Building a resilient and sustainable supply chain in 2021
Six of the world’s most influential procurement and supply chain leaders, spanning several industries and geographical regions, offer their insights on how to future-proof supply chains in the year ahead
Ingrid De Ryck, Chief procurement and sustainability officer, Anheuser Busch
Malcolm Harrison, Group chief executive, Chartered Institute of Procurement & Supply
William Holmes, Global head of supplier diversity, GlaxoSmithKline
Ryan Nied, Commercial transformation director, global procurement, bp
Charles Minutella, Head of due diligence, Refinitiv, an LSEG business
Thomas Udesen, Chief procurement officer, Bayer, and co-founder of the Sustainable Procurement Pledge
What are the biggest challenges in the supply chain and procurement functions?
CM: There is an explosion of new risks that must be managed. Several supplier risks have come into focus in the last 12 months, including environmental, social and corporate governance (ESG) risk and reputational risk. The industry is at an inflexion point where there is a need to rethink how to make supply chains sustainable because they are being forced to expand due to the changing dynamics. How do you manage that data and risk?
IDR: In the last 12 months, the biggest challenge in the beverage industry has been answering a huge shift in consumer demand while continuing to operate as a sustainable supply chain. The move from bars and restaurants to home consumption has brought a significant demand-mix change in beverage containers. On top of that, the massive and rapid increase of the ecommerce channel, combined with a shortage of drivers and reduced investment in trucks, has also made the transportation market challenging, creating a perfect storm.
WH: The coronavirus pandemic not only impacted our supply chain, but also amplified global healthcare and economic disparities for minority communities. However, challenges represent opportunities. At GSK we were able to further elevate our supplier diversity efforts in support of under-represented groups. For instance, during last year’s personal protective equipment (PPE) shortage, we were able to introduce new diverse suppliers that met our needs at a critical time.
RN: The biggest challenge we are working on right now at bp is how to start up as a new procurement and supply chain organisation that aligns with our net-zero carbon ambition following the most significant transformation in the company’s 111-year history. We are shifting to an agile-at-scale-type culture. Large amounts of focus are going on how we navigate the business from a legacy oil and gas company to a highly integrated, sustainable energy company.
MH: The big challenge for people working in procurement and supply in the last couple of years has been the agenda’s incredible broadening. It used to be about savings, and then it was about resilience, and then sustainability and social value. How do we embrace all these new technologies that are coming along as well?
What do successful procurement and supply chain functions look like in 2021?
MH: It’s always been important that a procurement-supply function is highly aligned with what your business stands for, but these days companies are thinking much more about their purpose. It’s not just about delivering profit to shareholders, they’re also thinking about what they are doing about the important issues to society. In a world where consumers think about what brands they’re going to buy, where employees think about who they’re going to work for, or indeed investors think about who they’re going to invest in based in part on the reputational image of that company, it’s very much about how you manage your supply chain.
WH: Research data shows that more than 85 per cent of the millennial population want to invest in and work for companies that are showcasing their ability to respond to environmental and social factors. When you have programmes in place that drive sustainability, and diversity and inclusion, specifically around the supply chain, you’re showcasing your company to that up-and-coming talent and to those investors.
TU: We see a trend across most of these progressive organisations, driven by investor sentiment and access to talent, which makes clear you have to up your game and act responsibly and look beyond the next quarter. The Sustainable Procurement Pledge, which is an initiative that I co-founded, is necessary and timely as we believe there is no sustainable supply chain without sustainable procurement. We are reaching out to the approximately one million practitioners globally, trying to engage them, equip them with the relevant knowledge and make sure this topic becomes front and centre of supply chains and procurement organisations throughout the world.
IDR: No single company can build a sustainable supply chain by themselves; it’s about collaboration and partnership across the entire value chain. Until a couple of years ago, we would never bring competing suppliers in the same room, but now discussing together how to make our collective supply chain more sustainable is a source of innovation.
MH: Smart partnering marks a change of direction. Collaborating with competitors would not have been talked about 25 years ago, but today we recognise there are certain issues that no one can solve on their own.
Apart from ESG pressures, what are the factors to consider when creating a robust supply chain?
