CHAIN - Third Edition

THIRD EDITION

EXCLUSIVE

SAP explains the importance of the digitalisation of the supply chain for customers, and why cloud services make the company more customer-centric

Luxatia International is hosting the 2nd World Digital Procurement Summit that will take place on the 3rd & 4th of March 2022. This virtual event will focus on the smart utilization of advanced technologies and the best transformation strategies of the digital procurement roadmap. The summit will serve as an ideal platform for key business stakeholders and technical experts to examine the benefits of the implementation of recent cognitive procurement technologies & the best strategies for reimagining the role of people in your procurement ecosystem. Leading experts from global brands will be sharing pr their experience on advanced data analytics, IoT, RPA, AI, ML, smart contracts and other disrupting tools in procurement. Don’t miss your chance to join the conversations contributing to the future of digital procurement during this 2-day event, filled with knowledge exchange and networking with your peers!

MEET SOME OF OUR SPEAKERS

David Storch

Charlotte de Brabandt

Nick Jenkinson

Head of Network Commercial and Contract Management

Member of the ISM Thought Leadership Council

Chief Procurement Officer

Allianz

Institute for Supply Management

Santander UK

Key Practical Learning Points • • • • • • • •

Introducing the Latest Advances of Digital Procurement Helping the Organization Respond to Procurement Issues and Priorities Building the Roadmap for Procurement's Strategic and Digital Transformation Achieving Next-gen Procurement With Advanced Automation & Data Analytics Unleashing the Potential of RPA, AI, ML and Other Digital Trends Embedding Blockchain Technology for Transparency in Sourcing Ex Extending Beyond the Tech-based Training and Upskilling of People Developing Soft Skills and Connecting Your Supply Chain Workforce www.luxatiainternational.com

WELCOME

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ur first edition of CHAIN for 2022 has been months in the making and we are very proud to present the result, with five fantastic interviews lined up for you – from SAP (p6), Kenco Group (p36), Atlantic Grupa (p76), Teva Pharmaceuticals (p98), and Sorgenia Bioenergie (p132).

Our cover story comes courtesy of SAP’s Andreas Wagner and Dr Johannes Tulusan, together with a number of their colleagues. We explore the importance of supply chain digitalisation and cloud solutions in enabling resilient, customer-centric and sustainable enterprises. Plus, we have been discussing the role of technology in transforming supply chains with Kenco Group’s Kristi Montgomery.

Darija Pizent, Director of Supply Chain Management at Atlantic Grupa, talks about running a digital transformation program in the midst of a global pandemic, while Teva Pharmaceuticals’ Val Petursson highlights the importance of forming strategic partnerships. As for sustainability and gender equality, Simona Izzo, CPO at Sorgenia Bioenergie, shares her thoughts.

We have a host of intriguing features to keep your finger on the pulse. Turn to page 54 to read how HS2 Ltd has successfully implemented the latest blockchain technology, as well as the findings from last year’s MIT-led State of Supply Chain Sustainability report (p88).

What’s more, we have a fascinating insight into the European Commission’s Digital Product Passport scheme (p124), as well as advice on how businesses can best prepare for climate risk (p154).

Editor

Director

editorial@ithink.media

d.harris@ithink.media

Anna McMahon

Senior Digital Designer

Daniel May

design@ithink.media

Danielle Harris Director

Tom Barnes

t.barnes@ithink.media

+44 (0) 203 890 1189 enquiries@ithink.media All rights reserved. Every effort is made to ensure the accuracy of material published in CHAIN Magazine. However, the company cannot accept responsibility for the claims made by advertisers or contributors, or inaccurate material supplied by advertisers.

CHAIN magazine is a product of iThink Media Ltd. Company Registration Number: 10933897. Company Registered in England and Wales

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THIRD EDITION

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6

SAP shares the key to enabling resilient, customer-centric and sustainable enterprises

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Kristi Montgomery is Vice President, Innovation, Research & Development, at Kenco Group

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HS2 Ltd has successfully implemented the latest blockchain technology

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Findings from the MIT-led 2021 State of Supply Chain Sustainability report

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Darija Pizent, Director of Supply Chain Management at Atlantic Grupa, talks continuous improvement

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Improving resilience and lowering costs

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We interview Val Petursson, Senior Director of Global Transportation at Teva Pharmaceuticals

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The EC’s Digital Product Passport scheme

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We chat to the CPO at Sorgenia Bioenergie, Simona Izzo

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How can businesses best prepare for climate risk?

Darija Pizent

Kristi Montgomery

Val Petursson

76 Simona Izzo

Andreas J. Wagner & Dr. Johannes Tulusan

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54 132

6 154

36

88

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C OV E R STO RY

Digitalised Supply Chains and Operations

The Key to Enabling Resilient, Customer-Centric and Sustainable Enterprises SAP executives, Andreas J. Wagner, General Manager, Digital Supply Chain, MEE, and Dr. Johannes Tulusan, COO, Digital Supply Chain, MEE, together with colleagues from SAP’s Digital Supply Chain leadership team, explain the importance of the digitalisation of the supply chain for customers, and why cloud services make the company more scalable. Digitalisation relates both to the shift from on-premise supply chain solutions to the cloud and changing the company’s manual supply chain processes to a digital format.

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Dr Johannes Tulusan

Andreas J Wagner

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Dr Johannes Tulusan COO, Digital Supply Chain, MEE

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Andreas J. Wagner and Johannes Tulusan lead a team of more than 150 sales executives, solution advisors, and business development experts for supply chain in SAP’s Middle and Eastern Europe (MEE) region, comprising Austria, Germany, Switzerland, Eastern Europe, and CIS. esponsible for more than 25 countries, Andreas and Johannes agree that if you had asked them three years ago, they would never have believed that a digitalised supply chain would become such a main priority board level topic in almost every company.

According to Andreas, an endto-end digital supply chain has recently become so important because we have had total

disruption in markets across the globe. We have seen widely fluctuating demand for goods and services, so predictability has become key. We have been confronted with an uncertain supply of critical materials, interruption of manufacturing sites, bottlenecks, and limited labour and work capacity, leading to inventory shortages and delayed shipments.

These unprecedented supply

“Some companies have a tendency again to focus on best-of-breed cloud solutions. For this reason, it is important for SAP to offer supply chain solutions adapted along the industry value chains to meet the customers’ requirements” Dr Johannes Tulusan, COO, Digital Supply Chain, MEE 9

chain disruptions have been major contributors to the current economic situation, which is why an endto-end supply chain has become such a key topic for all companies.

Companies have been working hard on balancing global supplies, so risk management has an important role to play, as well as a cross-functional synchronised planning process. A resilient, digitalised supply chain helps companies react much faster and even ahead of time. Investing in a synchronised, digitalised, and end-to-end supply chain will allow them to shift their supply operations from one country to another, depending on market situations.

Resilience is a buzzword when we talk about supply chain, referring to the ability to react quickly to unforeseen incidents, such as the Covid-19 pandemic. This can only be achieved with digitalisation, as Andreas explains, referring to supply chain key parameters (see graphic).

He continues, “The first part involves synchronising all the logistics and operational planning end to end.

The companies with synchronised planning processes in place performed

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better during the pandemic because they could work with existing processes to increase stability. The second part refers to automation, increasing productivity and flexibility, which, in turn, leads to resilience. It is necessary to act now with smart product development and intelligent factories, with a strong capability to react on changing market demands quickly. Thirdly, the business network topic has a focus on resilience because the inclusion of partners and customers is key to efficiency and flexibility. If an individual area of the company is facing difficulties, another company’s division or external partner (i.e. supplier) in the business network can step up to provide a suitable alternative. The last part is sustainability, moving in the direction of manufacturers’ CO2 footprint as an important driver. “All these areas impact heavily on the resiliency topic.”

Speaking of sustainability, Johannes adds, “There are already legislations, i.e. the Packaging and Packaging Waste Directive (Directive 94/62/ECC), implemented. Companies need to understand how much plastic they are producing in their packaging in

order to comply with new regulations.

If they are not able to provide these details, they need to pay a government-defined tax; for example, a non-recycled plastic packaging waste tax in Europe. The tax for nonrecycled plastic packaging waste, established already on January 1st, 2021, consists of a national contribution

based on the amount of nonrecycled plastic packaging waste.”

In asset-intensive sectors, such as energy, oil and gas, telecommunications, public transportation, or retail, there is a huge cost associated with servicing and maintaining these assets.

“Companies need to understand how much plastic they are producing in their packaging in order to comply with new regulations” Dr Johannes Tulusan, COO, Digital Supply Chain, MEE

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Complexity vs.

Access

How can SAP ® systems, their digital innovations and people be brought together for logistics?

The solution that drives enablement even before implementation

If you work in a company whose business involves logistics processes, here‘s what you know: In digital innovation lies the hope of meeting the increasing demands for transparency and efficiency. At the same time, embedding innovation poses a complex challenge, especially in logistics. At the end of the day this is the intersection where administrative and physical processes come together – processes that are mutually dependent and yet run in parallel.

From the system landscape perspective, you need nothing less than a custom-fit combination of an intelligent ERP system and a flexible supply chain management supported by well-trained players, both in planning and in execution. Once implemented, SAP solutions offer the potential for this significant (if not critical) digital supply chain value add.

However, for many companies, SAP projects are time-consuming and risky undertakings, especially when it comes to implementing a solution close to the standard to facilitate future release upgrades and flexible functional enhancements – such as digital innovations.

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The complexity associated with the large range of functions becomes a central challenge even during the design of the logistics processes: If the decisionmakers do not understand the SAP standard and its conditions, the interaction between the system and the user cannot develop its full potential and is also not extensible.

But how do you address this aspect in the initial phase without already going full bore into the project effort and investing costs and time accordingly?

What if your knowledge of the SAP standard is not sufficient or cannot be consistently conveyed (perhaps even in the evaluation phase of an implementation)?

Couldn‘t the system basis of a near-standard SAP system for digital supply chain management be available as a cloud demo system even before the project starts – from ERP components to the logistics modules SAP Extended Warehouse Management (EWM) and SAP Transportation Management (TM) as well as supplementary SAP components around usability, analytics, etc., preferably already documented?

»With the preconfigured system, the ideal basis for discussion is created even before the project begins. Our customers don‘t have to rely on our statements about the SAP standard, but can try it out directly.

They can compare process variants and even create prototypes already.« ⸻ Lars Gregor, Managing Director at prismat

Well, that is exactly what the prismat/RAKETE for S/4HANA is: We combined preconfigured customizing modules for SAP S/4HANA®, EWM and TM with our own development components, including frameworks, dialogs and functional enhancements.

The result is a flexible overall solution consisting of SAP standard and extensions, which based on our project experience every SAP project requires.

In doing so, we also keep our own components configurable and close to the standard, so that on the one hand we achieve a sustainable balance between SAP standard and required functional enhancements, and on the other hand our customers remain independent of the provider.

The prismat/RAKETE allows us to start with the crucial factor for a successful implementation of SAP solutions: enablement. We called this fast and time saving approach very fittingly »Rakete«, which is the German word for rocket.

About prismat: The SAP implementation company prismat was founded in 1991 as a spin-off from the Fraunhofer Institute for Material Flow and Logistics in Dortmund, Germany. Due to the close cooperation with SAP as well as several research and pilot projects, prismat always keeps up to date and continuously contributes to the further development of the standard features of SAP solutions. In the headquarters in Dortmund and its branch offices in Ratingen, Stuttgart, Bremen, Würzburg and Brașov (Romania) prismat employs more than 200 people.

Thanks to the prismat/RAKETE, the company is able to pass on knowledge gained from more than 30 years of project experience – to its project teams, its customers and business partners, but also to its junior staff as well as to universities and educational networks.

The SAP spectrum for your logistics needs #prismatgmbh — prismat.de

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Cigdem Kroggel Head of Sales, Digital Supply Chain, Germany

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Johannes says that by making it more intuitive with an intelligent and connected asset and field service management solution, you can predict when a service of an asset is required, thus scheduling service technicians more effectively.

He emphasises, “This is another important theme in the digital transformation of the supply chain.

Not only to design, plan, produce, and ship on time, but also to intuitively maintain assets of a company to keep

transparency, and we can offer that with our end-to-end offerings.

That is definitely an advantage.

We also have an open system and a strong ecosystem, with our partners developing and adapting our solutions on our SAP Business Technology Platform.”

Johannes adds, “Some companies have a tendency again to focus on best-of-breed cloud solutions. For this reason, it is important for SAP to offer

“Adaptation to new market situations, combining agile solutions, key partnerships, and Industry 4.0, allows us to remain competitive” Cigdem Kroggel, Head of Sales, Digital Supply Chain, Germany

the pulse of asset-intensive businesses ticking and innovatively saving costs.”

So, why should companies choose SAP for the digitalisation of their supply chain? Johannes says, “We have a comprehensive end-toend supply chain solution offering, combining everything from planning, design and engineering, to production, distribution, and services, all interlinked to SAP’s ERP systems.

Consistency of data and processes within a company is becoming more and more important to ensure

supply chain solutions adapted along the industry value chains to meet the customers’ requirements.”

The value of having a clear digitalisation strategy is echoed

by Cigdem Kroggel, Head of Sales, Digital Supply Chain, Germany. She considers it to be the backbone of SAP’s success in Germany.

