Supply chain resilience

Supply Chain Resilience

By Ryan Francis, CSaP Policy Intern

A supply chain expert and leading researcher from the University of Cambridge delivered a seminar for CSaP’s Policy Leaders Fellows (PLFs), the most senior policymakers in Whitehall, Brussels or devolved administrations, who provide access to research and academic expertise. The event held at Jesus College in November 2021 was led by Dr Jagjit Singh Srai, Director of Research in the Department of Engineering and Head of the Centre for International Manufacturing at the Institute for Manufacturing (IfM), Cambridge.

The talk focussed on what governments can learn from recent supply chain disruptions. Dr Srai discussed the importance of building robust supply networks and explored the challenges and benefits associated with making these more resilient. Throughout, Dr Srai drew upon his extensive 17 years of front-line experience managing many complex supply chains for the FTSE 100 Company, Unilever, and his teams’ research on supply chain design.

According to Dr Srai, a supply chain can be defined as the sequence of processes that are involved in materials supply, production and distribution of a product. He explained that a supply chain is comprised of the network of organisations involved from raw materials to the users of the finished product and/or service. The task is complex as it involves the management of information, material and value flows across these geographically distributed entities.

Dr Srai began the presentation addressing the importance of supply chains by identifying who the key stakeholders are.

The public for example, are a key stakeholder in supply chains, particularly for essential goods (food, medicines, fuel, etc) where supply robustness becomes a critical design requirement.

He explained that governments also invest in supply chains for economic development but first and foremost, robust supply chains ensure that society runs smoothly. Further, policy makers will need to set the agenda on Environmental, Social, and Governance (ESG) aspects of international supply chains, such as the policies that enable governments and businesses to ensure they are meeting net-zero carbon targets. One of the participants added to this point; stressing the importance of supply chains. She highlighted that Birmingham requires the retrofitting (insulation) of 16,000 homes, which is a huge and extremely challenging undertaking, as crucially the supply chain for industrial large-scale retrofitting does not yet exist.

The presentation then turned to addressing major challenges governments encounter when managing supply chains. During the COVID-19 pandemic, it was highlighted that international supply chains, which have become the norm for most manufactured goods, were compromised due to multiple failures as different countries faced local restrictions and lockdowns. The pandemic also led to major shifts in consumption behaviours, both in healthcare but also other sectors as working from home, restrictions on hospitality and retail, and panic buying exacerbated shortfalls in supply. Meeting the demand of the public during these lockdowns was a challenge to many governments, including the UK. One of the participants then suggested this issue can be in part mitigated by shortening some of these chains.

By diversifying, to produce more merchandise on local and regional levels, can support the resilience of supply chains.

This can be advantageous to governments as it means that a country is more able and better equipped to handle disruptions. It was argued this configuration change ought to be encouraged through policy interventions, as when companies offshore it is often only for marginal cost advantages.
The discussion then explored challenges facing supply chains in the form of handling spikes in demand. Demand spikes are notoriously difficult to manage, as they often arise with no pre-warning and their severity and duration is often unknown. The fuel shortage which occurred in the UK in October 2021 is an example of this type of disruption. However, unlike the name suggests, Dr Srai explained this disruption is more indicative of a spike in demand, not a shortage of supply. He suggested that firms and governments can protect themselves against demand spikes by holding inventory, which may involve stockpiling of materials, intermediate goods, and finished products; however, this comes at a cost.

Demand uncertainty requires resilient systems.

Dr Srai proposed the following solutions; firstly, he suggested that governments could make better use of data, simulations and modelling to understand supply chain risks, which would ultimately lead to better outcomes when governments have to intervene. This should include availability of skilled labour which is often overlooked. He also suggested investment in digital technologies to support the transparency of supply chains, such as watch towers, blockchain and tracking methods. These technologies can provide firms and governments alike early warning on emerging supply risks in an increasingly networked world. Finally, public-private-partnerships for essential goods should be explored that address both market and resilience requirements, and as exemplified in the example presented on medicine supply security.

Image Credit: Photo by Timelab Pro on Unsplash