Alumni Q&A on supply chain management in 2024
2023 was a very exciting year in supply chain management. Supply chain risks have been increasing and new challenges and disruptions might be on the horizon in 2024. Even after years of successful work in business and experience in supply chain management, global changes always bring new challenges. There are times when you wish you had the professors from your alma mater "at hand" to ask them questions about current topics. In our new series “Alumni Q&A”, our faculty are ready to answer your questions on current challenges. Our first issue is featuring Kai Hoberg, Professor of Supply Chain and Operations Strategy, who not only has in-depth academic insight, but also relevant practical experience from working with companies such as Bayer, McKinsey, P&G and Jungheinrich.
Anna Sarbacher, Supply Chain Strategy & Planning at Daimler (MSc GLSCM, 2017):
Supply chain resilience is the new buzz word, not only since Covid, but also when looking at the global economical and political developments during the last few years. How do you define a resilient supply chain and what are the top 3 measures to be implemented by Supply Chain Managers to increase their SC resilience effectively?
Kai Hoberg: The disruptions after Covid-19 have been an inflection point for supply chain resilience and it has made it to the CEO agenda in many companies. For me, a resilient supply chain has the ability to be robust against potential disruptions and if hit by a disruption is capable to recover quickly. Common measures taken to boost resilience are increasing buffer inventories, multiple sourcing, and network redesign. Early in the pandemic, many companies have built up inventories to buffer against potential disruptions and increase their time-to-survive. In addition, more and more companies have advanced from single sourcing strategies to multiple sourcing. This strategy reduces the risk exposure and if done in a smart way does not significantly increase costs. In the long term we see that many companies are redesigning and shortening their entire supply chains, e.g. setting up regional supply chains, where a supply chain in Europe serves the European market, a supply chain in the Americas the American market etc.. However, this is typically complex and costly. We need to see to what extent supply chain resilience measures are uphold as cost pressure increases and memories on the impact of disruptions fade. For me, the risk of major disruptions is unfortunately rather increasing than decreasing.
Alida Tiemann, Head of Supply Chain Management B2B at Tchibo (MSc GLSCM, 2013):
What is the technology that is expected to have the most impact on Supply Chain processes in the future?
Kai Hoberg: There has always been a big discussion of the impact new supply chain technologies. I recall that some people were saying that container traffic will diminish because of 3D printing. We calculated that if all available 3D printers in the world print 24/7 they could fill less than 0.01% of all containers shipped. However, for some industries 3D printing is already a game changer due to the possibility to print spare parts on demand or to build customized products. Certainly Artificial Intelligence and Internet-of-Things are high on the agenda. AI in planning is becoming big with better algorithms, new data sources and highly self-serving solutions – in my class “Supply Chain Analytics” our students are using Demand Guru and Data Robot and it is quite impressive to see how far your get even without Python. IoT has a lot of potential as more and more devices (e.g. containers, trailers, silos) are now fitted with tracking technology. However, companies are still in the process of developing good uses cases: How do I benefit if I know how much weight is in the trailer, or where the container parks at night or how full the corn silo for feeding animals is. There are many ideas floating around, but they need to be monetizable, and firms have to overcome potential resistance by supply chain partners.
Laszlo Del, Consultant at McKinsey & Company (MSc GLSCM, 2020):
2023 was a breakout year for Generative AI (GenAI), with the explosive growth of different GenAI tools and platforms. Where do you see potential applications of GenAI in supply chain management?
Kai Hoberg: A few years ago, IBM was running a promo video for its AI solution Watson and I really had to laugh. It showed something like “The supplier’s plant in Singapore has burnt down – Watson, please replan my supply chain”. Today, we might be a bit closer to this setting, but I feel SCM software providers still need long time to build all the complex relationships in supply chains, restrictions and non-linearities into their planning suites. Nevertheless, I see some first real applications of GenAI when it comes to demand planning. Planners are increasingly working with demand forecasts that are generated by advanced AI systems. These systems are black-box in nature. While systems typically provide a good forecast, e.g. 42.142 vanilla ice cream packages will be sold next week, they lack insights on why the forecast is particularly low or high. Planners tend to distrust these system as they are ultimately kept responsible for any planning errors. Here, large-language models can help planners to interact with the system to provide more guidance. For example, if the planner asks the LLM could explain that the demand forecast is particularly high because the weather forecast is good, there have been price promotions for the ice cream planned and about half the stores put the product into prime shelf space this month.
