Monday, August 10, 2020

World's supply chain managers enjoy their moment in the sun

Jul 11. 2020
Alexander Lacik, chief executive officer of Pandora, at the company's headquarter offices in Copenhagen, Denmark, on Aug. 19, 2019. MUST CREDIT: Bloomberg photo by Carsten Snejbjerg.

Location: Copenhagen, Denmark
Alexander Lacik, chief executive officer of Pandora, at the company's headquarter offices in Copenhagen, Denmark, on Aug. 19, 2019. MUST CREDIT: Bloomberg photo by Carsten Snejbjerg. Location: Copenhagen, Denmark
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By Syndication The Washinton Post, Bloomberg · Andrew Noel

Accustomed to crunch time and performing in a crisis, the world's supply chain managers are having something of an extended moment in pandemic recovery mode.

Procurement experts were center stage in the rush to secure alternative sources of household essentials, medical gear, raw materials and components to keep factories running when covid-19 first struck. Now chief executive officers are looking to those same managers for more strategic vision and ways to shock-proof supply chains for corporate survival.

From auto makers to food processors, manufacturers that have relied on a strategy of low-cost supplies and minimum inventories are rethinking such an approach given the combination of the pandemic, trade conflicts and harsher natural disasters.

The buzzwords now are flexibility and resilience.

"This whole part of the equation has a higher prominence," Alexander Lacik, CEO of Danish jeweler Pandora Group with about 7,400 outlets, said in an interview. The chief supply chain officer "is not someone I speak to just once a month," he said.

When the coronavirus hit, it took some companies three to four weeks to understand the ripple effect on areas like procurement and logistics.

Those firms are now in the rebuilding phase, with one eye on what digital tools and other technology they need to stay on top when the the next crisis comes, according to Kristian Park, a risk advisory partner at Deloitte in London.

"There's been a 50% increase in people coming forward who have realized they didn't have the information they needed," Park said. "As always with these things, it takes one seismic shift to change people's perception of the risks."

That's the sweet spot of a chief supply chain officer, who is typically more comfortable with a broad focus spanning procurement, logistics, strategic alliances and managing costs, Park said.

Recent studies support a move to introduce more flexibility. Companies with a resilient supply network grow faster because they better adapt to shifts in demand, potentially boosting their order rate by as much as 40% and customer satisfaction by up to 30%, according to a study by Bain & Co.

Making its own jewelry in Thailand and owning shops across 100 countries means Pandora's Chief Supply Officer Jeerasage Puranasamriddhi has greater control. Yet the company still relies on air freight and some 200 suppliers. As the pandemic snowballed, the company's initial response was to push more inventory to its shop premises in case one of the large centralized warehouse facilities went down, Lacik said.

Lacik is now reviewing his company's set-up, from procurement of materials to surging online sales. Where possible, having a single source for an input will be avoided and back-up plans put in place. Online sales are up as much as 300% currently, leading the Danish company to rethink its e-commerce strategy, and whether it could manage online sales internally rather than rely on a third party. It may also look at factories outside of Thailand, Lacik said.

Two decades ago less than 10% of companies had a supply chain director, according to Jan Godsell, a professor of operations and supply chain strategy at the University of Warwick. The number now is closer to 50%, with the role of a chief supply chain officer becoming more common in the past five years.

They're ascending the corporate ladder even more in the post-pandemic world, she said.

"Covid-19 may have been a wake-up call to main boards of the importance of supply chains and hopefully it will accelerate the rise of the chief supply chain officer," Godsell said.

The median salary for a supply-chain manager was about $78,507 a year for those with a bachelor's degree and $95,750 with a graduate degree or higher, according to the Association for Supply Chain Management's 2020 annual survey. The poll generated about 2,500 responses through Jan. 31.

At large global companies, the top positions can pay $300,000 to $400,000.

But even before the health crisis, there were chronic shortages of workers to fill the positions - about one applicant for every six openings, says Abe Eshkenazi, CEO of the Chicago-based association.

As the jobs become a bigger part of a company's strategic management team, he says more lucrative salaries will follow. "The demand for talent is going to be significant on the backside of this," Eshkenazi says. "We're seeing skills and expectations for supply chains increase exponentially."

All the sudden interest hasn't gone unnoticed among students facing a brutal job market. Haslam College of Business, part of the University of Tennessee in Knoxville, is among colleges offering supply chain studies that are seeing a flurry of inquiries from students and workers looking for a new career, according to George Drinnon, executive director of undergraduate programs. "This awareness is translating into more attention to the field," he said.

Another anecdotal sign of the profession's popularity: 6,000 registered attendees from 109 countries for a July 16-18 virtual conference titled "Preparing for the Recovery After Covid-19" and hosted by Alcott Global, an executive search firm specializing in e-commerce, logistics and supply chain executives.

Speakers include the supply chain bosses from companies including Swedish appliance maker Electrolux, U.S. tool maker Stanley Black & Decker and Beiersdorf, the German maker of Nivea skin-care products. The Singapore-based recruiter sold out of sponsorships for the event in 10 days.

"We are seeing huge interest," said Radu Palamariu, Alcott's managing director for Asia-Pacific.

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