Cigdem says, “Adaptation to new market situations, combining agile solutions, key partnerships, and Industry 4.0, allows us to remain competitive. Cloud becomes 15

SAP Integrated Business Planning and the CAMELOT team helped us shape our future digital supply chain based on a state-of-the-art planning application. We’re closing in on our goal to become and stay the first choice for consumers worldwide.

Dietmar Baumann, Program Manager Digital Supply Chain (Global Digital Services), BSH Home Appliances Group

Master Uncertainty Supply Chain Resilience with a Demand-Driven Approach Changes in consumer behavior, shorter product lifecycles, climate events or supply shortages unsettled supply chains even before the Covid-19 pandemic. The disruptions showed that traditional supply chain planning approaches meet actual demands less and less accurately. To manage the New Now of complexity and volatility, organizations need a more resilient approach for end-to-end, customercentric supply chain planning. One of the most promising approaches is the Demand-Driven methodology and the transformation with Demand-Driven Supply Chain Management (DDSCM).

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Demand-Driven Planning in SAP IBP for more resilient supply chains DDSCM helps navigate the challenges of the New Now and controls variability across value chains.

It maximizes contribution margins by increasing the flow of material through value chains resulting in higher service levels at reduced inventory. On the operational level, Demand-Driven Material Requirements Planning (DDMRP), as defined by the Demand Driven Institute, puts DDSCM into action.

It is comprised of known and well-established methods such as Material Requirements Planning, Lean, and the Theory of Constraints.

In 2019, the DDMRP methodology has been realized in SAP Integrated Business Planning (IBP) by SAP and Camelot ITLab as strategic development partner.

SAP IBP for Demand-Driven Replenishment enables relevant material and information flow in SAP IBP. Camelot also is a global implementation partner for this solution. The unique relationship between Camelot and SAP spans more than 25 years. It is best described as a 360-degree partnership: Camelot is co-innovation partner, global implementation partner and customer of SAP.

Significantly increased performance The “Demand-Driven” concept is leveraged successfully by global companies in various industries with the help of Demand-Driven Replenishment in SAP. It implements integrated processes based on tactical planning and operational pull replenishment and leveling. This paradigm shift within the supply chain towards pull replenishment based on the principles of demand-driven materials requirement planning is empowering planners for what-if simulations, allowing improved decision-making. The effects are optimized planning results using forecast algorithms and predictive analytics while becoming more agile with respect to changing customer demands and market conditions. As a result, they achieve a significant reduction in variability and a stabilization of the material flow in their supply chain. The benefit is a substantially improved service quality and increased agility of the supply chain due to a reduction in throughput times of up to 82% and inventory reductions of up to 70%.

Service Level Increase (Points)

Lead Time Reduction (Percent)

Inventory Reduction (Percent)

Median +13%

Max. +54%

-22% -82% Median

-31% Median

Max.

-70% Max.

Demand-Driven: A Cornerstone of the Intelligent Enterprise End-to-end Demand-Driven supply chain planning directly supports the efforts towards an Intelligent Enterprise, enabling organizations to make impactful changes in order to grow more resilient, more profitable, more customer-centric, and more sustainable.

For all companies relying on their supply chains, the Demand-Driven approach in SAP IBP helps achieve a competitive advantage and become more intelligent and resilient. Therefore, DDMRP now becomes a feature in SAP S/4HANA Core. 2021 IBP releases were a significant step to realize this vision with new integrated DDMRP scenarios across SAP IBP and S/4HANA. Now, organizations can leverage SAP IBP with time series and order-based planning for running the first four steps of DDMRP, and, as a fifth step, integrate supply elements to SAP S/4HANA or SAP ECC. SAP IBP for Demand-Driven Replenishment can be used in combination with any SAP ERP landscape and thus provides simulation capabilities, supply propagation across networks in one run, and more accurate net flow calculations. Supply elements for all location products can be created and propagated directly in SAP IBP using the DDMRP principles.

HOW TO START YOUR RESILIENT SUPPLY CHAIN JOURNEY: The Camelot Supply Chain Resilience Center Service includes a structured approach that guides organizations through every step of their transformation journey.

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already the reality because it enables our customers to be more flexible. It is the new standard for us.”

In addition, small and medium enterprises can benefit from cloud solutions because of the resilience and automation they can achieve, but how is the additional security aspect managed? Cigdem answers, “If you move to a large provider, such as SAP, the environment is much more secure

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than anything a company could provide on its own data centre.”

Matthias Riedel is the head of Solution Advisory for Digital Supply Chain in Germany. He believes that in addition to its broad solution ecosystem, SAP’s strength also lies in its ability to offer tailored solutions that are built according to customer requirements. Matthias explains, “The current situation

has made it even more important to speak the customer’s language and give them the comfort that we can translate their needs into SAP solutions. For example, what does the electrification of cars mean for the OEM’s supply chain, and how can SAP help? By understanding industry trends and challenges, SAP can create a solution approach that is tailored to a specific situation.”

Matthias Riedel, Head of Solution Advisory for Digital Supply Chain in Germany

As the competition is getting fiercer, it is essential for SAP to be able to articulate a clear and captivating proposition when interacting with customers. Matthias continues, “In terms of software, customers want to see the system in action and even testdrive it themselves. We have physical showcases featuring our entire supply chain portfolio at various locations, as well as online, to help customers experience how our solutions work hand in hand.”

Discussing the upcoming trends in the digital supply chain field, Andreas and Johannes say there are a number of prevalent themes. Andreas elaborates, “When we talk about consumer products, I am seeing the trend of end-to-end visibility on 19

“Transparency and visibility for the consumer are also increasingly important. Customers want a solution to track their products. For example, if you buy a bowl of organic fruit, you can scan it to see where it is from, which farm grew the fruit, when they were picked, and how they were finally transported” Andreas J. Wagner, General Manager, Digital Supply Chain, MEE

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various levels. In logistics, it provides predictability on the location of goods and when they can expect to arrive. Transparency and visibility for the consumer are also increasingly important. Customers want a solution to track their products. For example, if you buy a bowl of organic fruit, you can scan it to see where it is from, which farm grew the fruit, when they were picked, and how they were finally transported. In addition, more

In the automotive industry, there is full disruption happening alongside the need for continuity at the same time. We are seeing more scalable and flexible production, as we shift from global to near shore production processes. Hence more flexibility in production and an end-to-end production dashboard are also key for our customers. Additionally, the sustainability story is filtering down into every part of the business, from

“Predictive and synchronised planning is moving to the centre of businesses. When you open a new shop or release a new product, you can have full transparency beforehand” Andreas J. Wagner, General Manager, Digital Supply Chain, MEE

and more companies in the textile industry are doing the same by providing all the data on the materials and the product, such as where the materials come from, how they were produced, and under what conditions the product was manufactured.

“Furthermore, predictive planning is moving to the centre of businesses.

When you open a new shop or release a new product, you can have full transparency beforehand.

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when we talk about CO2 in the manufacturing process, through to transport management and sustainability reporting.”

Johannes states, “In terms of supply chain software cloud market growth, the overall expectation of the MEE market in the next four years, based on valid market research, reports that the cloud market growth will increase around 20%+ yearly. For the on-premise supply chain software

The SAP spectrum for your logistics needs

RISE with SAP Warehousing • Transportation • Track and Trace Mobile Apps • Digital Design • Analytics »Thanks to our productive partnership with SAP, we can support these and other logistics topics not only in a targeted manner, but also sustainably and with future-oriented digital added value.« – Fin Geldmacher, Managing Director at prismat

Many thanks to the teams at SAP who are working on the topic of Digital Supply Chain, and keep up the good work! We are very pleased about the partnership and the recognition, for example in the context of the Appreciation Award. Thank you very much!

– prismat, (obviously) proud winner of the Digital Supply Chain Award 2021

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MHP’S END-TO-END APPROACH TO SUSTAINABLE SUPPLY CHAINS USING SAP SOLUTIONS Digital transformation is a critical issue for companies and organisations, and one that is fundamentally reshaping many market participants. In addition, sustainability initiatives are increasingly being viewed as competitive factors, leading many companies to start thinking about the associated challenges.

Sustainability is no longer merely an abstract idea – it is becoming a tangible concern for us all.

As an enabler of progress, digitalisation can pave the way for a sustainable future. MHP supports its customers with their transformation to sustainable operations and empowers them to permanently close the gap between formulating strategic goals and implementing initiatives at an operational level.

business models. Digitalisation is key to any sustainability initiative, and to harness its true potential, a digital transformation must be implemented consistently at an organisational, process and IT level.

MHP strongly recommends that companies evaluate their operations excellence (OPEX) when implementing sustainable transformations.

How successfully can you link operations excellence with the requirements of sustainable excellence (SUSEX)? How resilient are your processes and systems in terms of being up to date or being secure in a crisis situation?

As evidenced by the ongoing semiconductor shortage, maritime traffic blockages caused by accidents and the simultaneous increase in online shopping, the resilience of a value-

“How companies incorporate sustainability into their processes and IT systems will be an indicator that people will use to draw conclusions about the performance and future prospects of a company.”

Ingo Windshügel, Partner at MHP – Digital Supply Chain Solutions Mounting pressure to act now is encouraging decision-makers to initiate change. Their ultimate aim is to ensure that their company is prepared for the future so that they can unlock fresh potential from company processes and establish new business models. To implement a genuinely end-to-end approach, it is necessary to utilise multiple digitalisation tools – at management level and within value-creation processes.

For this approach to be successful, we first need to look at how value chains have developed.

Companies started implementing their first lean management approaches back when sustainability was just a nice by-product; we are now in the compliance and standards stage where sustainability is mainly characterised by regulatory dynamics. Recognising sustainability as a competitive factor means that companies can start looking ahead and designing new

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creation chain is a critical success factor for companies in today’s era of global supply chains.

To open up new opportunities for companies and promote growth, OPEX and SUSEX must be considered holistically based on a strategic, conceptual and systematic framework. This is already possible using a meaningful combination of various standard application solutions from SAP. The SAP solutions and the transformation approach described above can also be used to increase efficiency long term and in a way that prepares companies for the future. However, the mentioned “management gap” between formulating strategic goals for sustainable initiatives and implementing these on an operational level must be overcome. This is the only way for all stakeholders to implement an end-to-end approach. The automotive industry in particular needs holistic solutions with which it can improve supply chain transparency, control

FOR GUIDANCE ON THE ROADMAP OF SUSTAINABILITY DEVELOPMENT FROM BYPRODUCTS TO SUSTAINABLE BUSINESS MODELS - THIS IS WHERE CUSTOMERS NEED OUR EXPERTISE

factories and modernise IT infrastructure in order to unlock new business opportunities for sustainable mobility products and services.

This is why MHP takes a holistic approach: Using standard application solutions from

An example that has already been implemented is the sustainable optimisation of global procurement transport chains: The SAP Transportation Management solution was used to re-design inbound processes within global procurement markets from a sustainability

“System-supported transport optimisation can make processes much more fluid, transparent and innovative,” Bastian Kempe, Senior Manager MHP – Digital Supply Chain Solutions SAP, we support our customers with every step, from looking at how to develop new business opportunities and services, to formulating corporate strategies and implementing these strategies at an operational level in all areas of value creation (planning, supply chain and procurement, production and logistics, as well as after sales and services). The consistency and connectivity of the individual SAP components is what guarantees a digital ecosystem, particularly in the manufacturing, sales and transportation sectors.

perspective. It was even possible to increase the transport volume at the same time.

All stakeholders in the supply chain can benefit, making each one, as well as the entire network, more competitive and better prepared for the future. The services available from MHP are ready to run, field-tested and scalable. MHP is the ideal end-to-end implementation partner for your transformation to sustainable operations based on SAP standard applications.

MHP Management- und IT-Beratung GmbH is a leading consulting company and a subsidiary of Porsche AG (81.8%).

MHP’s unique approach to consultancy is a blend of management and IT consulting. As a digitisation expert, we optimise and digitalise our customers’ processes across the entire valuecreation chain through our service divisions of Management Consulting, System Integration, Managed Services, and Digital Services and Solutions. MHP’s philosophy: Driven by Excellence

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SAP´s Innovation Hubs for Industry 4.0

market, we can expect to see a decline of around 10% yearly.”

Johannes adds, “We can learn a lot from early cloud adopter countries such as Switzerland, as well as in North America and Scandinavia.

SAP experts, such as supply chain solution advisors, consultants, and business developers – and our partners, of course – will also guide you in helping you make the right decision. Customers often look for business cases and industry-specific best practices to find out the impact of their cloud transformation.”

So, for a company starting their digital supply chain transformation 26

journey, where do they begin?

Andreas answers, “Planning is almost always the best starting point, as far as the end-to-end processes are concerned. In this case, SAP experts such as consultants are involved, who analyse the initial situation and make recommendations about the next steps based on this.”

With the shift from an integrated global supply chain to local production lines, Andreas says the independence of the key supply chain changes means complexities are increasing. He continues, “During the pandemic, many companies tried to maintain the status quo because they could not change their processes. The digital champions

“Planning is almost always the best starting point, as far as the end-to-end processes are concerned.

