Recent challenges underline the benefits of building resilience

The big buzzword for supply-chain managers is resilience. Instead of looking for the leanest, cheapest and fastest solutions, organisations are now looking for models which will prove most resilient in the face of economic, geopolitical and other shocks.

As supply-chain director at Coca-Cola HBC Ireland and Northern Ireland, Clive Wilson has been to the fore in managing the changes affecting supply-chain management.

“Coca-Cola HBC Ireland and Northern Ireland is the market leader on the island of Ireland. We are the bottling partner to The Coca-Cola Company and a member of the Coca-Cola System, responsible for the manufacture, distribution, sale and channel marketing of its beverage portfolio,” explains Wilson.

It is a portfolio with more than 600 individual product items, or SKUs, including sparkling, juice, water, sport, energy and most recently coffee and premium spirits.

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“For us in Coca-Cola HBC, a resilient supply chain is defined by its ability to respond to and recover from unplanned disruptions and maintain business operations and continuity of supply while protecting the health and wellbeing of its people,” says Wilson.

Covid-19, followed by high levels of inflation, significantly longer lead times for materials and freight challenges as a result of the war in Ukraine and geopolitical issues have pushed supply chains internationally beyond anything he had seen before.

“As an organisation, throughout this turbulent time, we not only maintained production but we responded by evolving our offering to meet consumer needs,” he explains.

Coca-Cola HBC’s supply chain has changed significantly as a result, not just in terms of new technology but in how it works. Today a collaborative approach is key.

“At Coca-Cola HBC, we have developed an agile mindset and way of working to adapt to changes or issues that arise,” says Wilson. “This ensured that during Covid-19 we were able to maintain a safe way of working while protecting the health and safety of our employees. We also work across teams, moving away from the silos that would have existed historically. This allows us to adapt quickly to trends in our market and has improved the service we offer our customers.”

A variety of changes have made the business more efficient and agile.

“Within our procurement team we now complete a twice-annual risk assessment across our wider supply chain of key materials and services to proactively monitor the market and plan for the future,” says Wilson.

“In addition, we have implemented a risk mitigation plan over the last three years as we moved from crisis to crisis. This has allowed us to proactively plan for challenges that may occur. For example, for many key ingredients and services we have introduced dual suppliers to reduce the risk of an interruption in production.”

By flattening its structure and giving more autonomy to its people, the company’s teams are better equipped to make fast decisions and learn from mistakes. “And crucially, our teams are more customer centric,” Wilson says.

“In addition, we developed an end-to-end strategy where all sub-functions challenged themselves on structure, speed and flexibility. We then worked with our suppliers to follow suit and deliver faster lead times and shorter windows for change.”

The success of Coca-Cola HBC’s supply chain comes from the resilience of its people and the proactive, problem-solving attitudes of those within its teams, Wilson points out.

“Resilience, enabled by digital capability, is the new supply-chain competitive advantage,” says Pankaj Agarwal, supply chain vice-president at PepsiCo Ireland. This is the ability to proactively sense adversity, agility to adapt to shocks and disruptions, and responsiveness to project innovation and growth.”

Agarwal believes digital capability within supply chains has to date lagged behind areas such as manufacturing. “Factoring in the turbulence within which supply chains now operate on a daily basis, digitalisation is increasingly a key priority to enable supply-chains shift from reactive firefighting to adapting to the new operating reality,” he says.

The downside of a single source of supply is that if there is an issue, there is a considerable issue

—  Paul Condon

With all the big disruptions of recent years it’s easy to forget the havoc the simple blocking of the Suez Canal last year by an errant ship wrought on supply chains worldwide, points out Paul Condon, head of strategic partnerships at Camida, a sourcing and distribution company that sells into big pharmaceuticals companies as well as the food and industrial sectors.

“Everyone is conscious of disruptions now and really making sure that supply-chain material flows are as robust as they can be. Companies no longer want to be dependent on a single source of supply of any critical material,” says Condon.

In the context of highly regulated sectors such as pharmaceuticals, that’s particularly complex to manage. “The downside of a single source of supply is that if there is an issue, there is a considerable issue. So now the focus is on dual sources of supply and on managing networks. We’re moving from linear supply chains to a more collaborative network of supply activities.”

Another consequence of the tumult of recent years has been the desire to shorten supply chains.

“Again it’s about saying, ‘Let’s not be depending on something that has to be shipped x amount of miles on a ship. Let’s build duplicate and triplicate sources of supply,’” says Condon.

A further legacy of all the disruptions is that those managing supply chains today are required to have not just planning and forecasting abilities, but a much broader skill set, including managing risks and relationships.

Where possible, supply will move closer to the point of manufacturing – or ‘near shoring’. “Being closer to the site of use is an obvious advantage but, in saying that, pharma is still a global industry, and you’ll never completely remove the need for sourcing overseas – so it’s all about balancing risk,” adds Condon.

A resilient supply chain is one that can pre-empt disruptions and adapt to them, “ideally before disruptions, otherwise as they occur,” says Heletjé van Staden, assistant professor of management in the supply chain management area at UCD College of Business.

She too believes advancements in digital technology tools are driving opportunities for resilience.

“We’re already seeing applications of large language models, such as ChatGPT, to assist supply-chain resilience. One example, announced recently, is a tool named RiskGPT, designed to assist in tracking freight transportation, predicting disruptions and prescribing responses to these disruptions,” she says.

Firms are increasingly open to using digital technologies to support decision making. “Probably the biggest advantage of digital technologies is that it allows firms to respond to changes in their supply chain, which can be, for instance, as a result of disruptions or changes in demand patterns, both better and or faster,” says van Staden.

Examples include smart algorithms that use data from different sources – such as inventory levels, sales, shipping location, supplier reliability and even weather conditions – to predict future demand, to determine inventory requirements, and to ensure that inventory is positioned in the supply chain when and as needed to minimise costs and maximise customer service.

“A third dimension, reducing emissions to improve sustainability, can also be more easily addressed and measured via digital technologies,” adds van Staden.

“These smart algorithms can be incorporated into what we refer to as digital control towers, providing recommendations to decision makers using up-to-date information.”

However, one area where more change is needed is in relation to environmental, social and governance issues.

Mathematical models and analyses have shown that such policies can reduce emissions, costs and improve reliability

—  Heletjé van Staden

“We are seeing efforts to reduce emissions, which are great, but we need so much more,” says van Staden.

“Cost and meeting customer service [needs] are still the main driving forces of most supply chain decisions. If products are delayed, firms choose the best alternative method to get the products delivered to customers; they do not consider the environmental impact thereof – understandable, since, if you don’t deliver, you can’t make a sale,” she adds.

But we are now at a point where firms simply cannot afford to continue ignoring climate impact, she warns.

“A systems view, whereby manufacturing, inventory and transportation decisions are made together to limit the total environmental effect while meeting delivery requirements, is one approach to address this,” she suggests.

One potential solution to this is called synchromodality, an emerging transportation policy which makes use of smart algorithms and the physical internet to dynamically make transport-mode decisions to ship inventory between source and destination.

“Mathematical models and analyses have shown that such policies can reduce emissions, costs and improve reliability,” says van Staden.

“However they require collaboration between shippers and transport providers to work, which also means changing working culture – and obtaining buy-in from end users.”