Supply Chains Innovation the Industries View taken from the Business Reporter, An independent report from Lyonsdown, distributed with the Sunday Telegraph.
Why should global supply chains be on the board agenda?
According to research by IBM, CEO’s say the most serious challenge they face is managing global interconnections and complexity. Companies are being forced to look further afield for customers and suppliers, which can give rise to reputational and regulatory risks, threats to intellectual property, an increased chance of broken or missing links and the challenge of meeting customer expectations.
Why do businesses have such trouble managing these issues?
Very few have the right management and measurement systems. There’s a lot of talk about supply chain risk but this isn’t reflected in actual priorities. You can hardly expect procurement managers to worry about supply chain risk when their reward structure is focused mainly on buying things cheaper. And current methods are not good at dealing with volatile markets and demand levels.
Is there also a communication problem?
Yes, because most organisations are better at communicating internally than externally, this is also true of IT systems such as enterprise recourse planning (ERP), which are principally designed to manage internal resources and often don’t ‘talk’ to trading partners’ systems. Leading-edge businesses realise they need to share knowledge and information to create greater transparency with the organisations in their supply chain.
How can organisations build more successful and sustainable relationships?
The old model of managing your supply chain through intimidation and harsh contracts Is outmoded. The longer the supply chain the more important it is to show respect, understand cultural differences and operate on a human level. In china for example, a failure to develop personal relationships threatens trust and respect- and therefore represents a source of risk. Agility and flexibility require greater collaboration.
What are the contractual implications of this?
Contracts should support relationships, not undermine them, and focus on reducing the probability of things going wrong rather than merely dealing with the consequences. Our research shows that the most common problems arise from acceptance and delivery – usually because the requirements weren’t made sufficiently clear- and disagreement over change management procedures.Tim Cummins
is CEO of The International Association for Contract and
Commercial Management (IACCM)