In this case, SAP experts such as consultants are involved, who analyse the initial situation and make recommendations about the next steps based on this” Andreas Wagner, General Manager, Digital Supply Chain, MEE

SAP also provides SAP Innovation Hub locations and SAP Experience Centres around the world where customers can experience the products live in person or virtually. Hereby Johannes also emphasises the importance of the Innovation Hubs: “This is very beneficial for customers to experience the product in action and, above all, to get first insights and impressions of SAP’s solutions.”

was chosen because they did some very innovative and powerful demand generation events. They have a broad knowledge across all SAP solutions paired with strong expertise per solution area. Westernacher is excellent when it comes to the solution areas in logistics and warehouse management, besides having in-depth knowledge of other SAP (supply chain) solutions.

Prismat are also experts in logistics, warehouse management solutions and further SAP solutions. They have a very strong footprint in all industries and customer segments.”

In terms of partner recognition, SAP has launched a ‘Diamond Initiative’ to award selected partners that have contributed to the success of customer projects, with a special appreciation award for the Digital Supply Chain (DSC) line of the business. Three partners each year are recognised for this commitment to customer projects. Last year´s winners were Valantic, Westernacher, and Prismat. Johannes says, “Valantic

However, besides the three DSC Appreciation Award 2021 winners, all SAP partners are an important part of the company and its solutions. All partners have a major role to play in the success of SAP and digital supply chain solutions. The teamwork and commitment of each and every one is nothing but amazing! Johannes adds, “It is important to mention that we have great collaboration with all partners, and that every one of them

were those early adopters. The best planning processes and a balanced supplier landscape can work towards mitigating the risks.”

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has contributed a huge part to the success of SAP Digital Supply Chain.

We are very grateful to accomplish something big in such a fastchanging environment.”

SAP’s partners are essential given the broad customer demands to run and implement projects on time.

Johannes says that this could not be achieved without the company’s

Arsim Jahii

“To drive large-scale transformation, customers and SAP work on holistic strategies and translate those into digestible operational plans” Arsim Jahii, Head of Digital Supply Chain for Switzerland

important partner network. He states, “We have a strong partner base for the supply chain to help customers validate a proposition with business use cases or see if a solution is the right one according to their industry requirements.

The partners are part of a trusted advisory network for our customers to make their supply chain transformation projects successful on all levels.”

Arsim Jahii is the head of Digital Supply Chain for Switzerland.

He is experienced in working on end-to-end supply chain projects to enable innovation, flexibility, 28

and unleash business value. He says, “Functional leaders across various sectors must foster collaboration with an aligned flow of information for better visibility and agility. Siloes create lonely island and the prices for those are corporate inefficiencies and dissatisfied customers.”

So, how does SAP win key customer projects? Arsim answers, “To drive large-scale transformation, customers and SAP work on holistic strategies and translate those into digestible operational plans. It is important to define a common and clear vision, supported by management, with clear business values attached to the

THE SUSTAINABLE BUSINESS OF TOMORROW At NTT DATA Business Solutions, we design, implement, manage and continuously enhance SAP solutions to make them work for companies – and for their people. When our customer DENIOS AG decided to develop a new business model – they found a strong partner in us, which combines tailored solutions and high-level expertise for maximum project success.

DENIOS AG is a global leader in the handling of hazardous substances and is now focusing on new, innovative scenarios in order to continue to successfully position itself in the market. To this end, a new business model is now being developed to address the challenges faced by customers. The focus is currently on the core business, but the medium-term goal is to expand the business model to safety management as a service in order to also act as a service provider on the market. DENIOS places particular emphasis on ecologically sustainable, social and economic development.

DIRECTION FOR THE FUTURE Together with us, DENIOS has designed a digital roadmap that shows the timeline for the implementation of many new digital services. In addition, the challenge of making all knowledge about the storage of hazardous substances available digitally is to be solved. With the conception and realisation of an app on the topic of quantity testing of hazardous substances, the first digital product could be implemented. But the digitalisation of this knowledge also opened new doors for the future storage of hazardous substances.

THE INTELLIGENT HAZARDOUS MATERIALS WAREHOUSE The question arose as to which innovative possibilities could now be implemented with the digitalised knowledge. The idea came up to develop a prototype for an intelligent hazardous

materials warehouse in which the most modern technologies are combined and orchestrated. In connection with the digital twin of the warehouse, the digitised knowledge about the storage of hazardous substances can now be used with the help of a digital voice assistant based on artificial intelligence to support customers in the storage of hazardous substances. The connection of the intelligent hazardous substance warehouse and the sensors installed in it was carried out using MQTT, a machine-to-machine communication that enables the transfer of data between devices.

Through the integration into the SAP backend processes, all data and information are recorded.

This pilot project shows how concrete added value can be achieved through the interaction of innovative technologies: New business models are created, hazardous materials can be stored in an environmentally friendly way and processes become safer.

nttdata-solutions.com

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transformation. At the same time, you need to include the end-users.

Scalable technology platforms are the foundation to drive global scale, but businesses need to find compromises between global scale and local requirements.”

Dominik Metzger

To drive business innovations, Arsim says that trust is the absolute foundation. He continues, “You must have a joint understanding of each other and the values both parties

“The idea (‘Showcases’) was born in 2013, with the goal of building an interactive experience for customers that reflected the motto of ‘Run Different’” Dominik Metzger, Head of Product Management – Manufacturing and Industrial Internet of Things

can bring to the table. Think outside the box about how you can solve the challenge then feasibility comes next. It is about defining engagement areas, which are future-orientated and of massive business impact, but at the same time, delivering strong ROI during the planned stages.”

When it comes to experiencing SAP’s supply chain solutions in action, Dominik Metzger, Head of Product Management – Manufacturing and Industrial Internet of Things, tells us more about the interactive

‘Showcases’, built to help inspire customers to experience innovations around Industry 4.0 which are reality today, based on SAP software. He says, “The idea was born in 2013, with the goal of building an interactive experience for customers that reflected the motto of ‘Run Different’. The Showcase is now part of the Innovation Hubs for Industry 4.0, placed in Walldorf, Newtown Square, and Tokyo. They are based on a ‘hybrid system’, which provides visitors the option to visit 31

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Experience Industry 4.Now Hub Find out more

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the Showcase either physically at the respective SAP location, or virtually.

The virtual experience combines a digital showcase on sap.com with a webcast directly into our Intelligent Factory. The team of industry experts provides an interactive tour, supported by cameras and screen sharing.”

One great example of the Showcase is the IoT-enabled Kanban (a procedure for controlling production and material flow based on the material stock in production). With this, the replenishment or production of a material is triggered only when a certain quantity of the material has been consumed. As a result, material is only replenished when needed, enabling organisations to avoid out-of-stock situations or overstocking, and reducing operational cost by automatically triggering replenishment processes, without the need for human intervention. This Showcase is based on smart sensing capabilities of SAP IoT, and allows customers to see, in real time, the value of implementing such a solution.

Johannes adds, “These concepts also require an innovative awareness and communication strategy. For this, we apply an intuitive social media communication strategy

concept with the support of a digital transformation expert, GeronimoNoah Hirschal, Founder and CEO of the Vienna-based agency, Digital Optimist Gmbh.”

Geronimo says, “We make digitalised communication personal, because people always do business with people. At SAP, we meet with Johannes’ concept of the DSC EX.PLORE Series. Groundbreaking projects are presented in the context of an online event and narrated by key people at SAP, their customers, and partners.

It is an outstanding experience that combines the virtues of storytelling with innovative supply chain content.”

Johannes and Andreas conclude, “The shift from on-premise to cloud supply chain solutions and the digital transformation to a resilient end-to-end supply chain entails many potentials for all companies in all industries. Companies need to continue to transform their supply chain processes to stay as agile as early adopters, the digital champions.

SAP and the strong partner ecosystem offer many best practices to prepare, plan, showcase, and implement this supply chain transformation successfully, and most importantly, sustainably.”

For further information on SAP’s offerings, visit www.sap.com

Cover image: © Loopding & Digital Optimist | Article images: © Digital Optimist

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BUSINESS INTERVIEW

AHEAD OF THE CURVE Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco Logistics Services, has identified over 40 million dollars in savings since launching the company’s groundbreaking Innovation Lab.

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enco Logistics Services offers customised thirdparty logistics (3PL) management solutions including distribution, transportation, material handling, and solutions engineering services to businesses across North America. Kristi Montgomery is Vice President, Innovation, Research & Development, and responsible for Kenco’s supply chain transformation initiatives utilising emerging and digital technologies.

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Having been with the company for over 30 years, she heads up the group’s Innovation Lab, committed to applying innovation in new and existing customer relationships.

“In 2015, the foresight and vision of our leadership to make innovation a priority put us ahead of our competitors, and our customers reaped the benefits,” Kristi says.

“Organisations using our services need their providers to look towards the future, identify trends and new technologies, determine how they would impact their business, and decide how best to prepare for it.”

Seven years later, Kenco Innovation Labs have identified over 40 million dollars in savings for customers, and they continue to push that envelope of what is coming next. They provide research, education, and thought leadership to customers.

But the biggest benefit of the Innovation Lab lies in its ability to test new technologies in a realworld environment, throwing as much challenge into new solutions as possible and proving their value.

In 2019, Kenco expanded their Innovation Lab to include a 10,000 square foot warehouse facility and fully functional distribution centre with the same environmental, space, and technology challenges as any normal warehouse.

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How does this really play out? Take robotics as an example. It is difficult to find the right solution that will accommodate a customer’s specific needs. This is where Kenco comes in.

“We become the experimentation arm for our customers, testing out solutions before they put them in production,” Kristi explains. “One of the robotic solutions we looked at continued to fail while operating in our test facility for no apparent reason. Working with the vendor, they realised that the extreme pollen count during that time of year in our facility was blocking the LIDAR

"Körber assisted Kenco in selecting the right robotics solution – Locus Robotics – for one of its ecommerce facilities, providing assistance throughout the project" sensors that allowed the robots to navigate the space. The value our customers found in not having to find this out on their own in production was immeasurable.”

INNOVATION EVERYWHERE Kenco has been an innovator long before the founding of its

Innovation Lab in 2015. In its 70+ years of business, Kenco boasts a history of entrepreneurial spirit and innovation including material handling industry attachment inventions, the first contract warehouse agreement, the development and application of the first known warehouse management system, and more.

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AMRs address the challenges in today’s warehouse If labor shortages or elevated demand are negatively impacting your warehouse fulfilment, then you’re likely thinking about Autonomous Mobile Robots (AMRs). With so many AMR choices available, it can be hard to understand which ones present the best fit for your organization’s unique situation. You therefore need a partner with a holistic approach and significant experience in both software and automation. That partner is Körber.

We would not be able to keep up with volume, without the addition of the robots.”

Theron Neese Chief Supply Chain Officer

Read case study This was one of the first technologies that I’ve seen come into a building where the team was excited from the get-go, and it just hasn’t stopped.”

Chris Christiansen Outbound Manager

Read case study

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The innovation never stopped.

Kenco is constantly finding new ways to keep a finger on the pulse of new trends. A key to success has been its work with start-up accelerators and entrepreneurs in the space to keep an eye on what is emerging and in development that could be impactful in the future.

Kenco continues to participate in logistics pitch days and corporate connection events with supply chain start-ups, which has led to multiple implementations of new technologies for customers.

Though far from exhaustive, below is an exploration of Kenco’s recent innovative endeavours resulting from these efforts.

INNOVATION IN WAREHOUSE SAFETY Kenco is currently working on several exciting projects in warehouse safety, including in the industrial internet of things (IIoT) space. Soter Analytics’ Soter Spine, for example, is a device that clips onto an associate’s collar and vibrates when they twist or bend improperly. The device also provides analytics around who needs additional coaching or who is improving. “This safety element is so important because employees’ physical safety is a top priority for our organisation,” Kristi says.

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Additionally, Kenco is currently piloting a project with HeroWear exoskeletons at two of its facilities where heavy lifting or repetitive activities potentially put strain on associates’ backs. HeroWear exoskeletons are wearable, lightweight devices that help reduce back injuries in the workplace. John Barlew, Vice President of Safety at Kenco, notes, “The need for back support in warehousing is undeniable. The exoskeleton has the potential to remove 50 pounds of lift pressure from the lower back. When bending, it will thrust you up into a standing position to help remove the strain.”

"Kenco is currently piloting a project with HeroWear exoskeletons at two of its facilities where heavy lifting or repetitive activities potentially put strain on associates’ backs" Nothing posed a bigger threat to employee wellbeing in the past 18 months than the pandemic.

The company took a strong approach to Covid at the outset, forming a Covid taskforce to look at the data on a regular basis and direct senior leadership. “We implemented safety measures including automatic temperature checks, limited visitors, stricter cleaning, contactless driver interactions, and mask policies,” Kristi says. “Because we took a strong stance early on, we were able to mitigate some of the outages that our competitors experienced. From an innovation perspective, we asked what we could do to make our sites safer, and deployed scrubbing robots that were completely autonomous,” she adds.

FUTURE-LOOKING ROBOTICS AND DRONE SOLUTIONS Körber assisted Kenco in selecting the right robotics solution – Locus Robotics – for one of its ecommerce facilities, providing assistance throughout the project.

