Supply Chain Resilience
Ensure your supply chains are robust, maintain at least dual supply and tie in suppliers to hold safety stock for you. Many companies have suffered this year as supply chains, previously thought of as robust, have failed dramatically. Many logistics companies when faced with capacity challenges have cut off the tail of smaller customers leaving these companies to urgently find alternative suppliers. The huge surge in demand for PPE and silicone gloves took levels of some chemicals involved in their manufacture to critically low levels, this has a knock-on effect to other industries where these chemicals are key constituents. Consider geographical risk and total delivered cost – where some companies relied heavily on far East supply pre-pandemic they will now spread this risk as they faced factories closed for months and then spiralling freight prices.
Wherever possible allow for late-stage customisation to meet changing customer demand patterns. Consumer surveys are indicating that the pandemic has increased brand switching and trialling of new products. This will require manufacturers to quickly change to meet these demands. Those companies who can adapt quickest will gain in changing demand times. A Sussex brewery with a focus on trade supply had several ready-made beers for consumer supply but had inadequate canning capacity to capitalise. A Brighton bag manufacturer was ideally placed to capitalise on the need for attractive masks but could not adapt their processing to efficiently manufacture small mask products. An innovative South East engineering company was able to adapt its 3D printing machines, previously little used, to manufacture parts and spares for its products when its supply chain collapsed at the start of the pandemic, this flexibility allowed it to trade seamlessly throughout the year.
Ensure you understand what value means for your customers. Lockdown, online shopping and hours spent at computers will have changed the habits of consumers and B2B buyers for good. Whilst price comparison is much easier with internet procurement if a company understands its customer’s value chain then it will maximise both customer satisfaction and profit by taking price away from being a main comparator. Speed of supply will normally be paid for, without much resistance, and this can be achieved through late customisation, fast supply chains and good logistics. Artificial intelligence selection systems have a part to play here in procurement. Buyers can be led to higher value products by features and benefits guidance and direction from a good AI selection tool.
Do not simply measure if you could do it cheaper, take a broader view. Efficiency is traditionally based on time and motions study work from the 1950’s. Whilst this still has a place in cost management, a more holistic view should consider the total manufacturing process. A holistic approach should consider if investment could allow manufacture in a fundamentally cheaper manner, less reliant on human intervention. Challenge your ROI criteria, industrial equipment will rarely payback fast but improved quality, flexibility, consistency and scalability should provide other means of return. Do not discount outsourcing or discontinuing a product if it does not fit in your future strategy – selling or licensing technology can be easily achieved even with small volumes.
Train and develop your good people. Human capital is the most valuable asset in business but is rarely nurtured or invested in adequately. Almost every business I work with is looking for the employee who will be driven, innovative, accountable and shows great leadership skills. The smarter companies are not looking in Hays, Reed or Indeed but choose to invest in their own talent. Developing employees should be a two-pronged approach, invest in some formal training and ensure there is constant review, feedback and mentoring. Successful leaders surround themselves with good people and all adopt the rule “if I’m the smartest person in the room I’m in the wrong room”.
Embrace Industry 4.0 or the 4th industrial revolution
When I hear this mentioned most executives raise their eyes skyward however understanding it and adopting it in businesses of all sizes is probably the most important piece of advice I would give to a company. At its simplest Industry 4.0 is utilising all the data available from modern equipment to provide advanced analytics which can be used to improve processes and increase profitability. Most organisations significantly underutilise the data that is available from the processing equipment they use. There are 4 main areas to embrace:
(1) Interconnection – The ability of machines, devices, sensors and people to connect and communicate with each other via the Internet of things.
(2) Information transparency —Provides operators with comprehensive information to make decisions.
(3) Technical assistance — The technological facility of systems to assist humans in decision-making
(4) Decentralised decisions — The ability of cyber physical systems to make decisions on their own and to perform their tasks as autonomously as possible. Adopting these transformative technologies, many of which already exist in organisations will produce real improvement to the bottom line.
The need to operate in as sustainable a manner as possible whilst once the domain of the more ethically driven companies is now a universal competitive requirement. Some industries have regulated environmental requirements however the real drivers for change are:
Eco-efficiency – Where recycling, waste minimisation and use of renewable energy is driven by cost through grants, tariff reductions or simple cost reduction.
Customer choice – Consumers and especially B2B customers will use environmental impact as part of their selection criteria. Many retailers will demand certain standards and sourcing provenance prior to listing a product.
Investor pressure – Shareholders, especially institutional investors, will have certain environmental criteria that they will apply to their investments. Companies will have to comply or will face disinvestment by shareholders.