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Around two thirds of all Nordic companies are working actively (albeit to varying degrees) with sustainability, Supply Chain sustainability, world goals, climate, etc. (1). Thus, many companies are still yet to adopt the sustainability agenda fully. There can be many reasons for this. It has not yet dawned on everyone that sustainability is here to stay.

What barriers are there in companies? Some companies are afraid of being accused of and caught out greenwashing. Some people mistakenly think they have to work with the entire sustainability agenda – e.g., all 17 UN sustainability goals at once. But they should not. They only need to work with the sustainability goals relevant to their business. Some also think it is very expensive. But sustainability is an essential investment in the future of the company. In attracting and retaining employees in a time of significant labor shortages, meeting current and future legal requirements, etc. It is timely care.

Understand the planetary boundaries

We must learn to understand the planetary boundaries of our Supply Chains. The planetary boundaries provide us with a quantitative framework within which humanity can continue to evolve and thrive in future generations.

It may sound a bit flippant to use the term ”planetary boundaries,” but it is an expression of the three environmental crises unfolding; temperature rises, pollution, and loss of biodiversity. Awareness and understanding of the planetary framework are central to ensuring the right decisions.

Understanding the effect of a company’s Supply Chain on the planetary framework requires data-driven work and analysis. One must understand the entire value chain’s CO2 emissions, water consumption, and waste volumes. In other words, one must understand sustainability in a broader sense.

Cascading sustainability down through the Supply Chain

In 2022 Optilon will publish a report based on a study about how the surveyed companies work to cascade green, sustainable initiatives down through their Supply Chains at a Nordic level.

A study on a more global level, ’Engaging the chain: Driving speed and scale, CDP Global Supply Chain report 2021’, shows that companies often restrict their work with sustainability to their part of the Supply Chain. Given that emissions outside one’s own Supply Chain are measured to be more than 11 times as large as one’s own emissions, it’s imperative to focus on the entire value chain.

It is very difficult to reach all the way out. The figures show that 71% of the companies in the survey work with scope 1 emissions, 55% work with scope 2, and 20% work with scope 3. In other words – the companies have so far only worked with a small part of the total emissions. (2)

The goals must be science based

One of the major drivers is that financial institutions and investors are increasingly focused on how companies manage their environmental risks and opportunities. In other words, how they respect the planetary framework.

It is no longer enough to set ambitions and goals that are not science based. Increasingly companies are joining the Science Based Target Initiative (SBTI). The fact that so many companies embrace the SBTI puts increasing pressure on the companies that have chosen not to go in this direction. Basically, the initiative is about setting Science Based Targets (SBT) that are in line with a 1.5° future (keeping total global warming below 1.5° temperature rise. Of the companies surveyed, 2.5% have Science Based Targets in place (2).

The challenge is that it can often take many years to set the right goals and take the right actions. Therefore, there is also a need for more people to commit to SBT and start work now – and not tomorrow.

Need for speed and scaling of supplier collaboration

Out of 11,457 companies surveyed, 28% say that they have launched ”low carbon” initiatives (2). To accelerate the companies’ focus on sustainability in Supply Chains, there is still a need to develop new procurement processes, train purchasers, and create greater collaboration with suppliers and stakeholders (the supply ecosystem). When it comes to utilizing technology, it is about finding solutions for setting better goals and being able to follow up on them. One possibility is to use simulation tools (e.g., digital twin solutions) to identify effective options for reducing emissions in a complex environment at a detailed level.

More and more companies are looking at their suppliers’ data as part of their environmental performance. It turns out that 28% of suppliers have launched plans for the green transformation, so there is enormous potential. 38% have launched initiatives with their suppliers. 62% have thus far not started work with their suppliers, which is exacerbated by the lack of suitable measurement results (2).

90% of the companies surveyed are prepared to work to a much greater extent with their suppliers, and 35% are ready to incorporate performance targets in their procurement processes or supplier Code of Conduct (2).

Life cycle analyzes are important

66% of the companies surveyed answered that life cycle analysis is one of the most essential tools for promoting the green agenda. Today, only 2% of respondents can report their emissions at the product level. Raising this level requires standards, the development of new methods, data exchange with suppliers and partners, and technologies that can help support companies (2).