“Locus is an autonomous mobile robot that increases your picking productivity,” Kristi explains.

“People are kept in the picking aisles and the robots do the travel distance back and forth to the packing station, which increased productivity four-fold, from 30 lines per hour to 120 lines per hour at peak. However, since we were not using the Körber warehouse

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between various types of automation. This helped Kenco to overcome some of the challenges it faced integrating with the Locus solution.

“We see SVT Robotics as transformational technology for the future of allowing rapid deployment, easy experimentation of plugand-play robotics, and execution system augmentation with workflow features,” Kristi adds.

Voodoo Robotics provided a dynamic, pick-to-light device that could be magnetised to stick to racking and relocated easily. Kenco deployed the Voodoo Robotics system to increase efficiency and help with bottleneck issues during peak season. management system (WMS), but a specific ecommerce platform, we encountered some difficulties in the way it could integrate with the Locus solution. That’s where we brought in SVT Robotics.”

SVT Robotics built a proprietary SOFTBOT® Platform, which rapidly integrates any enterprise software with any automation, robot, IoT device, or human productivity tool for any task, orchestrating these technologies from disparate companies so they all work in concert. With SVT Robotics, Kenco was able to add connectors to their WMS, with multiple connectors 44

The solution fills the put wall with high-volume SKUs, Voodoo indicates the tote to pick from on the put wall with a light and text on a screen, the picker picks all of the SKUs for the order, and another Voodoo device indicates that the order is complete, instructing the packer to remove the tote and pack the product into the shipping container. Once this is complete, the tote with container goes onto the conveyor line along with other totes provided by the Locus Robots as they are delivered.

The project was completed in phases to be mindful of the production impact on the floor.

"Kenco deployed the Voodoo Robotics system to increase efficiency and help with bottleneck issues during peak season" With Voodoo Robotics’ flexible design, and intuitive interface, Kenco customers achieve more picking in less time, and with fewer errors.

solutions be deployed successfully and generate the productivity savings they promise?

“The simple answer is yes. We have Kenco also worked with B Garage to done it,” Kristi answers. “We have develop the world’s first autonomous been testing robotic technologies for several years to determine the key battery changing drone solution, which is housed in Kenco’s Innovation capabilities of each one so we can deploy the best fit for our customers.

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Meeting Peak Holiday Rush with the SOFTBOT® Platform — a Kenco Logistics Case Study In July of 2021, third-party logistics company, Kenco Logistics, partnered with SVT Robotics to quickly connect and integrate their WMS with a fleet of Autonomous Mobile Robots (AMRs). The goal was to have system integrations in place and working smoothly in time to meet a Kenco e-commerce client deadline of peak holiday season that begins in November and runs through December.

At the time the project kicked off in July, the WMS platform being utilized

by Kenco did not yet have integrations, or “SOFTBOT connectors,” built on SVT’s SOFTBOT Platform. Nonetheless, SVT Robotics was able to quickly build the necessary connector in just over two weeks, with user acceptance testing taking place on August 16th and go-live launch on September 7th.

That fast schedule easily gave Kenco’s client plenty of time to gear up for their busy holiday shopping season.

In fact, the integration between their WMS and the AMR fleet went so smoothly, Kenco was able to accelerate their longer-term plan for staggered ramp up and begin that process on just day two of live operations vs. their original goal of beginning ramp up at one-week post-launch.

The plug-and-play functionality of the SOFTBOT Platform means companies can rapidly integrate the solutions necessary to meet accelerating business needs. Kenco Logistics quickly and easily met their goals - contact us to see what SVT Robotics can do for your company.

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predicting recovery. We are also currently building out a full supply chain end-to-end control tower.”

As a direct response to the supply chain disruptions and recordbreaking labour shortages that the pandemic created, Kenco updated DaVinci AI to generate savings of up to $300,000 in labour costs for some customers and deliver volume predictions at over 90 per cent accuracy. The solution helps improve productivity, efficiency, and ultimately, the customer experience. solutions for customers who have retail shipments that are sensitive to chargebacks, as well as wearables, voice-enabled systems, visionenhanced smart packaging, and autonomous tuggers that move eight pallets at a time instead of two. We did not change our focus of being more efficient and effective. We just pushed it to the next level.”

KEEPING AN EYE ON DATA SCIENCE, MACHINE LEARNING, AND AI Kenco continues to put an emphasis on data science, machine learning, and artificial intelligence.

Kenco’s Director of Data Science and Business Intelligence, Satish Vadlamani, explains, “We developed our own proprietary AI engine called DaVinci AI, and have built several predictive models around volume planning, labour planning and

“We have put a greater focus on data insights and digital technologies in recent years,” Kristi adds. “We are building a digital supply chain to help both our customers and our employees.”

KENCO’S PROPRIETARY TECH SOLUTIONS As part of its commitment to digital transformation at every level of the supply chain, Kenco launched Kenco TMS LITE in 2021. The technology empowers small to midsized shippers with the resources they need to effectively manage their transportation networks and drive business success. With integration-free deployment, outof-the-box reporting, and intuitive user experience, Kenco customers can quickly leverage this TMS tool to optimise their transportation networks for greater returns and 49

"Kenco partnered with Logistiview to become the first 3PL to use their workflow configurator program for vision"

customer satisfaction. Kenco TMS LITE also includes access to free training and specialised services through a single, personal point of contact.

“At a time when the freight market is extremely volatile due to the Covid-19 pandemic, mitigating carrier increases and increasing supply chain reliability are paramount for companies of all sizes,” says Mike McClelland, SVP of Transportation at Kenco. “Innovative solutions like Kenco TMS LITE are just one of the ways that we provide value to our customers.”

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Kenco is also a pioneer of its own telematics solution. Kenco’s FleetCloud is one of the most powerful telematic devices in the industry today. FleetCloud is a telematics solution that automates material handling equipment service processes and monitors equipment performance to drive efficiency, safety, and compliance.

Allen Polk, Vice President of Sales at Kenco says, “For over 70 years, Kenco has maintained its belief that material handling equipment (MHE) is a pillar to every warehousing operation, and having awareness of your MHE fleet is the difference between a successful, profitable operation and an inefficient one. From efficiency and safety to productivity and compliance, we’ve continually emphasised telemetry’s benefits of data-driven fleet awareness across MHE programs. Offering the industry access to a truly brand-agnostic telematics solution in Kenco FleetCloud™ with a customer-centric focus on implementation is just another step towards our goal of creating highly

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efficient and intelligent supply chains for companies of all sizes.”

ADDITIONAL NOTABLE PARTNERSHIPS THAT DRIVE CUSTOMER SUCCESS Kenco believes it is critical to form key partnerships with other companies and would not have achieved the 40 million dollars plus in savings without taking this approach.

Logistiview is one example. Kenco partnered with Logistiview to become the first 3PL to use their workflow configurator program for vision. Augmented reality glasses

connect to Körber’s WMS to take orders and create picking/puttingaway tasks. When the associate puts on the glasses, they see a picture of what they need to pick. The proper pick location is highlighted in green, thus reducing the error rate.

This solution improves picking and shipping accuracy while reducing the need for 100 per cent quality control audits.

To tackle the issue of customer chargebacks (i.e. underpaid invoices in the event of a problem), Kenco developed a solution together with Smart Gladiator for a more organised approach to supply chain accountability.

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“At the time, every warehouse facility had multiple digital cameras, taking pictures of shipments as they passed through the warehouse,” Kristi shares. “It was almost impossible to locate the right pictures in the event of a chargeback.” Kenco developed a mobile app called Loadproof (patent pending). When it came to commercialising it, Kenco made the choice to go to Smart Gladiator. “The majority of our customers are now using it, as well as other manufacturers and retail distribution centres, so it’s a real win.”

Loadproof provides proof of condition of product/shipment/ packaging through an image capture app, downloadable on any mobile smartphone. Users simply photograph shipments and instantly upload to the cloud, which can then be shared with internal leaders, external vendors, customers, and transportation partners. This solution improves retail compliance, reduces chargebacks, and improves visibility throughout the supply chain.

Kenco also recently became one of the first North American 3PL’s to partner with Phantom Auto to develop a fleet of remotely operated forklifts. Phantom’s interoperable software enables forklifts, tuggers, robots, trucks, and more to be remotely operated by trained operators sitting up to

thousands of miles away. The solution helps customers increase labour accessibility, maximise workforce impact, deliver improved workplace safety, and generate greater cost savings.

LOOKING AHEAD: THE FUTURE OF SUPPLY CHAIN INNOVATION Through dozens of various innovations, Kenco has for decades delivered cost savings to customers and helped move the needle forward in an industry that requires constant optimisation to keep up. It’s a fibre of the company’s being and mission. “We’ll always have our ears to the ground, picking up on industry trends and meeting those challenges with innovation,” Kristi says. “Our vision for what we can accomplish in the future is extremely exciting. We’ve certainly got a lot to look forward to.”

For further information, visit www.kencogroup.com

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BLOCKCHAIN

Increasing Trust and Efficiency HS2 Ltd has successfully implemented blockchain technology in a section of its procurement pipeline.

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HS2, the 52-mile extension of high-speed railway network from London to Manchester, is using blockchain technology to boost efficiency, trust and value in the supply chain, with plans to expand its use of the technology to wider processes.

S2 Ltd’s Head of Innovation, Howard Mitchell, Costain Strategic Growth Manager, Charlie Davies, and Blockchain Lead for Deloitte’s Real Assets Advisory Practice, Alexander Marx, explained the objectives and outcomes of the blockchain trial at a recent conference.

timestamp and transaction data that is practically impossible to hack or alter. This means that any data being input to the blockchain only has to be inserted once, and it can never be altered again, preventing any tampering or human error, as the information gets shared throughout the network of parties which needs to access it.

Firstly, it is necessary to give a definition. Blockchain is a form of cryptography that links together blocks of information in a secure chain, where each piece of information is given specific

As for its use on HS2, Marx explained, “It was really about what’s the value case – what does blockchain do better than other technologies that makes it worth the effort of putting it in place? For us, that

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Blockchain is a form of cryptography that links together blocks of information in a secure chain, where each piece of information is given specific timestamp and transaction data that is practically impossible to hack or alter 57

was trust, transparency and accountability.

“Trust because you create a single version of the truth that everyone shares, and it’s verified.

“Transparency because you can share information across that network to encourage collaboration.

“And finally, accountability because you can trace the business process from start to finish with clear and undeniable records of what’s been done when.”

Marx outlined three key uses for blockchain in HS2 – and potentially all construction projects in the future.

The first is to identify points in the supply chain where there are bottlenecks – where information or processes are held up. This provides an ability to spot trends that could be stamped out to improve efficiency.

Secondly, he explained how having complete confidence in the data being shared means that they can start to use smart contracts and 58

payment automation. For example, with blockchain baked into the technology, data will be created about when contractors arrive on site and leave with undeniable accuracy, meaning payments can be directly automated – no timesheets or administrators necessary. HS2 says using blockchain has reduced the total number of business processes for timesheets and invoices from 24 to 11.

The third main use of blockchain is material origination. Every single item, even down to a lowly bolt, will have its information inserted into the blockchain, and from that point, a record is kept on when and where it was manufactured, where it’s transported, where it’s included in the assembly, that assembly’s transport to the construction site, and ultimately, its location in the final structure.

Material origination data will be particularly useful as we move towards greater implementation of digital twins, as the information for each little piece of a building will have robust data behind it that can be mirrored in 59

the digital version. Origination data, including how it has been manufactured and where it has been transported, will also give much more detailed results when calculating carbon emissions for any given building.

HS2 has started putting blockchain into use with one of its plant suppliers, Lynch. By ensuring that everyone in this section of the supply chain is using the same, 60

secure information, they have been able to crack down on bottlenecks and start using more automated processes.

Davies explained, “We really innovated and connected up the supply chain in terms of proving this concept out; working with finance teams and working with commercial teams, as the gap between the two is sometimes not quite understood.”

"We really innovated and connected up the supply chain" Charlie Davies, HS2 Ltd's Costain Strategic Growth Manager

This increased speed of payments by 50 to 60 per cent. Davies added, “What that amounted to over the lifetime of (HS2’s) SES sections 1 and 2 main works – so Euston out to the M25 – was quite considerable savings.”

Mitchell, speaking on behalf of HS2 Ltd, said, “As a client, we’re not just looking for the benefit to be a proof of concept or isolated just within one part of the route. We are now

looking to expand the learning that we have from this particular case and cookie cutter it.

“So, we will lift throughout the first phase of the programme and then also start the dialogue with the second phase of the programme, where this should become more of the norm.

“But this is just one use case against many.”

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"Paying for supplies faster has benefits not just for the cost of doing so, but also for their costs when it comes to things like trade finance and all other things associated with it"

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Marx underlined this by explaining, “What we hope to do in the next few years is expand out in terms of its features and functions.

“It can be applied more broadly to other areas of timesheets and invoicing, while also looking at the rest of the process to move towards a one-stop-shop, essentially, for how you procure plant.”

He added that, in time, it will expand into other processes, such as different types of procurement or how to capture carbon.

Marx also wanted to highlight that this won’t just have positive impacts for HS2, but all layers of the supply chain.

