Topics to consider

Commentators have noticed the push by senior management for employees to ‘return to the office’. Another topic of interest has been that of collaboration through supply chains to improve resilience of businesses. And a third area for articles is that recent events and disruptions in supply chains has the potential for global consumer and supply markets to become more region based.

Could there be a link between these different topics? As each requires decisions by senior management, what is the motivation to consider the proposals and what is the likelihood of success for implementation?

Return to the office

A recent survey of clients by KPMG Australia concerning an organisation’s workforce had similar results to surveys in other ‘western’ countries. The responses identified that 82 percent of CEOs expect that in the near future, their staff will be at the workplace five days per week. Also that 78 percent of CEOs would reward employees that were full time at the workplace with pay increases and promotion.

The justification was expressed by one CEO as “being connected as a team drives a winning culture and supports us to collaborate and achieve our best”. But the same business has also retrenched groups of employees in the past 12 months. So what could be the motivation for ‘return to the office’ instructions?

The carrot and stick approach to reward returning employees provides an indication that it is about trust. The belief that only when a person can be seen is evidence that work is being done. It is evident that people with jobs in asset intensive roles – factories, warehouses, DCs, ports, container terminals etc. will undertake the majority of their responsibilities at the facility. However, people with a primary role of ‘thinking’ can do that anywhere, anytime, which requires flexibility. With an IT connection, a Planner accessing data to construct the next Sales & Operations Plan (S&OP) can do that at 2pm or 2am from wherever. But they will facilitate the S&OP meetings in person. Here the focus is on outputs and results, not on the number of hours and place as an input.

Collaboration with Tier 1 suppliers

An illustration of the difficulty to implement a collaborative business environment concerns cocoa and its supply chains. It has been seven years since the major chocolate manufacturers signed onto the Cocoa and Forests Initiative (CFI). This is an important initiative to end deforestation and restore degraded land in Ghana and Ivory Coast.

There are two main parts to the Initiative. At the technical level, traceability of supply is required for direct cocoa supply to the signatory companies. Achievement has been good, with more than 80 percent of supply now traceable to the plot level.

However, the CFI has not driven systemic change. The central initiative is for the companies to work collaboratively to help farmers interplant single crop cocoa plots with a mix of coffee, shade crops, hardwood trees and other cash crops. But after seven years, progress has been slow.

Here is a situation to improve sustainability of the major supply input for 35 global manufacturers that are part of the CFI. Yet in an area where collaboration would be in each company’s best interest, the companies have “struggled to deliver, as each company pursues its own sustainability furrow”.

To be ‘collaborative’ in supply chains requires trust between parties. This appears to be missing in an activity of mutual benefit, so what chance that these companies can forge a collaborative relationship with willing Tier 1 suppliers? Is it the internal culture, where a lack of trust by senior managers reflects onto a lack of trust with suppliers?

Regional supply chains development

What is a Region in the structure of supply chains? Typically it is geography based, either within a country (the US Library of Congress lists 16 regions for the country) or adjacent countries and parts of countries These provide a consumer market with access across borders and transport options. Given current geopolitical challenges, there is also ‘geopolitically distinct (and distant) markets’ as a region, under the term ‘friendshoring’.

While there is no ‘one size fits all’ concerning an organisation structure for decentralisation, the objective should be Simplification – make it easier to identify options that enable a decision. This includes standardisation of inputs, reducing supplier risk and supply concentration risk and reduced IT threats with only a region IT footprint.

Time to implement a change

A decision to implement decentralised supply chains and/or collaboration with suppliers are part of the Supply Chains Strategy. As such, recognise that implementation will take at least five years.

More supply and manufacturing within and for regions will require a rebalance of supporting infrastructure for supply chains, including inbound warehousing and distribution resources. The supply lead time risk will continue – even though Tier 1 suppliers can be in a region, suppliers at Tiers 2 and 3 could remain elsewhere.

The challenge for these elements of a Supply Chains Strategy is trust over time. As noted earlier, the majority of CEOs have a view that employees ‘be at the workplace’. But decentralisation in whatever form results in a lessening of control by the centre, which requires more trust in the people who are ‘decentralised’. If there is an underlying lack of trust, those responsible for decentralised operations are in danger of being micromanaged. Allied to this is where people who agree to a course of action that requires five or more years to implement are unlikely to see the project through to completion and their replacement could be trusted less.

As for collaboration with willing Tier 1 suppliers, if there is a lack of trust internally, then what is the basis for establishing trust with a supplier? A measure of trust in a business relationship is between a contract and a Memorandum of Understanding (MOU) – only a collaborative relationship can support an MOU.

Kenichi Ohmae wrote his book The End of The Nation State – The Rise of Regional Economies in 1995. His concept was expanded in 2008 by Prahalad and Bhattacharyya to define ‘Gateway Hubs’ in regions, so ideas about regionalisation have been around for some time. However, surveys that question the topic indicate that the percentage of respondents which intend to regionalise is far higher than the percentage who consider they have succeeded. Is this mismatch due to a lack of trust in organisations?