In summary, it can be concluded that many companies have not yet initiated the change in their Supply Chain that is needed to lift us out of the three environmental crises. As Steen M. Andersen (1) points out in Børsen, there is a growing awareness in Denmark of the UN’s world goals, and there is communication about the companies’ focus on the various world goals, but this is not yet translated into, Science Based Targets. There is still a need to think about the entire supply ecosystem, develop new procurement processes, train purchasers and create greater collaboration with suppliers and stakeholders.

Sources:

(1) Børsen Bæredygtig, Bæredygtighed og erhvervslivet – hvad holder nogle tilbage, Af Steen M. Andersen, Direktør, FCG Global Goals, Tuesday, March 1, 2022 https://borsen.dk/nyheder/baeredygtig/baeredygtig-debat/baeredygtighed-og-erhvervslivet-hvad-holder-nogle-tilbage
(2) Engaging the chain: Driving speed and scale, CDP Global Supply Chain report 2021, (February 2022) https://cdn.cdp.net/cdp-production/cms/reports/documents/000/004/811/original/CDP_Supply_Chain_Report_Changing_the_Chain.pdf?1575882630

Facts:

Scope 1: Direct emissions due to vehicles, fuel consumption, and / or chemical leakage

Scope 2: Indirect emissions due to purchased electricity, cooling, heating, and / or steam

Scope 3: Other indirect emissions that occur in a company’s value chain and are not already included in scope 2 (such as emissions from purchased goods and services, transport, or business travel)

The Unnecessary Report 2021 once again shows and enormous and unutilized potential for Nordic companies – every fifth stock item is unnecessary. More than a fifth of the inventory is unnecessary for Nordic companies, according to a new report released by Optilon. The average company has an untapped potential of EUR 48 million – which could instead be invested in more growth-promoting purposes. The total figure for the Nordic region’s 400 largest companies amounts to EUR 19 billion.

Effective inventory management and optimization can have a major impact on a company’s profitability. Optilon’s newest publication The Unnecessary report 2021 – which has studied 400 different companies across the Nordics show, that 22 percent of the items in stock are unnecessary for the average Nordic company. This means that they have more goods in stock than they need.

Removing an unnecessary item from the warehouse means not only less tied-up capital, but also less warehouse space, reduced distribution and administration costs and obsolescence. By addressing this and implementing effective inventory management and optimization the average company among the Nordic region’s 400 largest companies will be able to gain around EUR 48 million. Supply Chain has perhaps never been more important. The covid-19 pandemic and the prevailing macroeconomic situation have demonstrated the importance of robust and sustainable supply chains. Having fewer but the right articles in stock gives you more optimization power as a company. You free up capital at the same time as you reduce costs and increase your revenue.

Effective inventory management is an underestimated success factor. It is one of the single biggest measures you can take as a company to maximize your competitiveness. It simply ensures that the resources are used in the right way and where they generate the most value.

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The mind creates our behavior. Our behavior shapes the people we lead. And the people we lead create the culture in our organization and hence determine its performance. If one wishes to increase the total performance, it is important to show care for people as a part of the business strategy. Thus, the people one has employed will feel an interconnection, a meaning and a feeling of happiness.

The initiatives of companies with regards to increasing commitment and productivity was traditionally oriented towards external ways of satisfaction, such as bonusses, trips, dinners etc. These are short-term solutions that only work for limited amounts of time. The efficacy is often decreased. It does not create motivation. If we, as Supply Chain leaders, intend to develop organizations that prosper, we need to understand what really matters for people. Employees that return home daily, with a sense of satisfaction, will want to return and perform – focus on the challenges, and work determinedly and hard.

Delve into the culture

First and foremost, you must, as a leader, be a role model and impel the correct behavior. Cultures shape organizations. Cultures are not inherently visible, but they are powerful. The culture is created, maintained and expressed through the many different mindsets, that comprise any and every organization.

The culture is embedded as feelings, values and principles, and these are all unconscious. We cannot see them, and most of the time, we have no idea that we’re affected by them. This means that we all partake in the creation of a culture, that we are a part of, but often using unconscious values and behavioral patterns.

