Top Supply Chain Management Strategies and Tactics [How to Optimize Supply Chains in the 2020s]

Summary

Eric Kimberling, CEO of Third Stage Consulting, discusses the evolving challenges in supply chain management, particularly post-pandemic. He highlights the importance of cost efficiency, visibility, and diversification of suppliers, emphasizing risk management. Kimberling also explores the need for proactive criteria, such as assessing suppliers' financial health and sustainability efforts. Additionally, he stresses the increasing relevance of supply chain management in enhancing customer experience and aligning with organizational goals. By integrating technology and strategic planning, businesses can build more resilient and adaptable supply chains for the future.

Takeaways

• 🔄 Supply chain management is undergoing a major shift, and managing it the same way as 5-10 years ago is outdated.
• 💡 Digital transformation is crucial for modern supply chains, emphasizing new strategies beyond cost and efficiency.
• 🌍 Globalization has expanded supply chains, increasing the risks of disruptions like raw material shortages, higher fuel prices, and cyber attacks.
• 📈 Supplier diversification is essential in the 2020s to mitigate risks from geopolitical and economic factors.
• 🔍 Visibility and cost efficiency remain key, but newer technologies like ERP and supply chain management systems help with process improvements.
• ⚠️ Anticipating risks is more proactive, with factors like financial health and employee satisfaction being used to evaluate suppliers.
• 🌱 Sustainability in supply chains is a growing concern, and many organizations are evaluating suppliers based on their environmental impact.
• 🤝 Supply chains now directly impact the customer experience, with expectations shaped by companies like Amazon and Alibaba.
• 👥 Human capital management is critical for effective supply chain operations, making talent acquisition a priority.
• 🔗 Supply chain decisions influence other organizational areas, including finance and customer service, making it a more interconnected aspect of business strategy.

Q & A

What has made supply chain management more important in the 2020s?

Supply chain management has become more important in the 2020s due to several challenges such as higher raw material prices, material shortages, higher fuel prices, port disruptions, and cyber attacks. These factors have expanded the scope of supply chain management, requiring more focus on resilience and adaptability.

How have the objectives of supply chain management changed from the past?

Previously, the main focus of supply chain management was on driving down costs and increasing efficiency. However, in the 2020s, there is a broader focus on resilience, risk management, and the ability to navigate unexpected disruptions, in addition to cost efficiency.

Why is supplier diversification more critical now than in the past?

Supplier diversification has become more critical due to the increased risks posed by geopolitical impacts, macroeconomic shifts, and supply chain disruptions. Relying on a single supplier creates vulnerability, so diversifying helps hedge against these risks.

What are some leading indicators that organizations can use to anticipate supply chain risks?

Organizations can use financial metrics, such as the financial health of suppliers, and employee satisfaction within the supplier's company as leading indicators. These help anticipate potential issues, such as a supplier going out of business or facing internal challenges, which might affect their performance.

How can technology help with managing and improving supply chains?

Technology like supply chain management systems, enterprise resource planning (ERP) systems, procurement systems, and warehouse management tools can drive cost efficiency, increase visibility into supply chains, and help organizations manage and anticipate risks more effectively.

How does supply chain management contribute to a better customer experience?

Supply chain management impacts customer experience by improving delivery speed, flexibility, and service quality. Efficient supply chains can lead to faster delivery times and more responsive customer service, which are crucial in meeting modern customer expectations, often referred to as the 'Amazon effect.'

What role does sustainability play in modern supply chain management?

Sustainability has become an important consideration, with companies evaluating their supply chain’s environmental impact, such as emissions and climate footprint. Suppliers are now assessed based on their alignment with sustainability goals, and this may involve scoring them on environmental impact metrics.

How is supply chain management connected to other areas of an organization?

Supply chain management is interconnected with areas such as human capital management, as effective supply chain operations require skilled talent. It also affects financial performance, as well-designed supply chains can help meet financial goals related to inventory and return on assets.

What are the traditional criteria used to assess suppliers, and why are they insufficient in today's context?

