The Flexible Supply Chain – ESC 2010 – Day 1

Yesterday I had the great honour to chair day one of Extended Supply Chain 2010. This year’s theme was: The Flexible Supply Chain – meeting customer needs by responding efficiently to constantly changing market conditions. Very timely theme, as many companies are trying to take advantage of the slow, but volatile, exit of the recession, particularly in Europe.

We actually had great speakers, and a healthy debate took place with the audience. That’s always a good sign.

We started with John Gattorna and his intriguing approach  of segmenting what he calls the dynamic supply chain. His main argument is that in supply chain, one size does not fits all and points out how different customers have different expectations. Often we forget that, treat them all the same, either irritating our most loyal (and profitable) customers or over deliver (at extra cost) to others. This reminded me of some of our customers that only want us to sell them boxes, while others are looking for thought leadership. Obviously they should not be treated in the same way. But how many companies are analyzing such behaviours and acting upon them?

Throughout the day, a number of recurring teams appeared. First, supply chains are driven by people and that aspect is often overlooked in favour of processes and technologies. The cultural understanding is increasingly becoming critical, particularly in global supply chains were many different geographical and company cultures meet.  Recruiting, training and motivating people is key to run an effective supply chain. This was very well demonstrated by the Henkel contribution.

Second, collaboration with suppliers and customers came back at multiple occasions. Pepsico and Asda illustrated jointly a successful collaboration, recognizing the need for trust and a win-win attitude between the partners. I pointed out that one of the biggest barriers was the measurement put upon the procurement department and its subsequent attitude. That got the debate rolling and there was heavy pushback in the audience. What I meant was that, if the procurement department is measured on cost reduction, they will only focus on reducing the suppliers price, resulting in frustration and unwillingness to collaborate. Responding to a question, I suggested the use of total supply chain costs as a measure for procurement. We had to stop the debate, but the role, organizational position and interaction between procurement and supply chain is probably worth a whole conference in its own right.

Third, working capital was addressed. If we think about it, this would never have been the case 18 months ago, but this recession has demonstrated the importance of working capital and cash flow. How improve the capabilities of the supply chain while reducing inventory (freeing cash) and capacity (reduce assets). As pointed out by the contribution from Kimberly-Clark, traditional boundaries should be challenged. Talk value not volume as the motto.

The last two were innovation and CSR. Innovation demonstrated the need to constantly improve the supply chain. P&G, IBM and HP each gave an example of what they were doing to improve their operations. CSR was presented by Chiquita as an insurance to protect the brand.

All of the above require increased visibility in the supply chain as Cisco pointed out, understanding of what happens, and identification of where the “fat” is located. Could social networking be used to improve trading relationships?

As main conclusion, we all agreed that in a recession people make the difference, and when getting out of this recession, flexibility and agility are of the essence.