Niklas Kimo Bruns, PhD Student at the University of Sydney (MSc GLSCM, 2019):
Companies have put sustainable sourcing on top of their corporate agendas again after attention moved away from the Covid spook. How can we achieve sustainable supply chains that don’t compromise on profits or resilience?
Kai Hoberg: It is great to see that more and more company are realizing their responsibility for sustainability. However, I fear that only few companies have accepted that sustainability does typically not come for free. We see that many firms already struggle to build visibility on the sustainability of their supply chain since they underestimate the cost and effort for staff, inspections, or partners. Unfortunately, this is just the starting point – products from sustainable suppliers are often much more costly due to the need for new processes, new technologies, lower economies of scale, and more expensive raw materials. For me the question is ultimately: can firms encourage the customers to carry the additional costs? If one firms moves ahead and becomes sustainable while competitors continue to offer the non-sustainable product at lower cost, it is critical to find customers that are willing to pay for sustainability. One solution that impressed me is developed by chemical company Evonik. Evonik is offering a product both in the sustainable and the conventional way without compromising on economies of scale – so the customer can choose according to his preferences.
Elsa Cropp, Digital Supply Chain Manager at Accenture Industry X (MSc GLSCM, 2019):
For the implementation of advanced Supply Chain Software, companies often rely on external service providers to support the implementation / roll-out of the new tools. This comes with challenges: working with external partners, adoption of new processes, fast pace and more. What do the companies need to offer their Project Teams / Employees to overcome the mentioned challenges and to allow smooth implementations?
Kai Hoberg: External partners for the implementation of new supply chain planning suites are typically essential. There are many wonderful new SC planning suites (e.g. o9, Kinaxis, Blue Yonder or SAP IBP to just name a few) that are game changers. However, already the selection of the appropriate software is a challenge in itself. Most companies run this type of large scale implementation less than once a decade and supply chain managers often do not have the market knowledge, software architecture background and implementation expertise. A key question is certainly to what extent can the standard software meet the companies’ needs and to what extent do you have to customize the software. My feeling is that customization should be avoided as much as possible – even if this means that cherished processes need to be adopted. Companies need to prepare its employees that the interaction with implementation partners can be like a journey to a foreign company – sometimes you don’t speak the same language, sometimes you need to let go on things you cannot get and sometimes you have run to catch your next flight.
Minsang Eom, Supply Chain Consultant at LIDD, South Korea (BSc BA, 2022):
AI is being utilized in several industries already, and Supply Chain isn’t an exception. What will be the role of AI in the industry, and what will be the role of our human SC managers along the AI?
Kai Hoberg: I love to discuss the role of the human when it comes to the interaction with AI in supply chain management. We see that the role of the human is changing with more AI based planning solutions. Historically, supply chain managers have been collecting and integrating all different types of data, running analysis into different software tools (incl. the world’s most frequently used SC planning system: Microsoft Excel) and then made a decision at the moment of truth. With better AI-based software planners still need to ensure data quality and adjust parameters. However, AI-based systems then make – often very good – recommendations that the planners can review and validate. For many standard products the planning process can become almost touchless, if planners trust the output generated. For other products with more demand volatility and frequent supply disruptions planners need to spend more effort and manage these exceptions. However, running and optimizing the system to increase touchless planning is a whole new task of SC managers.
Román Peláez, Logistik Spezialicst at Volkswagen de México (MSc GLSCM, 2015):
What skills do you consider are a “must” for a logistic manager in this era?
Kai Hoberg: I would love to recommend you our new book “Global Logistics and Supply Chain Strategies for the 2020s: Vital Skills for the Next Generation“, which I edited with my colleague Rico Merket at the University of Syndey. For the introduction we wanted to obtain a comprehensive overview of the future skills and have asked 31 leading academics and 25 senior managers for the top three skills required to enable a successful supply chain career. These skills can be broadly categorized into three “superpowers”: technical skills, interpersonal and soft skills, as well as interdisciplinary skills. Technical skills encompass the analytical capabilities that enable professionals to leverage data emerging technologies, and optimization techniques to drive operational excellence and make data-driven decisions. Interpersonal and soft skills are considered essential for effective collaboration, communication, and leadership within cross-functional teams and with external stakeholders. Finally, interdisciplinary skills bridge the gap between different disciplines and domains, enabling professionals to think holistically and address the broader challenges of sustainability, resilience, and strategic decision-making in supply chain operations. Each of these skill categories plays a vital role in shaping the success and effectiveness of supply chain professionals in this decade.