Traditionally, suppliers have been assessed based on cost and quality. However, these criteria are reactive and insufficient for managing modern risks. Today, organizations need to look at more proactive criteria, such as a supplier's financial stability and employee satisfaction, to better anticipate risks.

Why is visibility into the supply chain more important today than it was 5-10 years ago?

Visibility into the supply chain has become more important due to the increasing complexity and global nature of supply chains, which are more prone to disruptions from geopolitical events, material shortages, and other risks. Technology plays a crucial role in improving this visibility, enabling companies to better manage disruptions.

Outlines

00:00

🌐 Evolving Supply Chain Management in the 2020s

Eric Kimberling, CEO of Third Stage Consulting, emphasizes the importance of modernizing supply chain management in the face of contemporary challenges such as increased material costs, shortages, fuel price hikes, port disruptions, and cyber attacks. He highlights that supply chain management is now more critical than ever, with a broader scope than just cost reduction and efficiency. Kimberling discusses the necessity of cost efficiency, visibility, and the use of technology to build resilient supply chains. He also stresses the growing importance of supplier diversification to mitigate risks from macroeconomic and geopolitical impacts. The paragraph concludes with the suggestion to consider proactive criteria beyond cost and quality to anticipate and manage potential supply chain disruptions.

05:01

🛠️ Enhancing Supply Chain with Technology and Sustainability

The second paragraph delves into how technology can be leveraged to anticipate risks in the supply chain by analyzing financial metrics and employee satisfaction, serving as leading indicators for potential issues. It also addresses the growing focus on sustainability within supply chains, urging organizations to align with environmental goals and assess suppliers accordingly. The impact of supply chain management on customer experience is highlighted, with a reference to the 'Amazon effect' and the raised customer expectations for delivery and service. The paragraph concludes by emphasizing the interconnectivity of supply chain management with other organizational aspects, such as human capital management and financial goals.

10:01

📈 Resources for Future-Proofing Your Supply Chain

In the final paragraph, Kimberling encourages viewers to access the 2021 Digital Transformation Report for insights on supply chain management transformation. The report is said to rank top supply chain providers and offer best practices for supply chain evolution. The paragraph serves as a call to action for organizations to utilize the provided resources to enhance their supply chain strategies, ensuring they are future-proof and capable of adapting to the evolving business landscape.

Keywords

💡Supply Chain Management

Supply chain management refers to the process of managing the flow of goods and services, from the sourcing of raw materials to the final delivery of the product to the customer. In the video, the speaker emphasizes how supply chain management has evolved and is now more critical than ever, especially post-pandemic. The video explains that modern supply chain management must balance cost-efficiency with new challenges like disruptions and diversification of suppliers.

💡Cost Efficiency

Cost efficiency in supply chain management is about reducing operational expenses while maintaining high productivity and quality. The video discusses how, although still important, focusing solely on cost efficiency is no longer sufficient. Companies must now consider factors like risk management, supplier diversification, and customer experience, making cost efficiency just one dimension of a broader strategy.

💡Supplier Diversification

Supplier diversification is the strategy of sourcing materials from multiple suppliers to reduce risk in case one supplier fails due to geopolitical, economic, or operational issues. The video emphasizes that relying on a single supplier can expose a company to significant risks. Diversification helps ensure business continuity, even in the face of disruptions like raw material shortages or price increases.

💡Risk Management

Risk management involves identifying, assessing, and mitigating potential risks in the supply chain, such as disruptions, financial instability of suppliers, or quality issues. The video highlights how supply chain strategies now focus heavily on anticipating and managing risks, especially given the unpredictable events of recent years, such as the pandemic and geopolitical disruptions.

💡Technology

Technology plays a key role in modern supply chain management by providing tools for increasing visibility, improving efficiency, and mitigating risks. The video discusses how companies can leverage technologies like ERP (Enterprise Resource Planning) systems, warehouse management software, and data analytics to gain real-time insights into their supply chains, enhance decision-making, and drive down costs.