As Supply Chain leaders, the responsibility of shaping the organization’s culture rests on our shoulders, due to human brains being programmed to see and respect hierarchies. The human brain is designed to understand where we fit in, within social structures, and to support those who seem dominant.

Focus on the health of the company

Human-oriented organizations put people first, since it is the people that make the company successful. This is why the companies, and by virtue of this, also the board of directors, should focus on the health of the company instead of the wealth of the shareholders. Only by doing this, one can recover the trust of the employees, and thereby attain a long-term, sustainable performance.

If we lead with the purpose of helping people create an immanent feeling of happiness, meaning, interconnectedness and contribution regarding their job, they will go home every day with a feeling of satisfaction. If we, as Supply Chain leaders, create an environment where the employees feel genuine care for their well-being, where we actually are present, they will become more motivated, more enthusiastic, and more cooperative team members.

The establishing of more human-oriented cultures is the most logical answer to the current organizational crisis, entailing decreasing commitment of employees and the widespread, negative occupational satisfaction.

I remember being a fresh student, 17 years old at my High school’s newly introduced cooperation with a global German company with its Nordic headquarters in my birth town just north of Stockholm. It was a unique chance to study subjects once a week that were set to plant the seed for us students to pursuit a career within the technology field, and perhaps one day, an employment at this specific company. One of the courses that made an impression was the Project Management course. The first day we learned that a Project Manager is responsible for everything in a project. He or she could never blame downwards on the team members. Essentially, he or she was not just the accountable, but also in a way responsible for the work of each team member. Now coming from this type of doctrine, which I did not reflect upon very much at the time, and given that it was a German company, it is very different from what we are used to in Nordic originated companies.

During some of my first employments after finishing university, I got to experience this difference right from the start. In comparison to what I had previously been taught at the German company, many project managers seemed to be less authoritative and often had a very consensus-based leadership style. Although intuitively it might seem like a negative feature, this leadership style is not always bad. From my own point of view, I felt that the responsibility for being creative and taking initiatives was shared with all project team members, including the Project Manager. This created one of the pros. The biggest con on the other hand, was that sometimes this shared responsibility could create a vacuum in responsibility as there was a lack of understanding of what was expected from each team member. In some projects it felt like I together with my team members were driving, planning, executing, and overseeing the project, even though none of us at the time were the Project Manager. We had become both responsible for the work that was to be executed, as well as accountable for the outcome of the project. Something that would never have been accepted in the German company.

So that brings a question: how can we fully use the power of a consensus-based leadership style with its pros, without having to deal with the cons?

A few years back, to improve Optilon’s delivery model, we nailed down the culprit of the matter. We discovered it was the lack of guidelines describing what the responsibilities of each team member (including Project Manager and Account Manager) really was. The answer to the above question became the following: Define a Responsibility map. A responsibility map clearly states who is responsible for what, regardless of project or role in the team. To aid every project team we created a template of the responsibility map to be used as a standard tool in each delivery.

To make things clearer, we also decided to introduce the word Accountability into this template as a complement to the word Responsible. Since both Accountable and Responsible translates to the same word “Ansvar” in Swedish, the importance of accountability risked being left out.

The result: we combined the best things from two worlds. We now have a hybrid by combining the way of the German company and the Nordic consensus-based way. Now each project has a clearly defined picture of the responsibilities and accountabilities of each project member. Not all team members will have accountability, but in larger projects some will. Although never directly to the client, but to the Project Manager who in turn has it to the client. This means that team members will never have to find themselves acting as an interim or substitute Project Manager, and in instances of project uncertainties it will all travel in one direction – up-streams to the Project Manager.

We can see that this approach has helped us streamline our projects to be more consistent in planning and execution. This assures a higher success rate when helping our clients with all their different Supply Chain endeavors.

Whenever organisations manage for change, we reach for the Change Management Toolbox. As experienced managers, we all know the essentials of stakeholder engagement, project management, training, and communication by heart.
Even though we strive to do the right things right, soon most of us learn – the hard way – that sustained change is hard to achieve, and it is basic knowledge from countless studies that the majority of change projects struggle to realize their full potential.
Popular explanations as ’unrealistic ambitions’ or ’inadequate change management’ may account for some failures. Still, an amazing number of perfectly orchestrated change initiatives sail into troubled waters.

