Hairpin bend

The path to supply chain maturity is a steep climb along an unpaved road that is littered with potholes and has sudden, hazardous bends. The coronavirus pandemic and the associated lockdowns created shortages of parts and materials. The war in Ukraine, which caught many businesses by surprise, led to soaring energy prices, rapidly rising inflation and slumps in customer demand.

Despite – or perhaps because of – these disruptions, Dutch companies have significantly improved their supply chain maturity over the past two years, according to the fifth edition of the National Supply Chain Monitor. On a scale of 1 to 5, the average score has risen from 3.0 to 3.2. Although this might seem like only a slight increase, it actually signifies that companies have successfully navigated a crucial hairpin bend from internal collaboration to external collaboration. Given the current turbulence in the world, this shift in focus towards suppliers and customers is both logical and necessary.

The question now is whether the Dutch companies will be able to continue the uphill climb to reach the very top of the mountain: network optimization. Lora Cecere, a leading American supply chain analyst, produces annual ‘Orbit Charts’ in which she plots publicly listed multinationals’ inventory turnover rates against their operating margins over a ten-year period.

Wrong turn

Interestingly, in the case of many leading multinationals, their score generally tends to move upwards towards the top right of the chart, but regularly falls back a little when it turns out that the company took a ‘wrong turn’ along the way by making an unwise strategic choice. According to Cecere, most businesses have five to seven different supply chain flows, but only 9% of companies actively design them.

Similarly, my own Inventory Strategy Survey of 150 Dutch companies in 2021 revealed that the vast majority of them had not clearly translated their corporate strategy into a supply chain strategy. To successfully navigate the path to full maturity, it is necessary to visualize the whole mountain and the best route to take. Based on our own recent survey, however, visualizing the end-to-end supply chain appears to be the biggest challenge.

Martijn Lofvers, Chief Trendwatcher Supply Chain Media
martijn.lofvers@supplychainmedia.nl