He continued, “Paying for supplies faster has benefits not just for the cost of doing so, but also for their costs when it comes to things like trade

finance and all other things associated with it.”

In conclusion, he wanted to emphasise the potential for blockchain to bring a new level of standardisation to the construction industry. He said, “What this really is for us is a move away from one project, one programme, one organisation’s style of technology implementation, and to much more of an ecosystem-driven approach.

“We can start standardising the way we do things – especially in these more administrative tasks, which is something manufacturing has done so well (to drive) their productivity forward. If we can build an ecosystem which is fair and equitable to everyone, there’s no reason we can’t adopt a similar approach.”

Source: www.newcivilengineer.com

Images courtesy of www.hs2.org.uk

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SOURCING

Top Challenges and Solutions for Optimising Procuremen How to improve resilience, lower costs, and improve operations with demand-driven inbound supply management.

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nt

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Optimising direct procurement and inbound supply means much more than just streamlining your ‘procure-topay’ processes for purchasing and accounting. paper by One Network Enterprises, ‘Optimising Direct Procurement’, has outlined how real-time business network platforms enable a new collaborative relationship between manufacturers, their suppliers, co-manufacturers, logistics providers, and customers. It’s one that operates in real time to optimise decision making, increase resilience, and unlock enormous business value for all parties.

Inbound Supply Challenges When it comes to direct materials – the products that go into your finished 68

goods – many manufacturers struggle on the one hand with increasing costs due to high inventory levels, and on the other, with critical outof-stock situations that, at times, result in lost production time, costly plant issues (such as unplanned overtime, production line setups, and teardowns), and high logistics costs. Inventory costs rise when you’re carrying excess inventory in some areas, and not enough inventory of the right materials in others. And high transportation costs result when expedites are required to cover inventory shortages.

Another problem is long information lead times

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“Your business will require a comprehensive platform for managing the flow of raw materials, intermediates, parts, and components”

with suppliers that impact responsiveness. Even when companies send weekly or daily communications to suppliers, communications can lag dramatically the further down the supply chain you go. Companies need to be agile to get information to all suppliers with close to zero time lags, to ensure that replenishment needs are met with desired service levels.

Most importantly in today’s environment, you want to ensure a resilient supply process is in place, one that provides for continuity of supply and minimises disruptions 70

to operations and your customers.

Part of this includes a streamlined and highly efficient process for rapidly onboarding qualified suppliers worldwide, and the ability to quickly ramp your supply network up or down in response to demand or supply shifts, regulatory, geopolitical changes, or natural disasters, such as the recent pandemic.

In a win-win process, your company may be judged on the quality of your order forecast to suppliers, and you’ll need a way to evaluate suppliers and hold them accountable on supplier delivery

performance, with a consistent and accurate way to measure and record this performance, which both parties can see.

Finally, for many companies, a key barrier to optimising inbound supply processes is the state of their own systems. Companies can have dozens – even a hundred or more – separate, siloed enterprise systems or ERP/MRP instances. How can you expect to put in place standards for replenishing components and raw materials, along with consistent processes for your many suppliers, without also addressing the fundamental issues of your IT landscape?

Optimising Procurement As you look to optimise your direct procurement processes, you’ll need to ensure that your platform provides the following essential capabilities: Orchestrate All Inbound Supply Your business will require a comprehensive platform for managing the flow of raw materials, intermediates, parts, and components – from supply to assembly, or manufacturing to final assembly, and packaging across your business. Your supply platform 71

must also include workflows well beyond basic ordering, including forecasting, planning, collaboration, executing, and delivering material orders. You’ll also need early detection alerts for material and logistics issues, as well as ways to identify, resolve, and automate issue resolution to the greatest extent possible.

Correlate Each Transaction Beginning to End You’ll need control and visibility over the entire life cycle of each transaction with full insight into cash flow and financial commitments. Procure-to-pay services will also need to integrate purchasing, logistics, and financial operations into a single environment, so you can track each order from beginning to end, shipment for the order, invoice etc. Services should include supply management, requisition, sourcing, order management, logistics tracking, invoice management, and data feeds to payables (external payment systems).

Propagate Demand to Upstream Tiers Can your system effectively propagate demand from finished goods all the way back to the n-level vendor tier in near real time? The answer will need to be ‘yes’, precisely computing net 72

“Most companie invested in their

es have heavily r MRP systems”

requirements based on stock on-hand, on-order, and your replenishment policy to generate accurate order forecasts (i.e. inbound supply requirements).

Distributors and vendors will need the ability to view and operate with accurate long-term forecasts, so they can plan their capacity and distribution accordingly.

Automatically Reallocate Inbound Materials You may need to dynamically plan and execute ‘milk runs’, where consumed materials or parts are replenished on a regular basis, according to real-time data.

You’ll be able to reduce the risk of shortages by autonomously matching demand and supply around the clock. As demand across each facility changes, you’ll want intelligent agents to automatically reallocate materials in transit accordingly.

High Precision Matching of Deliveries with Requirements, and Greater Accountability Most companies have heavily invested in their MRP systems. These create forecasts and firm orders where suppliers ship according to shipping instructions, typically specified on a weekly basis.

Suppliers can have leeway to ship any time during the week. So, they can ship to deliver on Monday even 73

though the real need is in the latter part of the week, say Thursday or Friday. The result is that you may have a maximum inventory violation at the beginning of the week. In addition, supplier performance is often loosely measured, where as long as the supplier ships in the specified week, they ship on time.

Ideally, you would like to instruct suppliers to ship and arrive at the time your factories actually need it, such that supplier performance is measured at the exact required ship date or request date. Suppliers may think their performance is greater than 90 per cent, based on looselydefined delivery dates, while the 74

actual performance could be only at 70 per cent, when measured on the exact required ship or delivery date.

You’ll require greater precision in your instructions to suppliers, as well as improved tracking mechanisms for greater accountability.

Integrate Transportation Too You’ll need a highly responsive realtime platform to make sure material supply meets fluctuating demand – while, at the same time, reducing transportation costs by maximising container and shipment use, rightsizing the container, consolidating deliveries into a run, and driving

out expediting costs. This will require the ability to aggregate demand, transportation requirements across the supply chain, and source materials, offering an integrated view of supply, demand, production capacity, and transportation across both internal manufacturing operations and the operations at suppliers and service providers.

Work with Logistics Providers in Real Time A world-class inbound supply process will also need a highly capable transportation management capability with end-to-end, real-

time visibility for material, and logistics planners. It will need to integrate materials management and logistics for inbound, outbound, international, domestic, and cross-border transportation, offering consolidated views that eliminate the need to manually track shipments via email and phone. Logistics features will need to include global trade document and milestone management, multi-modal and multi-leg shipment visibility, global milestone management, alerting, and third or fourth-party logistics integration services.

Source: www.supplychain247.com

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BUSINESS INTERVIEW

DARIJA PIZENT, DIRECTOR OF SUPPLY CHAIN MANAGEMENT ATLANTIC GRUPA

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arija Pizent is Director of Supply Chain Management at Atlantic Grupa, a Croatian multinational company, focused on the production, development, sales and distribution of food and beverage products, with market presence in over 40 countries around the world.

up by our IT department, leads the transformation across logistics and other departments within the group.

We started the journey because we were struggling with various challenges that came from both outside and inside the company.

“For many years, the only strategy for logistics was to lower costs, but the challenges Darija is responsible for all we faced grew bigger, logistics operations, as well particularly the increasing as the operating purchasing sales demand, seasonality, department for the entire people leaving the country region of Croatia, having and reducing the availability recently undergone a digital of labour, and the fact that transformation of Atlantic our processes were not Grupa’s operations. She reflects, “We started our digital standardised. We have a large network of customers, with transformation in 2017, and it different sales channels. We is still very much an ongoing have direct delivery to central program, which we call our warehouses, as well smaller Digital Agenda Program. The Digital Agenda Council, headed outlets, so there are lots of

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exceptions in our processes.

Sales in volume during peak season can increase by as much as eight times for some brands (like drinks) compared to regular sales in the rest of the year. We needed to standardise processes and get better visibility in order to be more efficient.”

Darija and her team had strong support from the IT department and management board, the starting point being to find the gaps which could bring the highest and fastest productivity to warehouse operations. Darija explains, “The warehouse was our main focus. We started with a voice picking project, which was very successful, giving a 20 per cent increase in productivity, and a 10 per cent decrease in picking errors. But, our biggest achievement has been the change in mindset, not just for the workers in the warehouse, but also for the board. This gave us the trust and push to move forward with our digital transformation.”

Voice picking is a technology from Honeywell, which is used

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by pickers in the warehouse.

Before its introduction, workers used scanners, requiring manual task management, with very little room for optimisation. Darija says, “We set up the project with Honeywell in less than 60 days. It is a fully customised solution that was integrated quickly into our warehouse management system, covering our local language.

The workers use headphones and microphones instead of scanners, picking up orders on their headphones. We are the first user in our region – our pickers couldn’t believe how much faster they are able to work!”

The voice picking technology opened up a new job position in the department, which saw one of the female pickers upgraded to the role, supporting her co-workers with her new knowledge. And that created even more trust from the workers and increased their engagement. The company was very aware of change management issues, but they carried out this project really carefully, giving the workers changes to adopt. Darija says that the learning curve has also decreased by 90 per cent. She adds, “All of the new workers that come to work during the summer season used to undergo training for one or two weeks to get to know the system. With voice picking, they are able to start on their own after just two days.”

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Some of the challenges that have arisen during the transformation on certain projects have come from customers not wanting to change the status quo. Darija explains, “We have contracts with customers that started a long time ago, and many of them did not want to change, so there was real reluctance on that side. As we were so successful with our first project, it was easy to move on to others, such a new paperless application for delivery drivers that we call Digital Shipment, giving full transparency of the order process.

We found our customers did not want electronic invoices – they wanted a piece of paper. When Covid hit, it was much easier for us to transform to digital, even though we had been trying to do so for two years beforehand!”

Darija says that collaboration with customers has been one of tests along the way, but during Covid, everyone was in the same boat. She continues, “Covid strengthened relationships with our suppliers and customers. For many years, we struggled with a wide portfolio and high stock levels.

But, during Covid, we could not reply on our ABC strategy – some of our main products with the highest turnover were standing in the same place for three months, while some C category brands were sought-after during this time. We therefore needed better collaboration with our suppliers

"Every minute in the warehouse process counts, and every minute can be made shorter" to make a new assortment list and avoid any stock issues. In addition, from the operative side, we wanted to avoid blocking on inbound, so implementing the Yard Management System helped both sides, suppliers and us.”

In short, is it fair to say that Covid accelerated Atlantic Grupa’s transformation? Darija answers, “Definitely. When Covid first struck, our main objective was to keep people healthy, maintain stable operations, and not have to lock down the warehouse. We worked

throughout the whole of the pandemic. In March, when people started to stockpile, we went more than 15 per cent over our budgeted planned sales, and we changed the shifts in the warehouse to have one team on standby should the first team go down with Covid. We were able to do all this because of the productivity increases we had made. Even though the focus is back on the cost of logistics, we have the support and experience to know that the optimisation will come if we are able to move on with the rest of the transformation.”

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"Voice picking is a technology from Honeywell, which is used by pickers in the warehouse" When Darija started looking into the warehouse processes, she undertook a detailed breakdown of the structure of each process in order to increase efficiency. She explains, “Every minute in the warehouse process counts, and every minute can be made shorter. After voice picking, we implemented cycle counting. It is a form of inventory control. We used to do one physical inventory at the end of the year,

with manual counting of each product, and we had to shut down the warehouse for three days and three nights. Cycle counting uses voice picking technology to count A articles each day, B articles every month, and C articles every quarter.

At the end of the year, we can run our annual inventory in just 15 minutes.”

Fully customised yard management software controls all inbounds in the 83

"We optimised the layout and introduced our autonomous mobile robots from our partner, Gideon Brothers" warehouse, which has replaced a manual Excel spreadsheet. Darija adds, “We now have a system that is connected to our main SAP system, offering total visibility on suppliers’ delivery and inbound.

All these changes have made the organisation of the inbound process easier and much more efficient. Our next logical step was to implement a digital control system for our quality control standards, starting from the inbound process.”

to work smarter. Gideon Brothers is a Croatian company, so we did not struggle with any language barriers.

The first thing we did was prove that the robots were safe. We tested them for a few weeks and everyone in the warehouse was on board to test them, giving the workers the chance to adopt and accept them.

“After proving their safety, we moved on to testing the transport of goods in the warehouse from position A to position B. We didn’t pause our operations in the warehouse for In 2018, Atlantic Grupa moved deployment and the support from into its own warehouse, having Gideon Brothers was extensive. They struggled with insufficient capacity stayed with us the whole day and over the eight 3PL warehouses. night to get those robots working Darija continues, “We built our new smoothly. We tested the heaviest distribution centre at the end of pallet at almost 900kg, which the 2018. It has become a polygon for robots were able to handle, proving testing all our new technologies. that they were efficient at easily We optimised the layout and introduced our autonomous mobile moving products from position A to position B. The robots are able robots from our partner, Gideon to help humans in this way, rather Brothers. Their AMRs are cuttingthan replace them. The technology edge technology, powered by AI also introduced a new job role and computer vision. It is a real within logistics, working directly privilege to work on this project.