The success of your change management efforts depends on your organization’s change capacity.

struqtures® founder Birgitte Clausen and Associate Professor Hanne Kragh, Aarhus University have studied what hinders or enhances organizational change capacity, and their research surfaces two interesting insights that go beyond general change management recommendations:

that deep structures in organizations hinder change or pull things back in line
that day-to-day management for change targeting deep structures can create organizations with a high capacity for change and innovation

The core message is, that you can significantly increase the success of the individual project, if your day to day management practices pays attention to factors, that increase the organizations overall change capacity.

Watch out for deep structures

Deep structures are relatively stable and reinforcing patterns that guide peoples’ behaviour, and as such, deep structures may hinder, limit, or enforce change.

Using an iceberg metaphor, change management is above the waterline while deep structures are below. Deep structures are invisible strings, ‘taken for granted’ ideas and patterns of behaviour, that guide

Deep structures are different from culture and climate. Instead, they are long-lasting consequences of organizational members’ interactions that shape culture and climate.

Deep structures are the strings that pull your organizations culture off track

It is an old refrain that culture eats strategy for breakfast. However, the mere thought of cultural change makes many management professionals take a deep breath and head for the next topic.

Culture is to abstract, too diffuse and to slow to change. And most people do not have the time, the patience, or the knowledge to really get started.

Our study offers good news. You do not need to run cultural change project to increase to increase your organizations’ change capacity.

4 areas of attention are essential to enable high change capacity

You can integrate certain practices in your daily management efforts, and thus manage for change and increase your organisation’s change capacity. In essence, you should emphasize 4 focus areas:

enhance the relational structures in your organization. The better related your people feel, the faster the speed of change.
beware of organizational myths and fairy tales from Once Upon A Time. Remember, that how we talk about past experiences shapes our expectations of tomorrow and determines our actions today.
accept that emotions beat rationality. We normally cherish rationality as the uncontested good guy in management. However, behaviours at all levels of the organization are constantly derailed by strong underlying emotions.
stop relying on your leadership autopilot. Fly manual instead. Even though they may have served you well in the past, your preferences, beliefs and organizational logics are most likely also your blindest angle and the enemy from within preventing you from achieving what you want most.

This Blog post is published in collaboration with Birgitte Clausen, Speaker, Trusted Advisor, and Managing Director at Structures, a Strategic Business consultancy focusing on Change Capacity. Learn more about the offerings of Struqtures here.

The most perfect project plan, the most perfect training plan, the most perfect communication plan will fail if it is launched in an organisation with low change capacity.

Change management is often presented as the magical silver bullet that can ease the way of any project. When a project fails, you will soon hear people blaming it on poor change management.

Bad timing. Bad communication. Bad training.

When things do not work out as planned, an automatic reaction is to blame it on the people.

We individualize the problem. We blame it on someone, on somebody: if only somebody did a better job, if only somebody were better, if only somebody knew better – then everything would be fine.

Very often, the problem is not the people. Nor the project.

The problem is very often the setting, in which the project takes place. The settings, in which people work.

Ease of change depends on organizational characteristics

Think about it like this: The project is the foreground of our focus. The organisation in which the project takes place is the blurred background, that receives limited attention.

Often, we direct our full attention to what goes on in the project. We look at the foreground, and we interpret everything related to the project within the narrow definition of the project. And we forget the background. We forget that the project takes place in an organisation with certain characteristics, and that these characteristics may determine the success of a project.

Imagine that you are the project manager of a construction project. You are tasked with building castles of sand.

You may be the ultimate builder, project manager, communicator, or trainer – but the success of your sandcastle depends just as much on the characteristics of the beach, where it is built.

It depends on the composition of the sand, the tidal waves and the weather. The context where you build your castle is just as important as the management of the sandcastle project itself.

The same applies to change projects in organisations.

