The UK’s exit from the EU underlines the need to create supply chains that genuinely serve the customer
What do CEOs expect from their supply chains? Squeeze some costs, drive efficiency, and avoid disasters. In the globalised, volatile, technologically disrupted 21st century marketplace, that attitude is untenable. As Brexit shows, business as usual no longer exists.
A truly demand-driven supply chain, built around efficiently fulfilling customer expectations, is key to growth. The return on investment can include a 1-4% rise in sales, 5-10% cut in operating expenses and a 20-30% reduction in inventory.
Erich L. Gampenrieder, Global Head of Operations Advisory and Global Operations Center Of Excellence, KPMG International says there are two key challenges: “Our research shows that organizations often do not start with a consistent approach towards an end-to-end supply chain and lack a clear supply chain vision. The plan for a demand-driven supply chain should fit the company’s strategy and tell stakeholders what their supply chain will be like in three years time. Organizations also need the right mix of innovative and proven concepts – and the latter must be implemented by trained, enabled people working towards a common goal.”In KPMG’s experience, there are five building blocks to success:
1. Align the supply chain with corporate strategy, integrate it with customer-facing functions and focus on customer needs. Look beyond the classic supply chain KPIs to measure customer satisfaction and net promoter scores.
2. Enhance visibility, sharing and using information across functions so that everyone knows what customers want and where materials, parts and finished products are. To reconfigure your supply chain for a post-Brexit world, you must know about your second and third tier suppliers.
3. Become flexible and agile enough to deal with unexpected events and source new materials, revamp logistics, scale up or down, or enter new markets. In the past decade the world has been shaken by the Arab spring, Fukushima and Brexit. Supply chain leaders need scenarios to cope with such shocks. Andrew Underwood, UK Head of Supply Chain & Operations for KPMG, says: “The consequences of Brexit will fundamentally change the financial impact of the physical flow of goods in and out of Europe, and to those countries where free trade agreements currently exist. While the specific consequences are a way off, clear scenarios can be planned around VAT, customs duties and currency. Supply chain executives should take the lead. Waiting for final trade agreements before planning your post-Brexit supply chain will make it hard for you to optimise your global sourcing options”.
4. Make the supply chain fit for local, regional and global competition and evolving regulations. After Brexit, this is vital. Trade – and its regulation – is globally contentious. Companies must be flexible enough to handle volatility.
5. Address different customer needs and values by segmenting and differentiating end-to-end supply chains and efficiently providing products and services your customers genuinely value. Many companies convince themselves they already have what the customer wants – and then the market tells them otherwise. Because demand-driven supply chains produce real time information, organizations can react quickly to market fluctuations.
At the heart of the demand-driven supply chain is the recognition that procurement is dead. Organisations that persist with traditional procurement, a back-office, backward-looking process-driven function, will fall behind. Procurement leaders must abandon their silos, understand what creates value for the business and think strategically. Brexit is a chance to show CEOs that their role is to drive growth, not tick boxes.
Erich L. Gampenrieder: “Our research shows that organizations often do not start with a consistent approach to an end-to-end supply chain, and lack clear supply chain vision”