💡Sustainability

Sustainability refers to practices that minimize the environmental and social impacts of supply chain activities. The video suggests that many organizations are now focusing on sustainability, considering the impact of their supply chains on climate change, emissions, and long-term viability. Companies are increasingly evaluating their suppliers based on sustainability goals, aligning their operations with environmental responsibility.

💡Customer Experience

Customer experience refers to how a company's supply chain affects the overall satisfaction and service provided to its customers. The video mentions that a modern supply chain is directly linked to delivering better service, faster response times, and more flexible operations, which is essential in meeting customer expectations, particularly in the age of e-commerce giants like Amazon.

💡Global Supply Chains

Global supply chains involve sourcing materials and products from different parts of the world, often across multiple countries. The video emphasizes that managing global supply chains is more complex today, with challenges such as geopolitical disruptions, increased risks of cyber-attacks, and raw material shortages. The globalization of supply chains also requires better technology and strategies to manage these expansive networks.

💡Supplier Scorecards

Supplier scorecards are tools used to evaluate and compare suppliers based on various criteria, including cost, quality, financial health, and sustainability. The video explains that companies should expand their supplier scorecards to include not only traditional metrics like cost and quality but also leading indicators such as financial stability, employee satisfaction, and alignment with sustainability goals.

💡Leading Indicators

Leading indicators are forward-looking metrics that help anticipate potential issues or risks before they become significant problems. In the video, examples of leading indicators include financial health and employee satisfaction of suppliers, which can signal future risks such as supply chain disruptions or quality issues. These indicators help businesses proactively manage and mitigate risks rather than reactively addressing problems.

Highlights

Supply chain management is more critical than ever, especially post-pandemic, as it faces challenges like higher raw material prices, shortages, fuel price increases, and cyberattacks.

Supply chain management strategies of the 2020s need to focus not just on cost efficiency but also on resilience, adaptability, and risk management.

Visibility into the entire supply chain, alongside cost efficiency, remains a key factor, but the complexity of global supply chains requires new technologies to improve this.

Supplier diversification is now crucial to minimize risk, ensuring businesses don’t rely too heavily on a single supplier in case of geopolitical or economic disruptions.

Technologies like ERP, procurement, and warehouse management systems are essential for reducing costs, increasing efficiency, and providing visibility into the supply chain.

Companies should look for leading indicators, like financial health and employee satisfaction of suppliers, to predict and prevent potential risks.

Sustainability is becoming a top priority for organizations, with supply chain strategies now considering their environmental impact, emissions, and alignment with long-term sustainability goals.

Supply chain management is directly linked to customer experience, impacting delivery times, flexibility, and service levels, beyond just cost and efficiency.

The 'Amazon effect' has reset customer expectations worldwide, making fast, efficient, and flexible supply chains a competitive advantage even for non-direct-to-consumer businesses.

Supply chain management now affects and is affected by other organizational areas like human capital management and financial goals, requiring a more integrated approach.

Risk management is more critical than ever, and proactive measures must be taken to anticipate supply chain disruptions before they occur.

Technology can support the diversification of suppliers by evaluating financial health and operational efficiency, helping companies mitigate risks.

Supply chain scorecards can be expanded to include factors like sustainability, environmental impact, and alignment with a company’s goals beyond financial performance.

Improving supply chains isn’t just about internal processes—it’s about how those processes impact the external customer experience and satisfaction.

As organizations look forward, they need to focus on creating supply chains that are not just efficient but also agile, resilient, and aligned with both sustainability and customer satisfaction goals.

