Weak links, strong links: Who is taking over the supply chain?
There have been rumblings that the procurement function is "taking over" supply chain management. That kind of thinking is shaky on its best day and destructive in the long run. Here's why.
Art van Bodegraven was, among other roles, chief design officer for the DES Leadership Academy. He passed away on June 18, 2017. He will be greatly missed.
One of the more respected discussion fora (no, that is not an oxymoron, and is the plural of a much-maligned noun) recently trumpeted an uncertain clarion call indicating that the procurement function was "taking over" supply chain management.
Never mind that the claim is not helpful in maintaining our fragile peer relationships within the chain(s); it is also wrong-headed. This should not be surprising, as consultants may have been involved in the background, and some are easily swayed by the wisdom of 26-year-old savants.
Climbing down from the aerie of high dudgeon, we are dismayed that it is apparently amazingly easy to either forget or ignore the core directions of changed relationships within both supply chain and corporate functions as we plunge deeper into the 21st century.
THE EMERGING BIGGER PICTURE ...
We have written, enthusiastically and approvingly, about the evolution away from last-century organizational paradigms. In short, the old model of operations management was often either led or controlled by an old-school executive, whose value was measured in the number of his (less often, her) direct reports and the number of functional departments making up his stable of skills and results. A popular management style was to pit departmental executives against one another in competition for budget money, capital, and positions as heirs-apparent. Performance targets were typically inwardly focused. Not only were they unaligned with one another for collective outcomes, but they were frequently in direct opposition, creating win-lose (or lose-lose) opportunities at almost every turn.
In the new century, we are seeing the beginnings of a sea change. The top executive in a supply chain management environment is no longer yesterday's operational lion tamer, with chair, whip, and pistol at the ready. He (and more often than ever before, she) is a facilitator and a builder, who fosters close positive working relationships within the chain and within the company. The idea is not internal competition; it is collaboration, synchronized execution, common and aligned performance targets, and a focus on enterprise success based on serving customer needs perfectly, even spectacularly.
We are moving away from the adversarial operations management model and toward the positive and integrated supply chain model. The direction is clear, but the pace of change is sometimes tentative. Both models will be around in parallel for some time.
Obviously, though, both models cannot exist side by side within a single organization without introducing very stressful cognitive dissonance and creating an umbrella of dysfunction. Equally obviously, in an age of external collaboration with suppliers and customers, internal collaboration is a must, a prerequisite. So, what are these people thinking when they gleefully salute a takeover within the realm of supply chain management?
THE ROLE OF ENLIGHTENED PROCUREMENT
We've written, too, about the necessity of including sourcing and procurement as part of end-to-end holistic supply chain organizations. It is vital to include, integrate, and synchronize what those folks do in creating profitable customer relationships and creating shareholder value. But "supply" is not "supply chain"—there are more pieces to the puzzle, and this news can stun those who think the universe begins and ends with good procurement practices.
THE REAL ISSUE
The core of our concern is not so much procurement as it is the notion that any functional area is being positioned to "take over" the supply chain. What's next, a palace coup by customer service? Just picture it, a gaggle of troops wearing headsets and camo gear, waving banners with revolutionary slogans, marching and singing like students in "Les Miz."
The idea that any function is superior or should, by virtue of title, rule the supply chain world is shaky on its best day and destructive in the long run. Our most important attribute is the ability to have everyone on the same bus and to not be fighting over who should be driving.
THE SUPPLY CHAIN LEADER
OK, smart guys, who, then, should be in charge of supply chain management? Our answer: no one based on job title, but someone with the right set of attributes. These are fairly simple to state, but very difficult to find. As for those attributes, in our view, the person must be:
A leader, not a manager. The successful supply chain function demands, for real success, to have someone at the top who can rally, align, and persuade those around him or her. Someone who attracts followers but does not command minions.