IDR: Agility is essential. Five years ago, we never imagined Brexit would happen or that there would be huge trade discussions in the United States and then we were hit by the COVID-19 pandemic. Agile supply chains are instrumental to operate under that kind of duress while keeping it as cost effective and sustainable as possible. Authorities, governments and international collaboration can significantly help reduce supply chain pressure.
CM: Damages from cybercrime are estimated to reach $6 trillion this year, which would make it the third-largest economy in the world. This figure is forecast to rise to $10.5 trillion by 2025. Our customers want to gain a better sense of the cyber-resilience their suppliers have. We’re also seeing more of a push for more predictive analytics on suppliers to identify risks throughout the supplier life cycle.
RN: Strategic partnerships are important to fuel collaboration and increasingly those are driven by procurement. For example, two of the largest partnerships at bp are with Amazon and Microsoft, which are reciprocal supplier-customer relationships with a joint commitment to achieving net zero. Clearly, a shift-change is underway: the procurement function is less subservient. A different type of leadership is required to navigate these complex, multi-stakeholder relationships to serve the greater good. You need to connect the dots across a large enterprise, always putting the company purpose and ambition first. And then it’s about working and influencing across the network to find the areas of greatest opportunity.
TU: Identifying second and third-tier partners is important for a supply chain leader. Given a high majority of the global economy relies on small and medium-sized enterprises, it makes it vital to ensure they have mature practices and I think there is a gap in terms of leadership. Regulators have a key role to play, but it is a tough balance to strike; a bit of stick is needed, but punitive fines are not the only way to encourage good practices and behaviours. The carrot has to be there, too.
How will procurement and supply chain functions evolve in the coming years?
WH: There will be greater need for agile and responsive supply chains, opening up opportunities for small and diverse suppliers that can be more nimble, boost innovation and serve the communities we work in. We will further embed supplier diversity and sustainability in our culture, so procurement managers can drive inclusion and sustainable sourcing strategies and processes, and feel confident to do so.
TU: It is about that intersection between sustainability and innovation. How do you orchestrate these ecosystems that you have in your supply base to extract the most value? We saw more collaboration between companies and governments during the coronavirus crisis, for example, to deliver PPE. I hope this will open a whole new domain where private and public sector partnerships drive meaningful change.
CM: A mindset shift is required to be able to deliver ambitious ESG goals. It’s going to cost more money, so how do you handle this, especially in a role that has historically been so focused on cost-savings?
RN: There must be a redefinition of the value proposition of procurement at the board level, around the impact we’re making not only for the organisation, but in the various stakeholder constituencies. Traditionally, all of us felt the pressure around what we’re going to do to deliver the in-year cost value targets. There should be more tangible frames around how we’re actually making an impact in these different areas.
MH: You’re now asking the supply-procurement function to deliver an awful lot more things that non-financial metrics will govern, but there’s some important thinking to be done to determine what those metrics are because they might not all be comparable.
What most excites you about the future?
RN: I’m excited about how agile ways of working and horizontal integration will open up new opportunities for talent development. I grew up as a category leader and I had my ‘lanes’ that I operated in. In the new world, our people are not limited by their category of spend. They have high business acumen and high learning agility. They can drop themselves into a transformational project with a level of influence to drive change, and then move onto the next big thing. This is a different skill set – and digital tools will help us move with greater pace, transparency and collaboration.
WH: I’m passionate about driving and growing supplier diversity in a way that drives value to our consumers, patients and workforce. For example, our consumer healthcare business working with diverse agencies to support GSK’s global marketing efforts to increase diverse customer representation and reach, and our pharma business working with agencies to support education and communications for minority participation to support clinical trial diversity. Also I’m excited about GSK’s global inclusion and diversity strategy and growing our inclusive and diverse culture.
IDR: What really excites me is the innovation coming from collaboration that will help us decarbonise the supply chain. We are just scratching the surface right now.
TU: It will be interesting to realise the true insight potential of artificial intelligence and digitalisation, to help us see a little bit into the future and better manage the risks.
CM: There’s going to be a lot of innovation that can drive value out of data for the supply chain and procurement functions. In the next three to five years, that innovation, coupled with our pledges to drive sustainability, will be interesting to follow.
MH: It’s an incredibly exciting time for the profession. There are more opportunities to address issues that are important to society. What we can do as leaders is help young people to understand how exciting it is. This will drive young talent that will be great for both the profession and society.
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