Transcripts

if you're still managing your supply

chain the same way you were 5 10 or 20

years ago

chances are you're probably doing it

wrong i'm going to talk about that here

today

my name is eric kimberling i'm the ceo

of third stage consulting we're an

independent consulting firm that helps

clients through their digital

transformation journeys

and supply chain management is suddenly

cool again

if you ever lost faith in the fact that

it was ever cool it is back and it's

something that's more important than

ever

and if you look at where supply chain

management is now in the 2020s post

pandemic

there's a lot of challenges that supply

chain managers are facing

you have higher raw material prices you

have raw material shortages you have

higher fuel prices

ports are getting disrupted you even

have cyber attacks that are affecting

supply chains

so the days of focusing supply chain

management on driving down cost

and just increasing efficiency those

days are gone that still is a dimension

of supply chain management

but the purview of what we need to be

evaluating and considering as we define

our supply chain management strategy for

the 2020s

is completely different is completely

expanded than where it was

even just five or ten years ago so what

i want to talk about today are what are

those strategies and tactics you should

be thinking about

to make your supply chain more resilient

in the 2020s and beyond

the first component of supply chain

management that's important that is more

of a continuation of what's always been

important

is to make sure that you have cost

efficiency and visibility into your

supply chain

so you want to make sure that you're

cost effective you're efficient

and then you have visibility into what's

happening throughout the supply chain

and this is the one part of the video

that we'll talk about here today that

isn't really new but it's continuing to

evolve

in advance over time so finding

technologies whether it's a supply chain

management type of technology

or erp enterprise resource planning

types of systems or

procurement or warehouse management

types of technologies all those types of

technologies are meant to drive down

costs to increase efficiency and give

you visibility into your supply chain

and this is even more important today

than it was 5 10 20 years ago

because first of all supply chains have

proliferated across the globe so now

we're not dealing with

myopic smaller supply chains we're

dealing with global supply chains

and secondly there's more opportunity

for disruption as we've seen in the last

year

whenever there's a pandemic or a port

shuts down or fuel prices increase or

there's a raw material shortage in some

part of the world

or there's a geopolitical disruption

there's all these different things that

can disrupt our supply chain

in a way that wasn't as prevalent a few

years ago

so making sure that you build a supply

chain that takes these factors into

account

and uses technology and process

improvements and organizational

improvements

to get there is going to serve you well

now and in the future

one of the biggest trends we're seeing

now that wasn't nearly as important even

just a year or a year and a half ago

is that now more than ever organizations

and supply chains need to focus on how

to diversify their base of suppliers

so not depending too much on one

supplier

to where if there is a macroeconomic or

geopolitical impact to that part of the

world or

if there's some sort of negative

economic impact on any particular

supplier

you have backup you're not putting all

of your eggs in one basket for any

particular raw material or finished good

that you might be sourcing

so supplier diversification is more

important than ever and this is an area

where technology can help

but more importantly process

improvements and organizational mindset

shifts

can help improve supply chains to ensure

that they're thinking about how to

diversify

suppliers and how to evaluate how these

different suppliers compare to one

another i'm going to talk more about

that here in just a second as well

but in general be looking for ways to

diversify your supplier base

and really hedge your risk all of this

is about risk management

and being able to navigate the

unexpected which again as we've seen in

2020 to 2021

there is a lot of unexpected especially

as it relates to supply chain management

now historically supply chain managers

have assessed

suppliers in a couple of different

dimensions one is cost

how much is the supplier charging you

for their their good or service

and secondly the quality rating how does

that supplier

rate in terms of quality compared to

other suppliers out there and those are

still two very relevant criteria that

you want to continue to use

but those are in some ways very reactive

criteria those are after the fact you

understand what your costs are although

you can predict the cost based on

whatever arrangement you have

but when it comes to quality that's

something that's reactive that's after

the fact you can assess

how much quality the supplier did or

didn't deliver

but the key here is to look at some more

proactive criteria as well and to

anticipate potential risks and to

anticipate problems before they become a

problem so in other words instead of

running into a quality issue wouldn't it

be great if you could anticipate that

they might have a quality issue

using some other criteria so for example

we're finding that there's technologies

out there now that

our non-traditional supply chain

management or enterprise resource

planning systems

they can help you aggregate data to

gather information about financial

metrics for example