Motivation for this came again from with the robots, as well as assisting the lack of labour and need for more co-workers in their use. With new job roles and new knowledge, the efficiency, and we saw AMR not importance of logistics grows.” replacing people but helping them 84

Forming partnerships with likeminded companies such as Honeywell and Gideon Brothers has been one of the keys to Atlantic Grupa’s success. Darija elaborates, “Partnerships are really important because our partners have the knowledge of the technology, and with our knowledge of the operations, it’s a win-win for both sides, where we learn from each other and develop even more.”

Darija’s forward strategy for 2022 is centred around a continuous improvement mindset. She enthuses, “We need to continuously improve our processes. Just because

we have implemented something does not mean it is done. We are working on a new project on the warehouse side, as well as focusing on collaborating with other departments to have cross-functional KPIs, and continuing

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to nurture collaboration with customers and suppliers.

On the operation side, we will be trialling drones in our warehouse to count stock, test more efficient outbound control processes, and we have just launched a new project with Gideon Brothers. We want to integrate their robots into more warehouse processes, not just for inbound, but in picking etc, to see if this is feasible for the future.”

"We pushed the boundaries by continuing to develop during this time, which is something that fills me with pride" On a final note, Darija is pleased that logistics and supply chain have been recognised as having such an important role within Atlantic Grupa. She concludes, “Covid did not stop us, and what is crucial is that we continued working. After the initial crisis stage of a month or two, operations were not affected.

We pushed the boundaries by continuing to develop during this time, which is something that fills me with pride.”

For further information, visit www.atlanticgrupa.com 87

S U S TA I N A B I L I T Y

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Findings from the MIT-led 2021 State of Supply Chain Sustainability report indicate growing momentum for sustainability efforts despite the pandemic.

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THE 2021 STATE O SUSTAINABILITY REP SUPPLY CHAIN SUS PRACTICES ARE BE GLOBALLY AND W FOR PROFESSIONA INDUSTRIES, AN t indicates that pressure to support SCS came from multiple sources, both internal and external to companies, but increased the most among investors and industry associations. Internally, company executives were standout champions of SCS, indicating that the growth in SCS is a business trend and not a fad.

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OF SUPPLY CHAIN PORT EXPLORES HOW STAINABILITY (SCS) EING IMPLEMENTED WHAT THAT MEANS ALS, ENTERPRISES, ND THE PLANET. The MIT Centre for Transportation & Logistics (MIT CTL) and the Council of Supply Chain Management Professionals (CSCMP), a leading, global, professional membership association, collaborated on data collection in order to attain the broadest audience of practitioners and input from various sectors.

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“OUR MEMBERS TELL US THAT NOW, MORE THAN EVER BEFORE, THE VERY NOTION OF EMBEDDING SUSTAINABLE PRACTICES FROM WITHIN THEIR COMPANY’S SUPPLY CHAIN DELIVERS REAL, TANGIBLE RESULTS” Mark Baxa, CSCMP Interim President and CEO

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David Correll, MIT CTL research scientist, said, “We believe cooperation between sectors is vital to thoroughly understand the complexity and evolution of sustainability efforts more broadly. Our work with CSCMP and our sponsors helps us to embed this essential research and its findings within the context of the real-life practice of supply chain management.”

The report findings are beginning to shed light on how supply chains are becoming increasingly recognised for their impact on a firm’s sustainability objectives and public image. Mark Baxa, CSCMP Interim President and CEO, said, “Our members tell us that now, more than ever before, the very notion of embedding sustainable practices from within their company’s supply chain delivers real, tangible results.

Competing in today’s global marketplace is not just about the high-quality products supply chains plan, procure, make and deliver. It’s about doing the right things right for the whole of society.”

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Although there are many approaches to investing in SCS according to the report, interest in human rights protection, worker welfare and safety, and energy savings and renewable energy increased significantly over the last year. Supplier development was found to be the most common mechanism used by firms to deliver on their SCS promises.

However, there are formidable obstacles to overcome too. For example, it is notable that most of the momentum behind SCS appeared to come from large (1,000+ employee) and very large (10,000+ employee) companies covered by the research.

Small to medium-sized enterprises appeared far 94

“IMPROVED SUPPLY CHAIN TRANSPARENCY AND DISCLOSURE ARE CRITICAL TO FIRMS’ RESPONSES, THE REPORT SUGGESTS”

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“OVER TIME, THIS ANNUAL STATUS REPORT AIMS TO HELP PRACTITIONERS AND THE INDUSTRY TO MAKE MORE EFFECTIVE AND INFORMED SUSTAINABILITY DECISIONS”

less committed. More work may be needed to bring them into the fold through a better understanding of the barriers they face, a possible topic for future reports.

A broader concern is that more attention from stakeholders – notably consumers, investors, and regulators – will bring more scrutiny of firms’ SCS track records, and less tolerance of token efforts, to make supply chains sustainable. Improved supply chain transparency 96

and disclosure are critical to firms’ responses, the report suggests.

The MIT CTL/CSCMP research team is laying the groundwork for the 2022 State of Supply Chain Sustainability report.

Over time, this annual status report aims to help practitioners and the industry to make more effective and informed sustainability decisions.

To read the report in full, visit www.news.mit.edu

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BUSINESS INTERVIEW

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Val Petursson, Senior Director of Global Transportation at Teva Pharmaceuticals, discusses the importance of global standardisation, advanced IT solutions, and of forming strategic partnerships when undergoing a successful logistics transformation.

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TEVA PHARMACEUTICALS IS THE LARGEST GENERIC PHARMACEUTICAL COMPANY IN THE WORLD, OPERATING IN ALL REGIONS, WITH LARGE PHARMA OPERATIONS IN EUROPE, THE US, ISRAEL AND INDIA, AND COMMERCIAL PRESENCE IN MOST COUNTRIES WORLDWIDE. 100

ts logistic network is very large and complex, and has been undergoing an End-to-End transformation for the last six years. Val Petursson, Senior Director of Global Transportation, explains, “Teva Pharmaceuticals brings medicines to 200 million people every single day, and is the world´s largest medicine cabinet. The company’s numerous acquisitions of the previous decades resulted in a number of

challenges for our Supply Chain and logistics, such as multiple IT systems in manufacturing sites and markets, different channels to market, hundreds of logistic partners, and no common global way of doing logistics.

“A major weakness was the lack of logistic intelligence i.e. globally standardised data and information on our compliance, service and cost levels. The 101

defined scope of logistics was too narrow, and an End-to-End approach was not taken. We are still on a journey, and we have plenty to accomplish yet, but looking at where we were six years ago, Teva has made huge leaps in globalising processes and systems, and in building strategic partnerships with the world´s most experienced logistic partners, utilising their core capabilities and knowhow to build solutions that benefit both parties long term. In doing so, we needed to look at many elements with fresh eyes from the start, sometimes referred to as ‘starting from a brownfield’.”

Defining the scope of logistics and the task at hand Teva has dozens of its own sites and hundreds of CMO’s, and 200 million daily customers in 80 markets. Discovering the true complete cost and scope was no easy task, as it is often hidden.

This brings further disadvantages when it comes to the visibility of incoming products and the suboptimised inbound warehouse operations. Val breaks logistics into three distinct legs. Leg A is the transportation of materials into the company’s manufacturing sites, while Leg B refers to the movement of the finished products from these sites into individual market DC’s. The third and final 102

“Teva has dozens of it’s own sites and hundreds of CMO’s, and 200 million daily customers in 80 markets” leg, Leg C, is the logistics from the market DC’s to the final customers e.g. wholesalers, hospitals etc. Val says, “Whilst optimising in all of those buckets individually, full optimisation is only reached by connecting all three. We have to look at these legs as one cost bracket in order to unify the processes, standardise the IT systems, and design and align in detail with other Supply Chain stakeholder sites and markets.”

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The ROI of real-time supply chain visibility Real-time visibility for the temperature-controlled supply chain is universally desired by enterprises, customers, shippers, and carriers, but its bottom-line dollar value is less often discussed. That means it often remains a nice-to-have rather than a must-have. You know that complete visibility over the entire supply chain is likely to have a good effect on business, but the tendency is to regard it as an ineffable benefit that either cannot adequately be measured or that is considered too expensive or complicated as an investment.

This is an antiquated mode of thinking and it is largely

products at the optimum temperatures—temperature

inaccurate. Allowing a belief that it isn’t possible to put

monitoring is mission critical. This is made more

hard figures against the benefits of a real-time supply

challenging as products make their way through various

chain visibility program to prevent your business from

stages of the supply chain. At each step, a slight variation

implementing one is likely to put you at a significant

in temperature conditions can lead to unsafe conditions

disadvantage, both from a competitive standpoint and

that impact quality and integrity. The product may have

a business standpoint. Data can now demonstrate that

been left out of refrigeration, left to sit in the sun or

having complete visibility and control over the entire

in a holding area for too long, or placed within a truck

supply chain can lead to exponential cost savings and

without palettes to optimize the airflow inside. Each

ROI. Improved visibility reduces both product and

lane of travel—air, road, or sea—requires different types

operational waste. It illuminates the dark spots in the

of handoff points and each poses different risks. As the

supply chain, enabling businesses to focus only on what

global cold chain is increasingly more complex, there

matters, and helps drive continuous efficiency and

has been a growing need for a trusted, secure way to

improvement. Further, real-time visibility is tied directly

document temperature and product movement end-

to better customer service, one of the strongest

to-end in a traceable format that can satisfy the reporting

competitive differentiators available.

requirements and data shared with stakeholders.

Heads of supply chain logistics and quality managers

Supply chain resilience is becoming increasingly

now have a far stronger argument than ever before

important because the frequency, magnitude, and

when it comes to convincing C-level executives to

costs of disruptions are increasing. Within the cold

green-light buying and installing a real-time visibility

chain, problems typically happen at multiple handoff

solution. Through data, they can now clearly

points. Today, temperature excursions account for nearly

demonstrate why the short-term operational disruption

80 percent of supply chain problems.

involved in making the most of today’s visibility technologies can be justified.

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Thermal energy efficiency has been an integral part of va-Q-tec’s DNA since the company was founded in 2001.

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other industries. These regulations are extremely strict, and as Teva’s market is enormous, with products and material moving intercontinentally and in different temperature ranges (all the way from -40°C to 15-25°C), the task to standardise its movements and processes was massive, and is still ongoing.

According to Val, many global and, in particular, fast-growing companies find themselves at some point in a situation where they discover that their legacy set-up simply isn’t scalable. Cost becomes

an issue, the set-up doesn’t integrate with other IT parts of the Supply Chain, and logistics are seen as purely transactional as opposed to value-adding units. At the start of a transformation, companies will begin by being an enabler, before becoming a value-adding driver.

So, how do you become faster and leaner, finding better solutions that give a competitive edge in the commercial space? Val continues, “We are now on this journey towards global standardisation and optimisation, focusing on value-adding, End to End logistics elements. We redefined our entire 107

operations and purpose, asking difficult questions, such as what we were good at and where we were behind.

And in cases of where we were behind, we asked the question of whether we should continue doing it or ask someone else to do it for us (Insource/Outsource model). The core purpose of Teva Pharmaceuticals is to manufacture and sell pharmaceuticals. We are not a logistics company.

Therefore, we strategically partner up with companies whose core function is logistics to help us on our journey.”

Strategic partnerships: Control towers (4PL concepts) Most large companies have moved a critical part of their logistics function to logistics control towers (or 4PLs). Teva took this step in 2017 to a global scale whilst continuing to optimise and improve. Val explains, “A logistics control tower is a concept of standardisation of logistics; one global IT setup, reports, execution, and process optimisation. Usually, companies outsource control towers, which becomes, in most cases, a fundamental 108

“The 4PL becomes an absolute core element of the logistics and valueadding for the entire Supply Chain of the company. This is a gamechanger for quality, service and cost”

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“At Teva Pharmaceuticals, there is great awareness of sustainable solutions. We have taken a very clear strategic approach – we are not just following the minimal guidelines, but we want to lead the way” Val Petursson, Senior Director of Global Transportation at Teva Pharmaceuticals

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strategic partnership. The 4PL becomes an absolute core element of the logistics and value-adding for the entire Supply Chain of the company. This is a gamechanger for quality, service and cost. For us, this opened up visibility and a fact-based approach towards everything we do, ensuring fact-based conversations with our internal stakeholders.

“By going through a control tower and booking everything through one single conduit, it also allows us to see where we need to improve and where the true problems lie, so we can prioritise our projects and put the right resources on the right pain points. We went from local

logistics with low visibility on compliance, quality and cost, to one global control tower set-up, which provides all the visibility we need. It is a one-stop shop, comprising everything from logistic transactions, invoicing and reporting, to project management and value-added services.”

By moving from local ownership to an external 4PL concept, Teva Pharmaceuticals changed its mindset towards forming strategic partnerships to assist its transformation; partners for transportation, warehousing, cargo protection, and not least, cargo monitoring. Val says, “We 113

realised more and more that, as we are not logistics experts, we needed to sign up with core service providers. We went through a long process of testing their qualities and expertise, selecting a handful of them to work with us on a strategic level.

