Building a resilient and sustainable supply chain in 2021

Pan­el

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.

We’re see­ing more of a push for more pre­dic­tive ana­lyt­ics on sup­pli­ers to iden­ti­fy risks through­out the sup­pli­er life cycle

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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