how well is the company doing how

healthy is the supplier if the supplier

is not healthy then obviously that's a

risk that you can start to anticipate

you can start to hedge your risk and

maybe look for even more alternative

suppliers in the event that you might

need it

that's just one example another example

is looking at employee satisfaction

if you know that employees are unhappy

at a certain supplier

and that there's a lot of turnover and

other issues internally and

organizationally that's a risk that you

can

anticipate and maybe start to diversify

and head your bets

so these are just two very small

examples of many that you can be using

as leading indicators that allow you to

anticipate where the risks are

so that you're not caught flat-footed if

and when there is some sort of

disruption

throughout one of these pieces of your

supply chain

many organizations we work with nowadays

are focused on sustainability

what is the impact to the climate of our

efforts in our supply chain

what level of emissions and climate

impact are we producing as a result of

our supply chain

if that's an important topic for you

then you want to be able to

evaluate and assess your suppliers

alignment

with that sustainability goal so when

you're looking at

your potential suppliers it's not only

important to look at the financial

indicators and the

quality indicators and the leading

indicators they mentioned before

but you also want to make sure that

they're aligned with your goals for

sustainability to the extent that you

have those

so this is another area where technology

can help a supplier score card can be

expanded to include

things like sustainability and impact to

the climate or impact of the environment

or whatever

criteria might be important to you as it

relates to sustainability

and then another dimension of

sustainability is just the long-term

viability of that particular supplier

as i mentioned before if they're on

solid financial footing that's different

than

a supplier that is weak is maybe

shrinking in size or losing market share

in the industry so really understand

what sustainability goals you have and

make sure that you're assessing your

suppliers throughout your supply chain

against those goals

one of the things that organizations are

finally starting to see in recent years

is that supply chain management isn't

just about

back office distribution logistics

warehouse management procurement all

that stuff

it's really about the customer

experience how does the supply chain

affect

your customers how quickly can you

deliver to customers how flexible can

you be

what type of service are you able to

provide to your customers

those are all things that supply chain

management directly impacts and so you

want to look at your overall customer

experience and think of your supply

chain not just as a cost

efficiency opportunity or to make sure

that you have the right relationships

with the right suppliers

you're not doing that in isolation

you're doing those things in

the context of how do we provide a

better customer experience and how do

the decisions we make in our supply

chains affect

that customer experience part of the

reason for this is because

of the amazon effect amazon has really

honed in on and mastered

the whole concept of supply chain

management as has alibaba and other

e-commerce providers throughout the

world

so even if you're not a direct to

consumer type of provider

you still want to understand that most

people in the world right now

have this reset expectation of how

supply chains should service their needs

and their

requirements so when you're analyzing

your supply chain it's important to look

at it not just from an internal

cost efficiency and supplier based

perspective but to look at it from your

customer perspective as well

[Music]

just as supply chain management is more

important than ever to your customer

experience

supply chain management now affects

other parts of your organization in a

way that hasn't been true or as true

in the past for example human capital

management

to run a effective supply chain you need

good talent

so to find good talent you need good

human capital management processes

so it's important to not just look at

supply chain management in its own

one-dimensional focus but to look at

what other parts of your organization

can affect and improve your supply chain

and vice versa on the flip side how does

your supply chain affect other parts of

your organization so for example if you

have

certain financial goals as an

organization whether it be inventory

related or

return on assets whatever the case may

be how can you design your supply chain

and build a supply chain that supports

those financial metrics

so again it gets back to this whole

concept of looking at your supply chain

not just

as it is as a supply chain but how that

supply chain affects other parts of your

organization

and ultimately even outside the

organization as it relates to your

customers as well

[Music]

so these are some of the things to be

thinking about as you define or redefine

your supply chain

strategies for the future for more

information on this topic i encourage

you to download our 2021 digital

transformation report which

is a guide to any sort of transformation

whether

it's an erp implementation or in the

case here a supply chain

management sort of transformation so in

this report

we rank the top supply chain providers

in terms of technologies

we provide best practices on how to

transform your supply chain

so i encourage you to download that as

well as other resources we've included

below

so i hope you found this information

useful and hope you have a great day