A visionary, not a rule-maker. Someone who is not a mere dreamer, but someone who can craft the structure of a distant, but far superior, future. And embed in that future the seeds of sustainable success, both external and internal.
A clear thinker, who is not seduced by passing fancies and who can cut through the clutter to get to core issues and opportunities.
A passionate server of customers and their needs in succeeding in their markets with their customers.
A performance-obsessed value creator—for the company, for its shareholders, and for its associates—someone who truly understands the full range of supply chain contributions to long-term success, and not merely a cost/price/inventory-cutter.
A broadly experienced supply chain professional who understands what the supply chain's components are, how they work together, and how they—in concert—deliver the goods.
It's a tough job, finding a walks-on-water individual who is genuine and authentic to the core. But the supply chain of today—and tomorrow—really demands no less. Not only is the search worth the effort, it could be the difference between being around or sinking beneath the waves as sea changes continue to roll in.
Economic activity in the logistics industry continued its expansion streak in October, growing for the 11th straight month and reaching its highest level in two years, according to the most recent Logistics Managers’ Index report (LMI), released this week.
The LMI registered 58.9, up from 58.6 in September, and continued a run of moderate growth that began late in 2023. The LMI is a monthly measure of business activity across warehousing and transportation markets. A reading above 50 indicates expansion, and a reading below 50 indicates contraction.
October’s reading showed the fastest rate of expansion in the overall index since September of 2022, when the index hit 61.4. The results show that the industry is continuing its steady recovery from the volatility and sluggish freight market conditions that plagued the sector just after the Covid-19 pandemic, according to the LMI researchers.
“The big takeaway is that we’re continuing the slow, steady recovery,” said LMI researcher Zac Rogers, associate professor of supply chain management at Colorado State University. “I think, ultimately, it’s better to have the slow and steady recovery because it is more sustainable.”
All eight of the LMI’s indices grew during the month, with the Transportation Prices index showing the most growth, at nearly 6 points higher than September, reflecting increased activity across transportation markets. Transportation capacity expanded slightly during the month, remaining just above the 50-point threshold. Rogers said more capacity will enter the market if prices continue to rise, citing idle capacity across the market due to overbuilding during the pandemic years.
“Normally we don’t have this much slack in the market,” he said. “We overbuilt in 2021, so there’s more slack available to soak up this additional demand.”
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
The port worker strike that began yesterday on Canada’s west coast could cost that country $765 million a day in lost trade, according to the ALPS Marine analysis by Russell Group, a British data and analytics company.
Specifically, the labor strike at the ports of Vancouver, Prince Rupert, and Fraser-Surrey will hurt the commodities of furniture, metal products, meat products, aluminum, and clothing. But since the strike action is focused on stopping containers and general cargo, it will not slow operations in grain vessels or cruise ships, the firm said.
“The Canadian port strike is a microcosm of many of the issues that are impacting Western economies today; protection against automation, better work-life balance, and a cost-of-living crisis,” Russell Group Managing Director Suki Basi said in a release. “Taken together, these pressures are creating a cocktail of connected risk for countries, business, individuals and entire sectors such as marine insurance, which help to mitigate cargo exposures.”
The strike is also sending ripples through neighboring U.S. ports, which are hustling to absorb the diverted cargo, according to David Kamran, assistant vice president for Moody’s Ratings.
“The recurrence of strikes at Canadian seaports is positive for U.S. ports that may gain cargo throughput, depending on the strike duration,” Kamran said in a statement. “The current dispute at Vancouver is another example of the resistance of port unions to automation and the social risk involved with implementing these technologies. Persistent disruption in Canadian port access would strengthen the competitive position of US West Coast ports over the medium-term, as shippers seek to diversify cargo away from unreliable gateways.”
The strike is also affected rail movements, according to ocean cargo carrier Maersk. CN has stopped all international intermodal shipments bound for the west coast ports of Prince Rupert, Robbank, Centerm, Vanterm, and Fraser Surrey Docks. And CPKC has stopped acceptance of all export loads and pre-billed empties destined for Vancouver ports.
