'Investment the key to optimise supply chain networks'

A study last year by the CBI highlighted a lack of investment in the supply chain, with a particular focus on a growing skills gap.

Some of the UK’s most important manufacturers have echoed this concern. “We are only as good as our supply chain capabilities,” said Mike Wright, executive director of Jaguar Land Rover. “In the 1980s and 90s a lot of the supply chain was hollowed out. That has to be reversed.”

For an international business, moving manufacturing or the supply chain foundation to a low-cost manufacturing base has obvious commercial advantages. But it also brings challenges and risks. Adding more partners on a global scale lengthens the supply chain and makes it more susceptible to disruption. Longer lead times also makes supply chain planning harder. Rather than one company seeing the process through from start to finish, there could be multiple companies involved at each stage of the process.

Inevitably, optimising supply chains is much harder with multiple parties and individual planning systems involved. Likewise, communication and visibility is much more difficult compared with firms that have a local, end-to-end supply chain controlled by a single operation.

All of these issues support the business case for investment in strong, strategic supply chain planning capabilities for the many modern firms that use offshore supply chain partnerships. In particular, good demand forecasting, visibility of all products across the supply chain and a culture of responsive communication that enables businesses to support more reactive networks.

One of the points highlighted in the CBI report was a skills shortage in the sector. Here too, it is essential for businesses to invest in training and talent. This would enable them to truly capitalise on the latest technologies capable of helping them optimise offshore and domestic supply chain networks.

Without this investment in people, firms are less able to make use of technology and achieve key goals such as cost-savings and service improvement. This was reflected in a recent Gartner survey showing that 73 per cent of manufacturing companies that redesigned their supply networks in the past two years did not achieve the benefits they originally sought. It concluded that “lack of investment in talent – in less mature organisations – is impeding progress on the process and system improvements required for successful supply planning.”

With cost and risk an ongoing priority for the supply chain, businesses should heed the talent warning. Likewise, the UK government needs to invest in and provide R&D breaks to businesses that will support a new generation of engineers and talent.

Fraser Ironside is head of strategic modelling at Barloworld Supply Chain Software

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