Some organisations are more favourable to changes than others. Not because their people have better skills or are less change resistant, but because the organisation is configured in ways that ease the speed of change.

This is called change capacity.

Change capacity can be built

You can build your organisation in ways that increase or decrease your change capacity.

Work is organized by means of a web of structural components, that determine how people behaves. You may ask them to do A, but if the structures pull them in the direction of B, they will move towards B.

Strategic priorities, hierarchies, rules, processes, systems, dominating behaviours, logics and old stories are examples of such structural components that shape the way people act and react.

Change capacity is a function of how well the different structural pieces fit together.

All organisations organize work in some ways. They lay out all sorts of structures. You cannot not have structure in an organisation. Because deciding not to have structures in place is also a kind of structure, because it organizes how people work.

The web of structural components is not permanent. You cannot compose them in any way you like, if you aim for change capacity. But you can learn the logics or structural fitness and integrate them as mindset and an approach to daily management practices.

Are you sometimes wondering what makes Nordic Business Leaders so unique in a global context? We may come from small countries, but with great innovation capabilities, we have the know how to build great companies ready to do good in the world – focused on more than just short-term profit and the bottom line.

Times are changing and so is the need for a new leadership paradigm. The rapid discoveries, innovations and developments demands a different style of leadership. It is the leader’s role as a navigator of change, and as a guide towards the future, to make sense of what is seen by many as a period of increased complexity.

Are there aspects of our Nordic style that could be beneficial in this rapidly changing and evolving world? Can they provide answers to a new leadership paradigm? What methods and techniques long-established in the Nordics can prove to be of relevance and practicable when working on a global level?

In this blogpost we will take a closer look at how the unique Nordic competences trust, care, openness, transparency, and responsiveness could support the change in global companies.

The Nordic history
The history of the Nordic region is one characterized by adventure, curiosity, and a dependency on the outside world. The Nordic nations understand that their own survival has been reliant upon looking outwards, participating in international communities rather than on insularity and isolation.

The history of the region is one of exploration and discovery, constant adaptation to complex environments, networked communities dispersed over a large area, innovation within creative constraints, continuous learning, facilitated from childhood and on through adult education, the celebration of the collective alongside the individual and a willingness to experiment over and over again.

The outlook of the Nordic people is phlegmatic. We are accustomed to circumstances changing at short notice, requiring responding to whatever new context emerges. Nordic people are also aware of the small size of their nations and of the disproportionate but significant role they play on the world stage.

This also means that Nordic people provide a creative, simplified and unbureaucratic perspective on what is going on, and about how to take advantage of opportunities and resolve issues. Nordic people speak their mind and are raised to do so. Access to and openness of Nordic Business leadership is unique and makes people meet each other as equals. In other words, it is the low power distance, clarity and straightforwardness and the flat organizational structures in which Nordic Business Leaders can be approached easily that makes the leadership style unique.

Leadership occurs when other people respond to someone’s authenticity and choose to follow them, not through the assertion of rank and status. Authority exists to provide help, guidance, and structure. It is not to be feared but to be engaged with, questioned, and constructively challenged.

Trust plays a special role
Trust plays a special role in the Nordics as it is the foundation stone for how the Nordic society works. It informs how we interact with each other; it explains our approach to leadership, and it is an enabler for many other aspects of our leadership style. Without trust our emphasis on openness, transparency, delegation, self-direction, teamwork, and equality would be undermined. Trust enables people to move swiftly from introduction to decision to action. Trust results in efficiency and effectiveness, helping to save time and money in the long-term.

Trust is the societal glue that is there by default rather than having to be earned, as is the case in many other cultures. In the Nordic region trust is granted unconditionally and with it comes an expectation that they will do it right. It oils the decision-making process, enabling people to bypass small talk and move straight on to what is important, and it allows young kids to climb trees without supervision.

Trust stems from respectful human connections that disregard otherness and highlights what we have in common. Many Nordic Business Leaders conclude that: “In essence we are all the same. We are all humans, driven by the same need for love, belonging to a community and contributing something meaningful in our lives”.

