The global supply chain didn’t get a whole lot of attention until it broke down. Now, consumers are painfully aware of just how much their lives rely on the smooth functioning of the system that moves goods around the world. Global shortages, episodes of hoarding, factories shuttered for lack of parts, soaring transportation costs, clogged ports and spiking inflation are all consequences of a snarled supply chain.
As a purveyor of supply-chain management software to companies around the world, Ottawa-based Kinaxis has an inside view of the global logistical quagmire. The company has customers in about 80 countries and has a market capitalization of roughly $5.5-billion. Mr. Sicard spoke to The Globe and Mail about the supply-chain crisis and how to fix it.
How would you characterize what’s gone wrong?
When you think about how supply chains work, there is a natural flow, almost like a river. When COVID hit, the water supply slowed to a drip. There was still a lot of water in the system, but the demand was all downstream. So consumers felt the effects almost immediately. But for manufacturers, there was a delay. No one was talking about supply in the early days of COVID, because there was plenty of supply in the pipe. Then, as lots of factories had to shut down, that meant less water in the pipe for future consumption. Well, the future is now, and we’re feeling the drought.
Is there something about the way the global supply chain is built that made it vulnerable to this kind of a breakdown?
I do think there’s something systemically wrong with how supply chains are planned. There’s been an obsession with accuracy for probably two decades now. When companies think about supply chains, they think about optimizing every link in the chain. It’s kind of like autopilot, which is a wonderful technology. But when turbulence hits, pilots have to remember how to fly. With COVID, it hit every industry and every geography simultaneously, and the technologies that work to optimize the supply chain collapsed. And many practitioners forgot how to fly.
You say optimizing the supply chain is part of the problem? What does that mean?
It means making pinpoint predictions. You start with end demand and you work on forecast accuracy, and you optimize master scheduling and hand it to the next team. So there’s blindness between these functions, between scheduling, capacity, inventory and distribution. It eliminates the need to be agile. It’s flawed thinking.
What does agility look like at the company level?
It has more to do with speed than anything else. How quickly do you know you’re in trouble? When your supplier delivers half the goods to you that they promised, which was pretty common in COVID, how quickly do you know how that affects promises made to your own customers? We’re coming from a world where it can take days or weeks to figure out why a customer’s order is not shipping on time. If you can collapse that to minutes or seconds, that’s a breakthrough. That’s a giant leap forward.
How does that happen?
We’ve invented this new supply-chain planning technique, what we call concurrency. There’s no lag between cause and effect. If demand spikes, what impact does that have on our capacity, on distribution? When materials fail inspection, for example, you instantaneously know what promises made to a customer are now compromised. It’s a different philosophy. This was a rough ride for a lot of manufacturers and they’re now realizing they’ve got to do things differently.
We’ve seen some modest easing of supply-chain problems lately. Are things are on the right track?
We’re going to start to see things ease on the distribution side. We’re going to get more truck drivers on the road. But then we’ve got this container shortage, because all the containers are stuck on boats. It will be one of those things where we’ll see a recovery in waves.
You’ve been in this space for a long time. What has it been like to have all of this attention suddenly focused on the supply chain?
It’s wonderful to see so much attention applied to this craft. For many years, people had no earthly idea how things got to them. But you can’t operate society with a supply chain. It’s like the world’s central nervous system. Anybody who enters the field of supply chain now will enjoy the most outrageous 10 years of their life. It’ll be just an incredible contribution to society, recognizing that supply chains are in service to humanity while simultaneously doing the least amount of damage to the Earth.
Can supply-chain management help companies reach ESG goals?
It’s part of the narrative. There is no other discipline in the world that consumes the earth’s natural resources like a supply chain does.
This interview has been edited and condensed.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.