We are able to talk through any issues and learn how other companies are dealing with these problems to create solutions together that benefit us in the long run. This has been the key to the success of our transformation.”

The Covid pandemic in 2020 and 2021 was perhaps the biggest test for Teva Pharmaceuticals’ logistics function in the last six years. Val recalls, “There has been no event in the world that has influenced logistics quite as much as Covid. Almost overnight, most air capacity worldwide was down.

Furthermore, the logistic pharma world experienced frequent and rapid ad hoc border closures from different countries in Europe, which caused extreme difficulties in the pharma road network in Europe.”

Val continues, “There were no passenger planes during Covid, but 80 per cent of all pharmaceuticals in the world moved at that time on these planes. With most of Teva’s airshipped products moving with 114

“We delivered to our 200 million people every day, despite the extreme circumstances throughout a very difficult 2020 and 2021”

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Challenge accepted.

“Our vision is to be the preferred choice for our customers in

selected markets globally, providing dependable integrated and

tailor-made air cargo solutions.”

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“When it comes to protecting its products, Teva Pharmaceuticals has also partnered with world-leading partners”

strategic partners on cargo planes, we were only marginally impacted by this situation. Our strategic partner on road in Europe secured an uninterrupted flow of products through the very congested borders, keeping all countries healthy on critical medical supplies. Covid and, later on, Brexit caused a lot of concern within most healthcare sectors, as our pipeline is critical for them. We delivered to our 200 million people every day, despite the extreme circumstances throughout a very difficult 2020 and 2021. This

would not have been the case without the strategic partnerships, and the visibility and tools at hand today.”

Monitoring solutions and protective packaging in pharma With very strict regulations on temperature protection during transportation of pharma products, monitoring and protective solutions are vital to the industry.

Both industries have advanced enormously in recent years. In 117

the monitoring space, Teva works with a world-leading innovative partner that provides an End-to-End realtime monitoring solution on its moving products across the world. Val says, “With this new technology, we have a 24/7 visual on all our moving products, and if they are stored at the wrong temperature or if they go missing, we receive an alert in real time, and can take appropriate mitigation action before the product is lost or damaged. This is a true gamechanger, and brings significant robustness in to our Supply Chain.”

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When it comes to protecting its products, Teva Pharmaceuticals has also partnered with world-leading partners. Val adds, “They provide equipment to keep the temperature of our products within the right range. In this way, they help us to uphold regulations by protecting the products we move. The quality and diversity of the protective products have advanced. They are more secure and definitely more protective, designed for different temperature ranges. Without those solutions, we would not be able to move pharmaceutical products in a compliant way today. They are absolute key for the industry.”

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Sustainability – green footprint The next large change in logistics will be the new regulations on carbon footprint and CO2 emissions. It is clear that cities will disallow current transportation forms in the future, raising diesel fuels taxes, as is already happening. Some might see this as a threat, but it is as a real opportunity for first movers.

Val says, “At Teva Pharmaceuticals, there is great awareness of sustainable solutions. We have taken a very clear strategic approach – we are not just following the minimal guidelines, but we want to lead the

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“At Teva Pharmaceuticals, there is great awareness of sustainable solutions. We have taken a very clear strategic approach – we are not just following the minimal guidelines, but we want to lead the way”

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way. For several years, we have explored new technologies to move our products in a green way. We are evaluating a project on using drones to move products from market warehouses to the wholesalers, and we are actively working with companies which manufacture hydraulic vehicles and trucks with solar cells on their roofs. We believe that whatever we invest in this initiative, we will get back in image, goodwill, and, of course, in doing the right thing for our planet. Sustainability is carved in to the company’s core strategic mission.”

For Val, the future means continuing to harvest on Teva Pharmaceuticals’ intelligence and experience, with help from its strategic partners, as well as looking further and wider in the logistics network to optimise and improve. He concludes, “The keyword is integrated logistics, with great emphasis on IT solutions and business intelligence to improve compliance, service and cost for our customers, as well as adding value through our green solutions.”

For further information on Teva Pharmaceuticals, visit www.tevapharm.com

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S M A R T E R S U P P LY

The European Commission’s Digital Product Passport scheme is designed to help EU nations hit net zero targets.

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he passport is designed to provide consistent information about products across the value chain and across borders, to business, customers and authorities. The idea is to identify the most important information about the makeup of each product so that users across the supply chain can reuse it or treat it correctly at waste management facilities. The move is part of the EC’s Sustainable Products Initiative, which itself stems from the Circular Economy Action Plan.

ICT, textiles and furniture, as well as for high-impact intermediary products, like steel, cement and chemicals.

DPPs will be deployed for consumer electronics, batteries,

William Neale, Advisor for Circular Economy at the European

This action is part of the EC’s global move to net zero by 2050, by tackling overconsumption and waste. The DPP is designed to help on this front in two ways:

• By facilitating the switch to sustainable, long-lasting products • By slowing down the use of resources as they flow through the economy.

Commission’s Environment Department, said, “We really need to make sure that the products that are put on our markets are durable and repairable. This is what we tried to do in the sustainable product initiative.”

At present, Neale pointed out, goods are produced, bought and sold, and the information about their components and recyclability is lost. The passport will address this by “harnessing the data for public good.”

Neale explained, “It can be one thing which can ruin a batch, which can render unviable recycling and can contaminate a lot. We need to know about that.

We can put together a process where we identify those bits of information which are really killers in terms of ruining value if that information is not made available along the line.”

It is often just a single element of a product that makes it impossible to recycle. Neale cited the example of textiles, 127

where PVC prints on garments can prevent recyclability.

It is also hoped that the DPP will help prevent ‘greenwashing’, the practice whereby businesses talk the talk on sustainability, but don’t walk the walk. But Neale did admit the EC faces a stiff challenge. He added, “Identifying the information that users across the supply chain require is a huge 128

amount of work. Because of this, we will deal with things product by product.”

For Europe to reach its climate goals, David Cormand, a French Green MEP, said it is vital that consumers and businesses now keep products in circulation for as long as possible. He explained, “We are designing and marketing objects that are not created to last. Most of the time, as soon as they are produced, they become

waste, of which only a tiny part is designed to be reused, repaired or recycled.”

To tackle this, Cormand called for a mandatory European standard for durability and repairability that would make environmental products the norm on the market. The information must also be used to penalise those companies which are not working sustainably.

Joan Marc Simon, Executive Director at the NGO Zero Waste Europe, added, “What we know today is that we don’t know as citizens. Most of us have our homes filled with toxic chemicals, present in furniture, in flooring, in concrete. It is impossible to know whether the product is safe, repairable, recyclable, so from that perspective, I think information is important for consumers.”

Neale highlighted that implementing circular economy initiatives in the EU will require key stakeholders across the supply chain to “sit down and discuss the crucial information that could prevent a product from going to waste.”

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Such discussions could also ease concerns in some quarters that DPPs might contain information that breaches intellectual property (IP) rights. Neale added, “When it comes to intellectual property, privacy, and so on, we need to make sure that those are dealt with either through encryption or through making data available at

William Neale, Advisor for Circular Economy at the European Commission’s Environment Department a later date. In each case, this will be done product by product and in full consultation. We’re talking about mostly existing data. We’re talking about a decentralised or distributed approach to the data.

It does not have to move from where it’s created.”

Source: www.supplychaindigital.com

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BUSINESS INTERVIEW

THE STRATEGIC APPROACH

Simona Izzo, CPO at Sorgenia Bioenergie, shares her thoughts on procurement strategy, technology, key partnerships, sustainability, and gender equality.

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SIMONA IZZO JOINED SORGENIA BIOENE DECIDED TO LEAVE A WELL-KNOWN INT MARKET SEGMENT TO CHALLENGE HERSEL WITH HER A WEALTH OF EXPERIENCE IN CH PROCUREMENT DEPART

orgenia Bioenergie, with its three renewable energy power plants, potential new future acquisitions and a plan to further integrate and develop its bioenergy segment, is the current Italian leader in the production of electricity through vegetable biomass. The company, which is part of Sorgenia Group, today the leading Italian private energy operator with 4.4 GW of installed power and 400 MW of renewable plants in development phase, is targeted towards reaching the most advanced innovation, reliability and sustainability in its market segment. In order to guarantee an efficient and effective energy production, it is working on identifying any 134

ERGIE IN SEPTEMBER 2019, WHEN SHE TERNATIONAL COMPANY LEADER IN ITS LF WITH A START-UP COMPANY, BRINGING HANGE MANAGEMENT AND IN CREATING A TMENT FROM SCRATCH.

opportunity for promoting the continuous improvement of the company.

Simona was tasked with the job of setting up one procurement function after the fund F2i, Sorgenia’s main shareholder, completed the acquisition from different owners of three power plants. She first focused on introducing the processes and procedures necessary to provide a standardised way of working. Simona explains, “We had three different power plants, which did not speak a common language, so it was important to create one unique procurement department with a clear organisation and its 135

own global vision. We carried out an in-depth spend analysis to pinpoint the most predictable category groups, identifying the most suitable procurement strategy for each category group, and the most effective synergies arising from the management of all the power plants. I tried to make the processes leaner and simpler, while the importance of an ‘early involvement’ approach was also key, from the budget through to post-contract. I selected the right suppliers to work with us on supporting our internal clients and in facilitating the change.”

Simona’s golden rule when creating any new function is to be consistent, as she explains, “Consistency is extremely important, meaning that what you promise, you must deliver. To do so, you need to understand the priorities and that they are delivered according to the requirements and expectations of the internal clients. As already successfully achieved in the past, I have shaped the organisation to meet this goal. The organisation is composed of several buyers, each responsible for specific category groups, so the power plant has a clear understanding of each one’s responsibilities, and the buyers have an in-depth knowledge of the market they 136

are assigned and the category groups they are managing. In terms of procurement strategy, supporting the internal clients from the start of the process, when the budget is defined, is vital, by acknowledging all their requirements in advance, and understanding all the risks involved to implement the most effective strategy, guaranteeing the signing of the contract in accordance with internal client requirements. Needless to say, an in-depth knowledge of the suppliers is a key component of an effective procurement department.”

So, does technology play a key role in an effective procurement department? Simona answers, “Yes, the very first step is to start with the introduction of new tools to harmonise the process of assessing suppliers.

In 2019, we selected the JAGGAER vendor management solution to facilitate a more structured management of the approved suppliers list based on category groups. The tool is composed of two main areas of assessment: vendor category assessment (ex-ante) and performance assessment (ex-post). We first select the best suppliers via a questionnaire containing 16 KPI (i.e. financial data, sustainability, geographical 137

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perimeter, certifications, training, compliance etc). We constantly monitor their profiles to anticipate any possible critical issues, and guarantee the transparency of the whole process from supplier onboarding through its performance assessment. The tool is easily accessible. Any data and all assessments related to a specific supplier are shared internally to provide a comprehensive overview of its profile, moving from a subjective opinion to an objective assessment. A specific area of the assessment addresses sustainability. We want to collaborate with suppliers which are more responsive to this specific issue.

“IN 2019, WE SELECTED THE JAGGAER VENDOR MANAGEMENT SOLUTION TO FACILITATE A MORE STRUCTURED MANAGEMENT OF THE APPROVED SUPPLIERS LIST BASED ON CATEGORY GROUPS” 139

“I WANT TO CONTINUE TAKING ON NEW ROLES WHERE I CAN REINVENT MYSELF. I YEARN FOR MORE CHALLENGING PROFESSIONAL ADVENTURES, AS I LIKE TO TRY NEW THINGS. FOR ME, I AM HUNGRY TO LEARN, AND I AM NOT SCARED OF NEW CHALLENGES. I JUST WANT TO PLAY MY OWN GAME, WHICH IS WHAT ALL WOMEN SHOULD STRIVE TO DO” Simona Izzo, CPO at San Marco Bioenergie

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“The second area is the performance assessment. We assess, via a virtual team, the performance of the suppliers once a contract is awarded. Therefore, we encourage continuous improvement of our suppliers, identifying their strength and their weaknesses to mitigate risks and possible non-compliances in the future. JAGGAER vendor management has thus proven to be extremely successful, enabling us to have an in-depth knowledge of our supplier lifecycle, which is constantly updated. When assessing and selecting suppliers, we do have in mind a few targets which are paramount: innovation,

sustainability, flexibility and speed.”

A key partner that has been pivotal in helping Sorgenia Bioenergie to innovate is GAP – Gruppo Piantoni. Simona says, “Last year, GAP was awarded an important contract for the handling on-site of our biomass.

Since biomass is the fuel we use for running our power plants, the handling of it is a crucial service.

GAP, which for some 60 years has provided services mainly to the steel industry, has broadened its horizons, pooling its competences to support the newly acquired biomass market segment. They

Through our interconnection system between vehicles, operating personnel and supervisors, we collect information in real time. That makes it possible for us to forecast events, moving from a passive to an active process control. www.gruppopiantoni.com

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EHRON was designed to be powered by batteries, as well as by HYDROGEN via a Fuel Cell System. Sustainability and safety on working sites: this is its mission!