In a global context it is often the case that the Nordic leader is responsible for overseeing change. It is imperative that the foreign leader recognizes that it is they who are the embodiment of change for their colleagues when they work with other cultures. How quickly they can move from fear of the unknown that they represent to trust of their leader is usually indicative of future success.

Care
In the Nordics, part of our leadership philosophy is reflected by the phrase “freedom with responsibility”. This captures the notion that people enjoy personal freedom but assume responsibility in a communal context.

A Nordic Business Leaders role is therefore to create a nurturing environment where people feel engaged and can flourish, where they feel safe and free to speak their mind, experiment and make mistakes and are empowered to move things forward by making their own decisions. Such a supportive environment, and the sense that an individual’s personal purpose is somehow aligned with that of the organization they work for, creates happiness at work.

Simon Sinek has suggested that the “the real job of a leader is not about being in charge, it is about taking care of the people in your charge”. Coming back to Nordic Business Leaders, they typically have a strong sense of responsibility for those who work alongside them. In other words, the Nordic way of trusting people and caring for people and putting responsibility out in the open helps build people up.

A popular metaphor is looking at the leader as a gardener. You cannot make a plant grow by commanding it to do so. You must create the right environment where it can flourish, watering it, ensuring there is enough sunlight and air. Only then will the plant grow. As opposed to seeing the leadership style as a game of chess.

Nordic Business Leaders are great at connecting with their colleagues on a personal level. This makes them establish strong trust-based relationships. People come first. A Nordic style of leadership can be mistaken for softness. Hence it is important to be clear about objectives and responsibilities.

Openness
Nordic Business Leaders are typically very open. They have a willingness to share information. They are aware of the fact that if you want people to do their best, to really question everything that they do and see how they can improve it, then it really does not fit with a very closed an authoritarian style.

The solution to complex problems is rarely found in the board room and often require seeking beyond the bounds of your own company. Looking outward and tapping into networked knowledge is necessary in order, to retain relevance in an ever-shifting, ever-adapting world. The ability to remain openminded as we immerse ourselves with other cultures enables us to challenge our own preconceptions, attitudes, and behaviors. Leading us to question what we believe in and why. If we remain closed-minded, dependent on the habitual and indifferent to other ways, we become blinded to the potential for change and the opportunities that offer.

Transparency
As also mentioned in the introduction, the notion of low power distance is a significant factor in how Nordics lead. The flat organizational structures they favor have the effect of making themselves more accessible and approachable. To maintain visibility as a leader it is important that you put yourself at the same level as your team. In doing so you make communication, explanation, contextualization, delegation, coaching and problem-solving much easier to accomplish.

It is good to speak openly about what you do, why you do it, what information you base your decisions on, why you ask for input and why you think it is important to draw on the knowledge and experience of others. In other words, help people understand how you lead and why these methods can be effective. It is about remaining open and willing to show your vulnerability.

Responsiveness
Nordic Business Leaders are good at adapting and providing the flexibility needed to move forward. It is called Nordic pragmatism. If you have plans and procedures that do not seem to work, you change them. If you have plans to go fishing and the weather deteriorates you adapt and make another plan. This is simply part of the Nordic way of life. Experimentation, supplemented by review, learning and adaptation are all part of the responsive sensibility advocated by Nordic Business Leaders.

“If you do not dare you will not win”. In the Nordics we have a more open attitude towards change and experimentation. Courage is a crucial factor behind the willingness to experiment. Continuous experimentation is needed if organizations are to innovate and find solutions for complex problems.

In other words, make plans, dream, imagine and draft multiple scenarios. The more scenarios you must hand the more you will be able to react and respond to the problems and opportunities. Be ready and willing to pivot, to abandon one plan and switch to another.

Alis Sindbjerg Hinrichsen works for Optilon and is especially passionate about everything that connects the Supply Chain strategy with the business strategy. She is also interested in what makes people and companies more change ready.

With inspiration from Pernille Hippe Bruns book: On the move, lessons for the future.

