Chapter 6 Facilitating flexibility and adaptability

Facilitating flexibility and adaptability

In brief:

One of the indicators most tested by recent global events, including the COVID-19 pandemic, is supply chain flexibility and adaptability. Survey respondents clearly believe they could do a lot better in several critical areas that impact the flexibility and adaptability of supply chains.

Figure 15: Shortfalls in flexibility and adaptability

Key to flexibility and adaptability of supply chains is having early warning systems in place focusing on production disruption or financial difficulties. Some companies are already using technology tools that give them visibility not just into tier one suppliers, but deeper into their ecosystems.

For example, Martin Huxtable, Director, Sustainable Sourcing for Unilever believes that digitisation is extremely important for instilling flexibility into supply chains. Industry-level solutions, such as track and trace capabilities rolled out by the shipping sector, have allowed adjacent industries to create similar technology platforms to create greater transparency of operations. He notes, “Digitisation is vital in order to be predictive and therefore, proactive.”

But this is more an exception than the norm. Respondents report that more needs to be done to develop technology solutions that offer greater transparency into deep-tier suppliers. For example, an automotive industry treasurer says, “I think the current technologies cannot fully provide the transparency we need. There are pilot test cases being conducted using blockchain, but these are discrete use cases, and it needs to be determined if these can apply to our industry as well.”

The data is there, but we don’t have the technology, on our side, to utilise that to the best advantage, and to really be responsive and agile in the supply chain.

Head of Supply Chain
Pharmaceuticals, UK

Furthermore, spotting an issue is only half the story; adapting and responding are just as crucial. While over half of respondents are confident in their business continuity plans, there remain challenges, particularly in their agility at conducting due diligence, onboarding and paying new suppliers.

During the pandemic for instance, some companies are having to find new suppliers to fill gaps in supply chains when critical components from traditional sources could not make it to production centres.

In general, I would say the requirements which we have now take some time to fulfil. During COVID, when we had to onboard new suppliers to produce sanitisers, we had to find workarounds. We used technology and review-based checks. Our own people went and did a check rather than wait for an auditor who could not travel. However, once the routes opened, we also sent actual auditors.

Amit Mohta
Head of Procurement, Asia, Unilever

There has to be an element of elasticity and flexibility in the supply chain, and your underlying policies should be such that they allow you to respond to emergency situations, without breaching compliance requirements.

Chief Financial Officer
Oil & Gas, United Arab Emirates

Interviewees suggest that there may be an opportunity for banks to connect ESG-vetted clients with each other, allowing them to leverage off the bank’s own ESG due diligence process, so that companies can become more agile in identifying and onboarding new suppliers safely.

For instance, Standard Chartered discloses whether it has certified a trade as sustainable and makes this data available to the client involved for their own reference and internal consideration.

Top tip:

Consider using supplier financing solutions with electronic supplier enrolment and e-signatures. For example, Standard Chartered offers sustainable Vendor Pre-Payment/Supply Chain Finance solutions directly and through third-party platforms or B2B networks.