The ill-informed might assume that a supply chain career is simply about shifting boxes around. But, as any supply chain director would tell them, there’s a lot more to it than that, and developments in the past few years have meant that the role is becoming ever more complex.
So how has it evolved, and what is the impact of having to juggle these extra responsibilities?
First and foremost, the wide-reaching effects of the present economic climate certainly haven’t escaped supply chain teams. The credit crunch has had major effect on stock holding. Credit insurers are reducing retailers’ credit ratings across the board, so it is proving more and more difficult for retailers to trade in the kind of quantities they were able to during the boom. Geoff O’Neill, who was Borders supply chain director until the start of this month, says: “It has a huge impact on inventory management. There are much stricter controls now. It’s something that supply chain teams wouldn’t have had to think about a couple of years ago.”
Linked with this increased focus on inventory management is the need to know far more about store operations. Homebase supply chain director Richard Morgan says: “There is far greater breadth in the role now. More enlightened companies are getting involved more in aspects such as space and layouts, replenishment methodology and inventory policies. It’s now far more about knowing in-store processes, rather than: ‘There you go, I’ve got it to the store, you do the rest’.”
O’Neill adds that security issues have also had a significant impact on supply chain teams – particularly after September 11. “A few years ago, I was speaking at a conference in the US and I was asked what I would do if I found a weapon of mass destruction in one of my containers,” he says. “We’d never had to think about before, but it’s a theoretical risk because a lot of the world’s container traffic is unsecured.”
Supply chain professionals now need much stronger business acumen. They are required to understand and focus on the financial aspects of the supply chain, find the most cost-effective supply network and ensure that logistics can be used to create value.
Former Woolworths supply chain director Alistair Charatan – now director at retail supply chain consultancy EOC Consulting – also points out that, at the same time, supply chain directors are under more cost pressures. “Their costs are rising so much – labour, agency labour and fuel are all increasing greatly.”
Ming Tang, senior executive at Accenture’s supply chain management practice, says: “At a higher level, most supply chain director roles are getting more credence within retail businesses, but it’s high pressure for all supply chain professionals at the moment.”
One of the most dramatic changes has been the huge upsurge in international sourcing. Managing the influx of goods from numerous far-flung corners of the world and ensuring that those goods arrive cost-efficiently and on time has given supply chain teams much more to think about – not least the different tax implications within each country of export. Furthermore, supply chain teams need to constantly assess whether tax
rates are changing, particularly if there is a new government in one of the countries that the retail business sources from.
As well as sourcing from much further afield, more and more retailers are expanding their businesses internationally. Tang says: “They are having to be even more successful internationally to get a good share price valuation.” As a result, many retailers are having to establish equally lean and responsive supply chains in their business’s increasingly long list of new markets.
The green agenda is yet another relatively recent development that is affecting the day-to-day running of the retail supply chain department. Retailers are trying to make their supply chains greener in a number of ways, including cutting road miles and using more environmentally friendly vehicles.
A focus on environmental issues works well for all concerned because of the cost savings involved. Charatan forecasts that supply chain directors could soon find themselves having to answer increasingly difficult questions about their business’s green credentials. “I would anticipate that more and more green commentators will be asking leaders of retail businesses to publicly quantify their specific carbon emissions on, say, flying beans over from Kenya,” he says. “That will impact very much on supply chain teams. They will become caught up in this and the answers will depend on the level of data and detail available.”
Charatan adds that there are ways in which retailers could give fairly accurate answers, but advises supply chain teams to start thinking now about the data – such as vehicle data – that will need collating.
“Who knows when a supermarket will make the first move and start displaying information about how much carbon has been used flying X from Y? Others will be expected to follow quickly, and if supply chain directors are prepared with this information, it will mean a lot less hassle for them at that time,” he says.
Tang agrees. “The green agenda is going to evolve even further,” she says. “A lot of companies haven’t put down real mechanisms. What will be interesting to see is the risk management issue – retailers are making statements and someone is going to have to prove it.”
She adds that specialist roles are being created within supply chain teams to cope with the increasingly complex tasks. Teams are being separated into those that deal with analytics and optimisation and those that deal with decision-making. “Those that aren’t able to have those specialised groups that focus more on analysis are struggling to compete,” she warns.
Tang adds that the increasingly financial focus of supply chain professionals is redefining their role. “They’re becoming more of a general manager, and the big issue is whether enough of them are experienced enough to do that,” she says.
Morgan backs this up. “Recruitment is getting more difficult. Some of the traditional routes that were open to senior supply chain teams, such as people who had run depots, are not so relevant any more,” he says.
Retailers’ ever-widening international focus is also causing problems with retention. As supply chain jobs become more powerful, it is becoming trickier
to keep the talent. An increasingly common trend is that those with the requisite skills are being tempted by opportunities in Asia, says Tang. “The good
people are being attracted elsewhere,” she adds.
And setting up international supply chains in new markets creates even more challenges for the people side. Tang says: “People development will become even more important because retailers are having to replicate their businesses overseas very quickly. They need to consider whether they have people they know and trust who could do the job overseas and do well over there. At the same time, their competitors are actively recruiting those people all the time.”
The wider role
O’Neill believes a lot of the skills now required are very difficult to teach. “The field of vision of a supply chain director has had to be widened. You’ve got to think about what’s happening in politics and in the financial markets and how that relates to the way you do your day job. It’s far more multi-dimensional than trucks and sheds,” he says. “It’s not necessarily something you can train people in or formalise – it’s an innate awareness that is required across the whole business.”
David Grant, Hull University professor of logistics and member of the British Retail Consortium advisory committee, says: “Some of these skills are new and, with those extra responsibilities, you need more people and there will be a cost for doing this.” He adds that smaller retailers are particularly vulnerable. “They could be more at risk and might not be able to stay on top of that.”
Retail supply chains are far leaner than they have ever been before. There are minimal lead times and there is minimal stock holding. As a result, retailers are also far more exposed. Grant adds that he once researched how long it would take for there to be a crisis if, hypothetically, all carriers were to stop running suddenly. The conclusion was that it would only be about one week before there was next to nothing on supermarket shelves and chaos ensued. “The supply chain roles today have a huge focus on risk management and there is no slack to cover shortfalls,” he warns.
Charatan believes that retailers now realise that the supply chain professional is a “huge differentiator of sales, competitiveness and cost, and that there is a far better understanding at boardroom level of what the role involves”.
Wider recognition of the role is a positive development, but there is a serious risk that too much may be demanded from these teams too quickly. Attention must be devoted to ensuring these professionals are given the resources to deal with these additional tasks and manage their training and development, otherwise retailers risk losing the top talent that is so crucial. And, if that happens, they could find themselves at a very untimely competitive disadvantage.