Buy the book here: https://www.saxo.com/dk/on-the-move_pernille-hippe-brun_haeftet_9788770362382

From Amazon: https://www.amazon.com/Move-Lessons-Future-Nordic-Leaders-ebook/dp/B07N2JXX4C/ref=sr_1_1?dchild=1&keywords=on+the+move+pernille+hippe+brun&qid=1605004124&sr=8-1

Capacity for change in a digital era: Effectively integrating the learnings from Covid-19
As the Covid-19 storm pulled up, the world closed down, and companies found new ways of working. In a few days actually companies carried through radical changes in the way they work. Changes that would have taken months before or years. Everyone was affected and had to go lightning fast to adapt. The burning platform was a triggering factor. But what concrete handles were pulled in and that made the companies adjust with lightning speed?

Birgitte Clausen from Struqtures.com will inspire us in this session. She has been in charge of Denmark’s largest, qualitative study on the experience of capacity for change during the shutdown. The study is called Corona Change Capacity Project. The study shows that the capacity for change is made possible by micro-adjustments in the way we work, lead and organize us on. It also shows that most of these micro-adjustments can be easily integrated in daily work. Birgitte will inspire us to what capacity for change is all about, what she has found in the study and how these micro adjustments can be integrated into the way we work, lead and organize us.

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The COVID-19 pandemic is spreading at an extraordinary speed. As a company, you probably have put a crisis team in place and are doing all you can to keep your people safe and stay on top of your business. You deal with the uncertainty amid constant disruption. Close on the heels of the coronavirus outbreak, the biggest economic shock since World War II is headed our way. And it isn’t just an economic shock: it is a shock to customer behaviour and business models too.

Extreme level of uncertainty
The challenges associated with it will be orders of magnitude bigger than what we are used to dealing with. To handle them, you need to adopt an operating model that accommodates the extreme disruptive level of uncertainty facing your business. If you have not already done so, it is time to put together a team tha plans ahead. The plan-ahead team will help elevate your view above the day-to-day response that your crisis team is managing. Its objective is to enable modular, scalable thinking that any Supply Chain Manager needs to navigate this unprecedented and rapidly evolving situation.

Adapting to the new normal
Traditionally, Supply Chain Managers consider the cost, quality and delivery as their key metrics when developing Supply Chain strategies. But as the crisis has shown, major global events caused by pandemics such as COVID-19, as well as natural disasters, climate change and geopolitical tensions, can create significant disruption to the reliable supply of parts or products.

Supply Chains cannot be established overnight. It takes time and effort to qualify potential suppliers in areas of manufacturing quality, capacity, delivery, cost and their ability to respond to engineering or demand changes. Thus, Supply Chains are designed for longer-term needs. Once they are established, it can be difficult to change them quickly to adapt to unpredictable disruptions.

Supply Chain KPI’s are changing
The COVID-19 pandemic has reminded corporate decision-makers that there is a need to develop new business strategies in their future supply chain designs. The KPIs to be considered for future Supply Chain designs likely will contain both traditional metrics such as cost, quality and delivery, and new performance measures including resilience, responsiveness and reconfigurability.

The understanding of supply-chain risk will be changed forever. Too much risk has accumulated in the global supply chains that has left no room in dealing with disruption. The balance of low cost and flexibility needs realignment. Supply-chain strategy development and execution will be sought-after skills. Thinking beyond the smooth flow of products and services needs much more focus on risk and corporate responsibility.

According to a recent study from Accenture – 94% of Fortune 1000 companies are seeing supply chain disruptions from COVID-19. 75% of companies have had negative or strongly negative impacts on their businesses. 55% plan to downgrade their growth outlooks (or have already done so).

The use of digital twins will increase
Given that Supply Chains need to be redesigned to treat disruptions as the norm, detect early warnings and be able to sense and pivot seamlessly to offset situations like the ones mentioned we believe that the use of digital twins will increase. Organizations can use them to create business process simulations that can be updated in real time as circumstances change. For example, this could include finding the best way to shift production to alternate locations, move inventory to different warehouses, increase or decrease safety stocks and be better prepared overall.

Source: https://www.supplychaindigital.com/supply-chain-management/accenture-building-supply-chain-resilience-amidst-covid-19

There is a widespread fear of a global economic meltdown. Particularly today, it is visible to everyone how critical Supply Chain performance is. A well-run Supply Chain ensures that we all get our daily goods such as toilet paper, hand sanitizers, masks, tests and drugs.

