Supply Chain 2015

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RACONTEUR.NET /COMPANY/RACONTEUR-MEDIA /RACONTEUR.NET @RACONTEUR 1 i f t SUPPLY CHAIN ONLINE: WWW.RACONTEUR.NET/SUPPLY-CHAIN-2015 P03 Overview T he global economy may be improving, but the fear of a new crisis is never far away – impacting how organisations set up and run their supply chains. According to figures from Zurich Insurance, 81 per cent of business - es experienced at least one supply chain disruption last year. Its Glob- al Risks 2015 Report identified ge- opolitical tensions, in Ukraine and the Middle East, for example, as the most significant threat to organisa- tions in the year ahead. "Interstate conflicts can have a detrimental effect on supply chains and, as new sanctions come into place, businesses may see some of their suppliers affected," says Nick Wildgoose, global head of supply chain at Zurich Insurance. "We have also seen a marked rise in techno - logical risks, in particular cyber at- tacks. Businesses that work with a multitude of suppliers often allow vendors to access their own systems and could ultimately be offering a direct route for hackers." The turbulent geopolitical and economic environment means or - ganisations' supply chains need to be more flexible, and supply chain lead- ers need to factor in the costs of po- tential disruption. "Today, managing costs is about moving more quickly towards agile supply chains, which allows for rapid response to chang - ing market conditions and variable cost structures that ramp up and down with revenues," says Gerard Chick, chief knowledge officer at Optimum Procurement Group. "Flexibility is the antidote for cost volatility and to improve the or - ganisation's cost structure and bring growth." Supply managers need to create interconnected networks of suppliers and manufacturers to help with this, he believes, drawing on intelligent modelling capabilities to assess the cost, quality and time implications of any decisions. ON-DEMAND ECONOMY The move towards an on-demand economy, based around shorter lead times, is also increasing pressure on supply chains, says David Noble, chief executive of the Chartered Institute of Procurement and Sup - ply. "Products are beginning to be commoditised quickly and can be produced in small labour units," he says. "Those that execute better and faster than others will fare better." Technology will have a role to play in helping supply functions cope with these increased challeng - es, both in planning and designing supply chain operations, and in the movement of goods. Much of this will come from the so-called internet of things (IoT) made up of intelligent devices that can communicate with each other and alert organisations to potential problems or shortages. "The basic effects of IoT are al - ready being seen as businesses put RFID [radio-frequency identifica- tion] chips and QR [quick response] sensors into products to track them across the supply chain," says Hans- Georg Kaltenbrunner, vice presi - dent, manufacturing strategy, Eu- rope, the Middle East and Africa, at JDA. "In the near future, machinery beyond premium cars will actively send performance metrics back to manufacturers, making it easier for them to pre-empt maintenance needs before faults occurs." Big data is also having an impact, allowing organisations to better pre - dict what will be needed and where, as well as in the logistics of moving goods around, as long as it can be used effectively. "Even more infor - mation is available to help make plan- ning inventory more accurate, but it can soon overwhelm people," warns Melissa Cupis, managing director of AGR Inventory. "Technology can help to bridge that gap by turning data into useful information at the right point in the process. A good example would be the availability of free weather data or social likes as an input into supply chain planning." The procurement function is also undergoing significant change in the wake of the end of the finan - cial crisis. Closer relationships with finance departments have meant a new level of cost reductions in the region of 15 to 20 per cent in some categories, says Rob Woodstock, m a n a g i n g d i r e c t o r, o p e r a t i o n s strategy, at Accenture, while the procurement is also much more involved in supporting growth and transformation than was the case before the downturn hit. In addition, the digital revolution is impacting procurement in both the nature of suppliers with which it liaises and the speed with which it has to engage. "The sourcing team is presented with the challenge of working with much smaller organi - sations where there is little historical information," says Mr Woodstock. "The speed and style of contracting has to be far more agile than a tra - ditional long-term sourcing process and relationship." The development of supplier networks also requires different skills, he adds, including being able to encourage innovation from partners. Alongside developing a supply chain that is equipped to cope with the increased pressure on organisations is the ongoing need to run operations in a responsible manner, after a spate of recent supplier-related scandals. "The risks are as great as ever as global trade continues to grow," says Professor David Menachof, Peter Thompson chair in port logistics at Hull University Business School's Logistics Institute. "How do you make sure that your firm has an eth - ical supply chain, avoiding modern slavery or child labour, for instance, with one of your suppliers or sup- pliers' suppliers? None of the global names wants to risk their reputation over an event that could be prevent- ed with forethought in the design of their supply chain." Fresh challenges face supply chain bosses as world trade continues to evolve at a rapid rate and possible disruption is a constant threat, writes Nick Martindale Publishing Manager David Kells Managing Editor Peter Archer Head of Production Natalia Rosek Design, Infographics & Illustration The Design Surgery www.thedesignsurgery.co.uk Although this publication is funded through advertising and sponsorship, all editorial is without bias and sponsored features are clearly labelled. For an upcoming schedule, partnership inquiries or feedback, please call +44 (0)20 3428 5230 or e-mail info@raconteur.net Raconteur is a leading publisher of special-interest content and research. Its publications and articles cover a wide range of topics, including business, finance, sustainability, healthcare, lifestyle and the arts. Raconteur special reports are published exclusively in The Times and The Sunday Times as well as online at www.raconteur.net The information contained in this publication has been obtained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. © Raconteur Media Contributors Distributed in The speed and style of contracting has to be far more agile than a traditional long-term sourcing process and relationship MICHAEL DEMPSEY Journalist and media consultant, he has worked for BBC News, Financial Times, and numerous other publications and broadcasting organisations. NICK MARTINDALE Award-winning freelance journalist and editor, he contributes regularly to national business media and trade press, specialising in HR and workplace issues. DAN MATTHEWS Journalist and author of The New Rules of Business, he writes for newspapers, magazines and websites on a wide range of business issues. CHARLES ORTON-JONES Former Professional Publishers Association Business Journalist of the Year, he was editor-at-large of LondonlovesBusiness.com and editor of EuroBusiness magazine. MIKE SCOTT Freelance journalist, specialising in environment and business, he writes regularly for the Financial Times, The Guardian, Forbes and 2degrees Network. EDWIN SMITH Writer and editor, he has contributed to The Guardian, The Independent, The Independent on Sunday, The Sunday Telegraph, London Evening Standard, City AM and Private Eye. AGILITY IS KEY IN ON-DEMAND UK Image: Getty 83% of chief executives believe their supply chains are "not optimal" to meet today's demands Source: PwC/Forbes/JDA 15% believe their supply chain is resilient enough to address the threat of external disruptions Source: PwC/Forbes/JDA of businesses experienced at least one supply chain disruption last year Source: Zurich Insurancez Distributed at 81%

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