Resilient Supply Chains

Rowena Daines (née Morris):

For decades, the watchwords for a successful supply chain were lean management and just in time delivery, it was a global model that promised agile customer service while providing cost and operational efficiencies. Then came Brexit, the pandemic, as well as the war in Ukraine. Lean supply chains ran into supply shortages, capacity issues as well as greater scrutiny. So, looking ahead, digital and decarbonisation will bring new challenges, thus keeping this topic at the top of mind for the boardroom. So, where to start with all of this. I'm Rowena Daines (née Morris), and I'm joined today by PwC partners, Fred Akuffo, from our supply chain and operations team, as well as Cara Haffey, leader of industry for manufacturing and automotive to find out how we can move to mature resilient as well as responsible supply chains. It's great to have you both in our virtual studio today. Thanks so much for joining.

Fred Akuffo:

Thank you, Rowena and hello to all our listeners.

Cara Haffey:

Hi Rowena, great to be with you.

Rowena:

Lovely to have you both with us today. Let's just get into it. Cara, it's fair to say that the automotive industry is a great example of where we've seen a lot of the challenges and disruption around supply chains really playing out. Can you give us a bit of a snapshot on how some of the headlines we've been reading, have been translating into boardroom challenges for us?

Cara:

Yeah, absolutely. The automotive industry has been in the headlines in the newspapers and what we're seeing as an example of supply chain issues and I suppose in actual fact being talked around kitchen tables as well as people think about how to get their new car, whether old or new. How long that's also taking, so clearly there is a stress in the system. In the UK automotive industry, this is something that's been talked about for longer than that, unfortunately because of Brexit and the critical challenges that brought however that did give a lot of my clients the visibility and an awareness before actually the pandemic started. This has been an ongoing issue. People are very aware of where their supply chains now but yet, there's always something new it feels on the horizon and unfortunately with the war in Ukraine, one of the examples, that is highlighted, there might have safety harnesses made for the world's automotive industry and Ukraine itself. Therefore, how people think for the future about how to ramp up and other areas quickly, but also think about how that affects resilience and a supply chain globally. Because who knew before now that was the amount of suppliers and you create in that one particular product area?

Rowena:

It's really shone a spotlight on it, hasn't it? Fred, we were talking just before we started recording, we could talk for a long time around the resilience of supply chain, but can you talk a little bit through, I guess your observations on that?

Fred:

Thank you, Rowena. Yes. Just to reiterate, your opening over the last five years we've been faced with Brexit, we've been faced with a pandemic, more recently, of course, the Ukraine War and we continue to face further lockdowns in China. Until these events again as you mentioned, the focus of supply chain and procurement has been very much about time to market, getting product to market quickly. Also based in just in time inventory, and so that organisations could and can keep their inventory levels low. All of this being measured through working capital, in terms of inventory and also on time delivery. But it poses a lot of challenges now, based on where we are. The real challenges for the boardroom, were seeing is how to really get the executive team working effectively together. Things are changing so quickly, that it's very hard to get financial insights balanced with changes in customer demand, and because of all due to supply disruption. It makes aspects of scenario planning rather difficult to achieve for our clients and we're seeing quite a lot of this and we're in a great position to help drive that for clients. When faced with impacts of scope 3 emissions, how to address changes in regulation, for example, or to adapt to new trends due to customer impacts around the circular economy. These are some of the conversations that we're having on a daily basis with clients and trying to find ways to support the existing operational teams to really address management business reviews at the executive level.

Rowena:

Cara, you had a great story that we were talking about that and really brought this point around, resilience to supply chain and thinking creatively to life. Do you want to share that with our listeners?

Cara:

Yeah, it's an interesting one. One of the anecdotes which I have not yet proven one way or the other was actually one of the companies that builds lithographic machines involved in the fabrication of chips and was doing it annual earnings call and it's not yet known yet whether the CEO made a bit of a joke or not, where companies taking apart other products that had chips in them ripping them apart to use for other industrial modules, e.g., potentially the auto industry. It's interesting just what levels people will be going to think creatively. There's obviously a massive recycling point in this, are we actually recycling enough of the precious metals and things that are around some of our homes in the world, or other places to make sure that we're utilising precious metals and things that we need for chips in as good a way as we can. It's very interesting that supply chain very much hits the ESG question quite quickly, and not just in climate and other ways. This is actually about a very wide view on, are we doing the right things across the planet in mining and in recycling. Conversations on this can go very broad.

Rowena:

That links nicely to my next question. I wanted to touch on how you move to that responsible as well as resilient and mature supply chains. I guess Fred, it'd be interesting to get your perspective on what we're seeing that model actually moved to, we’ve touched on the decision making aspect.