For the Supply Chain Manager and the CEO, experiencing such a major crisis for the first time, it can be challenging to navigate both mentally and operationally in this challenging environment. That’s why we have gathered a crisis checklist. The checklist is of course not covering all aspects, but it can work as a starting guide.

The following crisis checklist is of course not covering all aspects, but it can work as a starting guide.

Crisis checklist step 1: Move the crisis into the boardroom
Like never before, the Supply Chain has the attention of the board. A survey conducted by PwC showed that 9,34% of the CFO’s said Supply Chain issues were among their top 3 concerns in the current climate. That being said, 30% of the companies where thinking about making changes to their existing Supply Chains. The conclusion is though that the duration of the impact is the most important factor. It is expected that the learnings from the outbreak will most likely move the competitive forefront of Supply Chain operations toward more comprehensive, proactive modeling.

Crisis checklist step 2: Establish a war-team and understand your supply exposure
You should start out by asking yourself:

What are the challenges, our supply chain is facing?
What actions could be taken to tackle unexpected challenges?
What is the short-term immediate action plan? Can we short term look at different sourcing strategies?
What aspect of supply chain management is most challenging – demand forecasting, logistics, manufacturing?

If you have not already done so – establish your crisis team. Make sure it works cross functional. Some companies are working with daily dashboards in order to handle it operationally. It is not enough to handle the issues on a high-level track driven approach.

For many companies it means looking into production and part-level mitigation. It could also be beneficiary to look into your n-tier exposure, which means reaching out to tier-2 and tier-3 sources and risks. It is about being fact based: which components are affected, at what production burn rate and what is supposedly on-hand and in-transit.

A way to proactively mitigate risk is to build extreme scenarios. It could be: “this is a 100 year event”. If you do not have the digital software yet, short term operational solutions can be established if working agile and focused.

Crisis checklist step 3: Protect your employees and customers
The advice is to implement and overinvest in the best-known guidelines available for both employees and customers. Overcommunicating with full transparency is not possible.

Crisis checklist step 4: Defend against revenue decline
How will this effect business results and how are we minimizing the negative impact on business results?

Start by putting the customer in the centrum. How will you build trust, loyalty and market share through and beyond the crisis. Build specific revenue mitigation actions for core revenue stream declines. Pivot resources to pockets of current and future growth, online and beyond

Crisis checklist step 5: Plan urgent cost take-out to conserve cash
After stabilizing operations to “new normal” it is time to look at whether it is necessary to reduce cost in order to conserve cash. One of the ways to release cash is by looking at what you have in stock, what the demand looks like and how the processes are towards your suppliers. Research conducted by Optilon shows, that in average 22% of what companies have in stock is not necessary.

Crisis checklist step 6: Design your future Supply Chain around risk competitiveness
Already now companies are experiencing product and material shortages. For most of the companies the short-term focus is on getting things working. In the long term though, many companies are looking at rethinking their Supply Chains, making them less risk prone and creating contingency plans. Many companies are now realizing that they designed their operations with cost in mind. And not around risk competitiveness.

You could start out by asking yourself:

What is our long-term action plan?
How are we planning to reduce the risk posed by any future health crisis?
Do we have any business continuity plans and protocols to hep us tackle this?
What are the ongoing challenges for our supply chain moving forward?

While it is impossible to predict the outcome of this kind of crisis, maintaining and adapting your operations to these fast-changing events is complicated but possible. It is critical for you as a CEO, Supply Chain Manager or business leader in general to have a clear understanding of the disruption consequences and the actions required to restore your business foundation.

References:
https://www.prnewswire.com/news-releases/pwc-cfo-covid-19-pulse-survey-the-first-in-a-bi-monthly-series-that-shows-how-cfos-and-finance-leaders-plan-to-react-to-covid-19–and-what-impacts-they-expect-to-see-301024904.html

Understand the planetary boundaries

Cascading sustainability down through the Supply Chain

The goals must be science based

Need for speed and scaling of supplier collaboration

Life cycle analyzes are important

Sources:

Facts:

Delve into the culture

Focus on the health of the company

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