other present and future strategic goals, including ESG goals? Is the focus on the right areas, such as agility – being able to handle disruptions, dealing with demand changes – or reliability, or greenhouse gas emissions or other key parameters?
- Do we have visibility and transparency in our supply chain such that we can build strong governance?
- Do we have sufficient risk management and governance focus in our supply chain management to cover everything from contingency plans to compliance to supplier management? Scenario planning, such as managing a supply chain through a severe conflict with China, becomes important.
- Do we have enough supply chain talent now and in the future? Businesses suffer from a general talent crisis, but no place more than in manufacturing and supply chain.
- Does our technology strategy align with supply chain strategies? I believe that we will see big shifts in supply chain technology over the next five years. Bigger companies with legacy systems may be severely impacted by these shifts.
- One of the key parameters that I have focused on is building a company culture that is aligned with ALOM’s strategic goals and mission. For instance, we are nurturing a collaborative culture, because supply chain is a very collaborative effort with many internal and external stakeholders. We are nurturing excellence and quality-focus because the customer deserves that we do the right thing, in the right way, and on-time. The same alignment thinking is behind our ESG and corporate social responsibility commitment, our technology and innovation focus. Enough said.
Many have seen supply chain as millions of small actions rolling up into a perfect delivery. I have in the past compared supply chain to cooking a complex meal. Many parts need to come together to form a perfect whole. However, that does not happen by coincidence. It takes planning, skill, determination, and foresight. Otherwise, the souffle just may collapse. Just like the supply chains.
