The future of your supply chain
31 May 2018
It’s a fair assumption that effective supply chain management is an essential prerequisite for a successful business. Indeed, the great pioneer of mass production in the early 1900s, Henry Ford, came up with the following:
“Coming together is a beginning. Keeping together is progress. Working together is success.”
In many respects, it is quite startling how applicable this is in today’s now-globalised world of supply and demand. With increasing public scrutiny, legislation and a drive for businesses to do the “right thing”, both public and private organisations are arguably now more dependent on their supply chains to maintain efficiency and competitiveness than ever before.
Ask yourself: how much of your revenue goes to your supply chain? For many businesses, this can be up to 80 per cent. And do you understand your supply chain as well as your own organisation? An increasing trend for public bodies to outsource services to the private sector means supply chain management should be at the top of any CEO’s to-do list.
The recent collapse of Carillion shows how a traditional linear model of supply chain management can fail. Carillion had little idea what happened beyond tier one, and its deep and complex supply chain had little idea what was going on at the top. The fallout will be catastrophic for some small businesses, their employees and families. Equally, the closely integrated model adopted by the Japanese automotive industry was stretched to breaking point when the 2011 earthquake and tsunami had a devastating impact on its highly localised supply chain. There is no magic bullet. Each organisation needs to find its own optimum model, but some key principles of transparency, fairness and collaboration can be used as a moral and practical compass when developing a strategy.
Stakeholder expectations are changing. If something bad happens in an organisation, or in its supply chain, punishment can be rapid and potentially catastrophic. The impact of the Volkswagen and Facebook scandals are examples of how quickly customers and shareholders can run from a formerly trusted brand. In recent years, organisations have been expected to address complex issues, such as climate change, air quality, the circular economy, ethics, bribery and corruption, social value, modern slavery and many more. All this in addition to keeping up with the competition, embracing innovation and using ever-changing technology.
The world has a clear direction of travel around these issues, with the publication of the UN Sustainable Development Goals and the UN Guiding Principles on Human Rights and Business. The principles of complicity and due diligence come across strongly. To put it simply, by outsourcing a service and buying in goods, you are no longer able to absolve yourself of your responsibility to do business in an ethical and sustainable way. You will be judged in the court of public opinion, or possibly by a court of law.
Legislation is one way of reinforcing this message and the UK is somewhat of a trailblazer in this respect. The UK Anti-Bribery Act makes any form of corruption anywhere in the world by UK companies unlawful, the Modern Slavery Act makes UK companies accountable for any form of modern slavery anywhere in their global supply chains, and the Social Value Act requires public bodies to consider social value in all their procurement decisions, which has a profound impact on any company in the public-sector supply chain. The UK Climate Change Act places a massive focus on energy and, given the intense political pressure on issues such as air quality and use of plastics, we can expect more to come.
How do we make sense of all this? One way is to look to the international standard for sustainable procurement, ISO 20400. The standard provides practical guidance for developing policy, strategy, organisational conditions and procurement processes so that organisations can align their supply chains with their corporate values and ambitions. It helps to mitigate the increasing levels of risk we see in our supply chains today. Based on the well-established British Standard BS 8903, and developed in collaboration with over 40 countries, the standard is a robust and practical guide.
Technology is also playing an increasing role to improve the efficiency of supply chains today. Indeed, many organisations now use platforms such as the Sustainability Tool to manage their operations and to ensure that they can, and do, deliver on objectives and foster a culture of continual improvement.
Undeniably, as HE Luccock points out, it takes a whole orchestra to play a symphony. Action Sustainability’s pioneering work within the construction sector could not have been achieved alone. Our development of the Supply Chain Sustainability School, an offering of free learning resources for organisations, primarily across the construction supply chain, is supported by the industry’s main training association (Construction Industry Training Board), and over 75 industry-leading company partners. The programme offers a benchmark for effective industry collaboration and an example of global best practice, replicable in any industry.
To find out more about the ISO 20400 Standard visit www.iso20400.org, to join the Supply Chain Sustainability School visit www.supplychainschool.co.uk, or to find out about our consultancy services across the globe and the Sustainability Tool, visit: www.actionsustainability.com
Together we can make a difference.
By Shaun McCarthy, OBE