Building resilient supply chain
16 Jul 2024
The global supply chain operates as a vast and intricate cycle, encompassing the production, transportation, and consumption of goods and services across the world.
It is also the same flow that highlights the interdependence of economies, industries, and consumers globally, making the supply chain a dynamic and essential element of modern commerce.
Today, however, it has become clear that it is no longer a competition between the countries or companies intertwined in the supply chain, but rather a collaboration and how each one brings something to the table.
Speaking exclusively to TheStar, Boston Consulting Group (BCG) managing director and partner, Alex Dolya said each country in the Asean bloc is blessed with a different size of population, logistics, and geographical positions.
He said some of them have softer or harder commodities, each with strengths of currencies while some may even have historical prerequisites of manufacturing facilities being located there.
“What we noticed is that for the last 20 years, there’s been a trend of accelerated economic collaboration and cooperation within Asean.
“For more complex supply chains, very often one country is not enough,” he said.
Inverto managing director for South-East Asia Fahad Anwar said while the region has always been a vital hub, today, it has reinforced its position within the global supply chain.
“There are various reasons for this. One of them being the geopolitical conditions that are happening out there. Trade wars, trade restrictions between entities causing diversification of supply chains, all benefit South-East Asia.
“The other factors, if you look at it from a secular point of view, there’s a trend about wage inflation and ageing demographics and other geographies that are close by.
“Again, that is spurring investment into South-East Asia,” he said.
Fahad explained supply chains have been proliferating in the region as a result of all that.
According to Dolya, Malaysia has had a rather interesting domestic market in terms of consumption.
“If you talk to Eastern and Western big manufacturers, they think Malaysia is fantastic. In terms of logistics, talent pool, friendly visionary government, and of course, the natural resources.
“So from this perspective, Malaysia has its own competitive advantages to bring to any type of supply chain,” Dolya said.
He added it is for this very reason that BCG decided to open an Inverto office in Malaysia.
Inverto chief executive officer and BCG managing director and senior partner Daniel Weise said Inverto is BCG’s arm to bring procurement and supply chain as an end-to-end offering to its clients.
“We support our clients to take costs out of their supply chains, to make them more resilient, and actively manage the risk positions in those supply chains.
“We also help our clients to actually move on the sustainability agenda. For example, scope-free and decarbonisation, water usage. All of this is part of what we do in supply chains,” he said.
Weise said as a global company, BCG had rigorous processes when it came to the decision making about moving into the region.
He said the Asean region and the US have become a priority to them, simply for the fact that it has been a trade hub for the last 2,000 years.
“We also began the year with opening up in North America, and we will be opening an office this year in Zurich.
“Malaysia and Indonesia are the firsts in South-East Asia to have an Inverto office. We aim to become as global as possible so we need to choose wisely on where to go,” Weise said.
The disruption factor
Despite companies like Inverto making a significant mark on the procurement and supply chain sector, disruptions seem to be inevitable.
Fahad said complexities in supply chains have grown exponentially, while everything is interconnected.
He added to make matters harder, customers’ expectations have radically shifted, meaning most expect same day or next day delivery.
“At the same time, you see news of disruptions all the time. The scale is just growing because of macroeconomic and geopolitical factors.
“What happens now if you couple the two together is that a supply chain can’t react to an event like that, or even begin to figure out how to react without having digitalisation to help speed up information flow,” he said.
This, he said, is where technology and artificial intelligence have become a part of the solution.
He said for example, if a company, through intelligence, had identified that 30% of its value chain flowed through the Red Sea – a politically contentious place to be – then they would also realise the need to diversify away from it or have alternative means of getting products to customers.
“Now when you have figured out that there are alternative pathways, you have to create models because now you have a cost to your business of managing risk. Managing risk, unfortunately, comes at a cost. So you try to minimise as much as possible,” he said.
Weise said over the years, turmoils have amplified, whether it was the Covid-19 pandemic, geopolitical unrest or shortages.
“We have come to the conclusion that you cannot manage black swans, but you can anticipate those grey rhinos coming out of the fog, where we use artificial intelligence to model that out and create scenarios, but do this proactively,” he said.
Weise added that using AI is one of BCG and Inverto’s super strengths – there is a workforce of more than 2,000 software engineers, developers, and platform engineers who programme and give AI the architecture it needs for the supply chain.
“What we now see with generative AI is that it can be even quicker than we have anticipated, it takes less time to conceptualise towards the ready-to-use product.
“That is why the BCG investment we made five years ago in that workforce is now paying off tremendously,” he said.
Automation on the other hand, has been utilised at BCG for the last ten years or more.
Despite this, Dolya said supply chains are vulnerable from a digital point of view, in particular from cyberattacks.
To this end, a practice area of tech applications and non-tech applications are set up, whereby the team learns how to mitigate such issues if it should take place for real.
The people factor
Dolya reiterated how important the people factor is as the backbone of not only companies but also entire supply chains.
He said some 20 years ago, no one might have heard of a discipline to do with procurement or supply chain, it was simply not common at all.
“Today however, this has changed. There is a growing number of universities across the globe and even here in Malaysia that are starting to uncover this specialisation and offer these disciplines to students,” he said.
Dolya said this was magnified especially during the pandemic, as supply chains were often at the forefront of news for its disruptions and deficits.
He said when speaking to the younger generations, a majority have been excited because it is stimulating and intellectually interesting.
“Right now, if you ask a young person, why would you want to study a course in supply chain? They would say, it has an impact because we can fix something which is broken. It is also such a data-rich environment that you can analyse so many data points and apply quite advanced mathematical computer science,” he said.
Dolya added there’s been a mega trend of professionalisation of the whole supply chain body of knowledge and how it is being taught in undergraduate and graduate programmes.
Weise added what is in fact, fuelling this trend is that many of the chief executive officers of renowned companies were previously chief procurement officers.
“If you think about a very recent example,Tim Cook who leads Apple Inc, he was the CPO of Apple.
“Think about some of the German automotive companies where the CEO has been a CPO, there is really a pathway now for talent also going via the procurement and supply chain to become the CEO of a company,” Weise said.
He noted companies today are keen on leaving corporate Siberia, and leaning towards becoming a meaningful corporate function that fuels growth.
“The growth we have been describing does not only show that universities emphasise more on the important pathway, but also that companies themselves invested a lot by recruiting the right talent for the procurement supply chain.
“It gives them a home and invests in their expertise, so they become really knowledgeable.”
Source: The Star