Fred:

Absolutely. The underlying basis is, organisations need to go through some level of planning, transformation and operations transformation as well in order to build maturity in the supply chain. To us, really maturity is the foundation for building and assessing resilience, modelling resilience across the organisation across the network, but it's also a way to start to then be able to quantify ESG, what we're seeing is that traditional approaches to integrate a business planning, for example, sales and operations planning really has to be up ended to an extent because new technology is just making it so much more possible to move to an event based planning and organisation across your end to end supply chain. We're now able to get that real time granular data and also to alert when different events occur in the supply chain. A couple of examples could say so, due to a disruption in supply chain from the Ukraine war, we can very quickly begin to assess multi-tier supplier risk and feed that across the supply chain network in order that we can reorganise and look at different resilience strategies, whether it be onshoring moving to a second tier production facilities, but also real time transport and logistics data that can influence our deployment plans and our vehicle shattering plans and really make a difference to last mile delivery. Overall, the aim is really to enhance the productivity of the organisation. When we look at technology, we've got RPA but as you rightly say, decision automation is now starting to really take over the more micro planning decisions and it really gives us room and gives the executive team room to make the macro decisions, and really focus on getting that right.

Rowena:

Cara, I guess auto we're going to be very good at planners and project managers and being on top of, the line items and the costs, but could you bring that to life in terms of what we're seeing from that sector?

Cara:

Yeah, you're absolutely right. Automotive and manufacturers generally are very good planning systems, project managements, engineering thought. Yet, I also, like to point out, how much innovation has gone through that industry. Actually, people who've really transformed the product, they're making the change to electric autonomous or everything else that's been going on, and therefore, this aligns with that the capabilities out there to cope with this and deal with it. But it takes time, the data as Fred said, there the data available now, and the decisions that can be made with proper insights is there for everyone - I'm not sure that each of the companies that I work with would be on different spectrums of how much they use that or how much as they can get access to it quickly, but definitely have come a long way. I think therefore, how we put that into, the ESG angles of that. So actually, we knew every part do we knew the miles that's travelled, do we know how it's been produced? That's obviously coming at our industries as well. Therefore, just really interesting point to how people make decisions in the future and as you said at the start, Rowena, this used to be about just in time and very much procurement around cost and delivery. Actually, it's forming what will be the model of the future that is the best one, because clearly it needs to have a lot more about the resilience that needs to take into account a lot more about other factors and therefore, it is interesting to say at this moment time, what will be that model for the future that everyone should move to, but I'll say determinedly automotive will be in a good place on that and there will still be a way to learn from them like others have in the past.

Rowena:

It's nice link there. This might be a trickier question to answer. But given the complex challenges, we really like to leave our listeners with something that they can really put into action to tackle the challenges that we've talked through. Fred, coming to you first, what would your advice be for listeners around how to deal with some of the things we've talked about?

Fred:

For me, it would very much be just to ensure that you have a supply chain roadmap that focuses on building your maturity to address the challenges as well as improving the existing practices and ways of working and the aim of this is to really just to be able to leverage decision data, but also as I said before, to automate the smaller decisions, and then to inform the operations planning on a daily, on a weekly basis, but also to underpin the decisions in the management business review. It's not necessarily to go all out from the outset, but it's to ensure that you have a clear roadmap in place that it's a step wise program towards transformation.

Rowena:

That's great advice. Thanks, Fred. Cara, how about you?

Cara:

Yeah, for me, it's just to build on that point, it is very much about, this is my boardroom level discussion, which it's not always been. Therefore, thinking about building that model for the future, using the crisis to actually think, what would we need, how does that work for the future? We knew in automotive that people make decisions about platforms a long time out, and actually, what will we need in three to five years’ time and actually just be thinking about that as these crises are met. That's easy for me to say actually, if you need to solve something quickly, you have to, but there is always something about trying to think of a solution and setting up the information that you need that will help the whole business, in the end, and as it crosses over into other things and also just asking for help speaking in associations, we try and help our clients to give examples of how others have done it. Sometimes there's too much of not talking about issues, and actually just asking for help and thinking consulting with others and collaborating on some of these points, because that it makes a big difference - people are generally talking about the same issues at the minute.

Rowena:

That's some great practical advice there. Thank you so much both, really fascinating discussion. If this conversation has got you thinking about how you can address your own supply chain challenges or what it could mean for your industry, please visit our website at pwc.co.uk/industryinfocus, where you can find out more about the work that we're doing to support businesses right across this agenda, as well as wider practical insights. Of course, thank you to everyone for listening and don't forget to subscribe to keep up to date with future episodes. Thanks, everyone, and please tune in again soon.

Participants

• Rowena Daines (née Morris)
• Fred Akuffo
• Cara Haffey