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“LAST YEAR, GAP WAS AWARDED AN IMPORTANT CONTRACT FOR THE HANDLING ON-SITE OF OUR BIOMASS. SINCE BIOMASS IS THE FUEL WE USE FOR RUNNING OUR POWER PLANTS, THE HANDLING OF IT IS A CRUCIAL SERVICE”

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have worked closely with us to enhance the quality of the service, and have been constantly innovating by proposing new equipment to improve their economic and environmental performance”.

of a solution to digitalise the management of all the data relating to the handling of the biomass in the power plants.

Simona says, “We want to become a more digitalised, innovative company. PN6, the supplier selected, is working with us to simplify and accelerate our data management, developing a digital solution to help us to transform.”

Another important project Sorgenia Bioenergie is currently working on is the engineering

As far as speed and flexibility are concerned, a successful collaboration has been

“PN6, THE SUPPLIER SELECTED, IS WORKING WITH US TO SIMPLIFY AND ACCELERATE OUR DATA MANAGEMENT, DEVELOPING A DIGITAL SOLUTION TO HELP US TO TRANSFORM” 145

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consolidated with COREF Engineering. The company is specialised in refractory construction works, specifically on the boilers. Simona adds, “They are a key and reliable partner because they do understand our priorities. To be considered a partner as opposed to a supplier, it is extremely important to be quick and flexible. This is what the market expects. COREF works during the outage of our power plants, where there are real time constraints, or alternatively when there is an unexpected problem.

“COREF WORKS DURING THE OUTAGE OF OUR POWER PLANTS, WHERE THERE ARE REAL TIME CONSTRAINTS, OR ALTERNATIVELY WHEN THERE IS AN UNEXPECTED PROBLEM. THEREFORE, SPEED IS A KEY DRIVER. ANY DELAY WOULD INCUR A HIGH COST. COREF HAS NOT LET US DOWN”

COREF Engineering is a leader company in the Refractory sector, carrying out activities of design, supply and installation of highquality refractory materials, especially in WtE and Biomass cogeneration market.

COREF has also developed its own system of oxy-nitrurate silicon carbide refractories in partnership with the company RATH Gmbh (Tilecor system) to guarantee top quality and performance standards.

As a General Contractor, COREF is also able to carry out other types of services, such as sandblasting and scaffolding assembly, all according to European safety regulations.

COREF is able, with its partners support, to employ over 200 refractory workers, other than a trained team which guarantees technical solutions to the customer, even with short deadlines.

At every level of its staff, COREF adheres to criteria of technical and managerial excellence, in compliance with UNI EN ISO 9001:2015, UNI EN ISO 14001:2015 and UNI ISO 45001:2018 standards.

Since 2019, COREF has also been the Italian exclusive partner for IGS Europe, specialized in in-situ metallic anticorrosive coatings to increase reliability in mission critical equipment.

www.coref-engineering.it

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Therefore, speed is a key driver. Any delay would incur a high cost. COREF has not let us down.”

Sorgenia Bioenergie has also been working on another great project with Vodafone to introduce Biotrack, a new custom platform to support the end-to-end biomass lifecycle. Simona says, “It provides and guarantees a full traceability of biomass sourcing from the pick-up location to the plants. All relevant stakeholders, internal and external, have quick and simple access to all required information, which has been made fully digitalised. After the initial portal released, which has been appreciated and positively adopted by the suppliers involved, we are now enhancing the initial solution, adding a mobile app to strengthen further the tracking process.”

The aforementioned vendor management system allows Sorgenia Bioenergie to select 148

“SORGENIA BIOENERGIE HAS ALSO BEEN WORKING ON ANOTHER GREAT PROJECT WITH VODAFONE TO INTRODUCE BIOTRACK, A NEW CUSTOM PLATFORM TO SUPPORT THE END-TO-END BIOMASS LIFECYCLE”

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its suppliers based on a series of expectations. One such parameter is their approach towards sustainability. Simona says, “We have a strong focus on sustainability and, as a matter of fact, our portal has an area dedicated to it. As a group, we pay attention to sustainability, but this is not enough. You need to ensure your partners are sustainable too. In that respect, when we work with a supplier, we want to know their sustainability strategy, incentivising all those which are sustainable.”

In addition to this, Sorgenia Bioenergie has been consolidating strong partnerships with suppliers to guarantee as far as possible the recovery of the majority of its wood ashes, which are a residual of the burning process.

The company has been exploring new alternative solutions that would be particularly innovative.

Simona says, “Sustainability is a pillar for our company. As a consequence, we have been continuously adapting our strategy to avoid ‘the waste of the waste’ as far as possible.”

Aside from sustainability, another cause close to 150

Simona’s heart is her role in championing women in leadership positions, particularly in procurement.

She says, “There are not many women in procurement, which is a pity.

I am surrounded by men, but I have never considered myself as any different.

We are 51 per cent of the population, but when you compare this representation with the participation in the labour market, there is a drastic reduction. We need to help bridge this gap with proper mentorship. In that respect, men must play a key role as a powerful change agent. In my opinion, change is only possible if there is a full alignment of ideas and targets between the two genders, and equality between partners is an additional enabler for supporting women’s careers. Women should also strengthen their networking to build up constructive relationships and support each other to eradicate the bias of disharmony amongst women. Finally, they should stop questioning their capabilities but learn to ask for new opportunities, being ambitious and visionary. I have recently worked with 151

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a group of friends, both men and women, currently in managerial roles. The idea is to launch a specific project ‘Even-out’ focused on the gender issue and on the necessity of changing the culture. Sorgenia is also actively working on this specific topic, which is an important signal to be pleased of.”

So, speaking of women in leadership roles, where does Simona see herself in the next five years? She concludes, “I want to continue taking on new roles where I can reinvent myself. I yearn for more challenging professional adventures, as I like to try new things. For me, I am hungry to learn, and I am not scared of new challenges. I just want to play my own game, which is what all women should strive to do.”

For further information on Sorgenia Bioenergie, visit www.sorgenia.it/biomasse

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C L I M AT E C H A N G E

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How can businesses best prepare for climate risk?

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THE THREAT OF CLIMATE CHANGE IS EVERYWHERE – FROM FLOOD, FIRE AND WIND, TO MIGRATING LABOUR AND DEPLETED RAW MATERIALS – AND THOSE SCENARIOS STAND TO DIRECTLY AFFECT A COMPANY’S BOTTOM LINE. ccording to recent research from the United Nations Development Programme, productivity losses related to climate-change-related workplace disruption in the United States could rise to above $2 trillion by 2030.

But, it’s only in the last decade that most organisations have even begun to gird against climate impacts. Christopher Knittel, a Professor of Applied Economics at MIT Sloan, said, “Companies that are going to be ahead in the game are hiring risk-management consultants that are tooled up in the impacts of climate change and can give an idea of what portions of their company are more at risk going forward.”

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That strategy makes sense to Suzanne Greene, Program Manager of the Sustainable Supply Chains Initiative at the MIT Centre for Transportation and Logistics, who emphasised that it is possible for organisations to take action.

She said, “Climate change doesn't just happen to you. You can actively work to fight it.”

So, how do you harden your supply chain and build resilience — the ability to bounce back from disruption — throughout your organisation?

Here are five ways to brace for the storms that loom on the horizon:

ENGAGE IN DEEPER, LONG-TERM COLLABORATION WITH SUPPLIERS A company is only as good – and as protected – as its suppliers.

According to Jason Jay, Director of the Sustainability Initiative at MIT Sloan, forwardlooking companies are already engaging suppliers around health, safety, and environmental issues. With those kinds of relationships in place, it’s not a big leap to suggest changes that improve partners’ climate resilience.

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“NIKE, FOR EXAMPLE, HAS ADOPTED A LEAN MANUFACTURING APPROACH WHERE THEY SAY TO THEIR SUPPLIERS, “WE’RE GOING TO WORK WITH YOU TO IMPROVE THE PRODUCTIVITY OF YOUR FACTORY”

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Nike, for example, has adopted a lean manufacturing approach where they say to their suppliers, “We’re going to work with you to improve the productivity of your factory,” as well as suggesting ways to improve worker health and safety, or to reduce environmental footprints.

Jay explained, “They say, ‘It’s all going to be rolled into a set of things that are going to increase your output, increase your quality, increase your revenue, and make it a healthier business’.”

It’s a process that requires longer-term relationships built around trust and collaboration.

Jay added, “If you want to tell a (supplier) that they need to put air conditioners on their factory roofs so that they’re more resilient to flooding, it’s going to be the same kind of thing. You have to be in a good enough collaboration with them that they’ll be willing to listen to you.”

This may mean committing to longer supply contracts, but it also means you gain influence with your suppliers. Jay noted, “This is how Toyota has always managed its supply chain. Lean manufacturing companies will 159

have two, maybe three, suppliers for each category of product, so that they can have those long-term, high-volume relationships.”

However, this tactic can lead to a lack of diversification among suppliers, a downside for companies that seek to protect themselves by retaining multiple connections in various geographic areas.

Jay added, “If one of your strategies for resilience is to spread your bets across different geographies 160

so that you can easily move production from one to the other if there’s a disaster some place, it would tend to decrease the amount that you’re buying from any one organisation. This would make it harder for you to have influence over the local climate resilience of any one particular supplier.”

As such, managers may need to decide between geographical diversification – and potential redundancy – and long-term collaboration and influence.

EXTEND YOUR RISK HORIZON TO ADAPT TO LONG-TERM CHANGES In a 2016 study for ColgatePalmolive, MIT students examined the effect of climate change on the supply of mint.

Oil and compounds derived from mint are used in many of the company’s products, and it relies on its supply from India and North America.

Climate change could affect the crop’s seasons, yield, and quality,

leading to supply chain and economic issues. The study urged Colgate-Palmolive to engage in risk mitigation beyond its current fiveyear horizon, moving to a 20-year plan.

Given that not every climate change incident is an extreme, sudden event such as a fire (it could be a long-term combination of droughts, pests, flooding etc), Jay said all companies should add long-term data on climate change to create more robust riskmitigation plans.

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TAKE STOCK OF GEOGRAPHIC THREATS Knittel urged companies to think ahead in terms of geography, possibly retaining existing facilities but also operating other facilities in less disaster-prone areas. He said, “Companies need to take stock of the individual threats to their organisation, because it varies depending on whether there are facilities on the coast versus facilities in hurricane districts.”

floods), “The issue with hardening the supply chain is that those are huge investments, such as building a sea wall, which any one organisation can’t do alone.

“A single firm isn’t going to do that, but individual companies can do things. They can raise critical assets that are near coastlines. They can move.

They’re not helpless in this. I’ve talked with utilities that have physically moved substations

“THE ISSUE WITH HARDENING THE SUPPLY CHAIN IS THAT THOSE ARE HUGE INVESTMENTS, SUCH AS BUILDING A SEA WALL, WHICH ANY ONE ORGANISATION CAN’T DO ALONE” Knittel Christopher Knittel, a Professor of Applied Economics at MIT Sloan, citing New York City’s proposed $119 billion sea wall While organisations will vary considerably in what those threats are and what they can do about them, one thing that’s clear is that supply chains in the absence of any adaptation by companies are going to be much more volatile and riskier.

So, why wouldn’t a company act? Physically shoring up existing resources is costly.

Knittel explained (citing New York City’s proposed $119 billion sea wall to protect against

to higher elevations or built existing substations and put them on stilts as a way to adapt to sea-level rise and storm surge.”

Proactive doesn’t mean drastic – there’s no need to shut down a fully functional facility in a precarious location. Knittel added, “But the next time you need to expand production, you build another plant somewhere else, as opposed to expanding that plant.”

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“PROCUREMENT AND SUSTAINABILITY SHOULD BE ALIGNED. WHOEVER’S BUYING A PRODUCT OR SERVICE SHOULD BE ASKING ABOUT THE ASSOCIATED EMISSIONS” Suzanne Greene, Program Manager of the Sustainable Supply Chains Initiative at the MIT Centre for Transportation and Logistics

START LOBBYING So what about that sea wall, bridge or fire break that could help protect a geography crucial to your supply chain? Knittel urged companies to lobby policymakers to do their part. He said, “If I were inside a company, I would create a list of what (my organisation) could do, what an industry consortia could do, and what needs to be done by policymakers. Because of the nature of climate change, because 164

it impacts everybody, there’s always going to be some things that just should be done by policymakers.

“Companies can play a critical role in lobbying policymakers to do the right thing. I would push on all three fronts, and I would be lobbying policymakers on both sides of the aisle to take climate change more seriously, because, often, it’s the duty of the policymaker to say, ‘Build that sea wall’.”

DO YOUR PART TO REDUCE EMISSIONS While you’re analysing, relocating, and hardening your supply chain, why not decarbonise at the same time? Microsoft, for instance, recently pledged to go carbon negative by 2030. As part of this plan, the company vowed to make carbon reduction an explicit aspect of its procurement processes.

Greene explained, “Procurement and sustainability should be aligned. Whoever’s buying a

product or service should be asking about the associated emissions.

“Companies can leverage their climate goals to support decarbonisation processes throughout the supply chain.

For example, a company might choose to buy low carbon steel or aluminum, and put their goods on the hydrogen ship, when these options are available. We’re seeing the action slowly come, and increasing demand for low-carbon goods will accelerate the process.”

Source: www.mitsloan.mit.edu

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