Connected with the turmoil, Maersk has suspended its import and export carrier demurrage and detention clock for most affected operations. The ultimate duration of the strike is unknown, but the situation is “rapidly evolving” as talks continue between the Longshore Workers Union (ILWU 514) and the British Columbia Maritime Employers Association (BCMEA), Maersk said.
Terms of the acquisition were not disclosed, but Mode Global said it will now assume Jillamy's comprehensive logistics and freight management solutions, while Jillamy's warehousing, packaging and fulfillment services remain unchanged. Under the agreement, Mode Global will gain more than 200 employees and add facilities in Pennsylvania, Arizona, Florida, Texas, Illinois, South Carolina, Maryland, and Ontario to its existing national footprint.
Chalfont, Pennsylvania-based Jillamy calls itself a 3PL provider with expertise in international freight, intermodal, less than truckload (LTL), consolidation, over the road truckload, partials, expedited, and air freight.
"We are excited to welcome the Jillamy freight team into the Mode Global family," Lance Malesh, Mode’s president and CEO, said in a release. "This acquisition represents a significant step forward in our growth strategy and aligns perfectly with Mode's strategic vision to expand our footprint, ensuring we remain at the forefront of the logistics industry. Joining forces with Jillamy enhances our service portfolio and provides our clients with more comprehensive and efficient logistics solutions."
In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.
British carbon emissions reduction platform provider M2030 is designed to help suppliers measure, manage and reduce carbon emissions. The new partnership aims to advance decarbonization throughout Clorox's value chain through the collection of emissions data, jointly identified and defined actions for reduction and continuous upskilling.
The program, which will record key figures on energy, will be gradually rolled out to several suppliers of the company's strategic raw materials and packaging, which collectively represents more than half of Clorox's scope 3 emissions.
M2030 enables suppliers to regularly track and share their progress with other customers using the M2030 platform. Suppliers will also be able to export relevant compatible data for submission to the Carbon Disclosure Project (CDP), a global disclosure system to manage environmental data.
"As part of Clorox's efforts to foster a cleaner world, we have a responsibility to ensure our suppliers are equipped with the capabilities necessary for forging their own sustainability journeys," said Niki King, Chief Sustainability Officer at The Clorox Company. "Climate action is a complex endeavor that requires companies to engage all parts of their supply chain in order to meaningfully reduce their environmental impact."
Supply chain risk analytics company Everstream Analytics has launched a product that can quantify the impact of leading climate indicators and project how identified risk will impact customer supply chains.
Expanding upon the weather and climate intelligence Everstream already provides, the new “Climate Risk Scores” tool enables clients to apply eight climate indicator risk projection scores to their facilities and supplier locations to forecast future climate risk and support business continuity.
The tool leverages data from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) to project scores to varying locations using those eight category indicators: tropical cyclone, river flood, sea level rise, heat, fire weather, cold, drought and precipitation.
The Climate Risk Scores capability provides indicator risk projections for key natural disaster and weather risks into 2040, 2050 and 2100, offering several forecast scenarios at each juncture. The proactive planning tool can apply these insights to an organization’s systems via APIs, to directly incorporate climate projections and risk severity levels into your action systems for smarter decisions. Climate Risk scores offer insights into how these new operations may be affected, allowing organizations to make informed decisions and mitigate risks proactively.
“As temperatures and extreme weather events around the world continue to rise, businesses can no longer ignore the impact of climate change on their operations and suppliers,” Jon Davis, Chief Meteorologist at Everstream Analytics, said in a release. “We’ve consulted with the world’s largest brands on the top risk indicators impacting their operations, and we’re thrilled to bring this industry-first capability into Explore to automate access for all our clients. With pathways ranging from low to high impact, this capability further enables organizations to grasp the full spectrum of potential outcomes in real-time, make informed decisions and proactively mitigate risks.”