̽��ֱ�� of Cambridge - supply chain

It’s high time for alliances to ensure supply chain security, researchers urge

sc604 — Thu, 19 Oct 2023 18:00:00 +0000

An international team of researchers, including from the ̽��ֱ�� of Cambridge, are calling on government agencies and national banks to support an effort to map the billions of connections in the global supply network which, among other impacts, could reduce tax evasion by as much as €130 billion (about £113 billion) annually in the European Union.

̽��ֱ��researchers say that understanding supply networks could also improve supply security, promote objective monitoring of the green transition, and strengthen human rights compliance. Writing in the journal Science, they emphasise that international alliances, backed by government organisations and the research community, are needed for such an understanding.

Even though most companies know their immediate trading partners, they depend on countless other relationships up and down the supply chain. A shortage anywhere in the supply network may aﬀect suppliers, suppliers of suppliers, and so on, as well as customers and their customers’ customers.

“Supply disruptions caused an estimated loss of 2% of global GDP in 2021 – approximately $1.9 trillion (£1.6 trillion) – and signiﬁcantly contributed to the current high inﬂation,” said lead author Anton Pichler from the Complexity Science Hub (CSH) in Vienna. “For a long time, it was unthinkable to analyse the global economy at the company level, let alone its complex network of supply interconnections. That is changing now.”

“Understanding supply chain interdependencies between companies, sectors, and countries is vital for many challenges, from identifying how disruptions may emerge and cascade across economies, through to monitoring carbon emissions and ensuring ethical and sustainable practice,” said co-author Professor Alexandra Brintrup from Cambridge’s Institute for Manufacturing.

For almost a century, only aggregated data – such as the average values of entire sectors – could be analysed. Predicting how individual company failures would aﬀect the system was simply not possible. What happens to the economy when a speciﬁc company stops its production? What if an earthquake paralyses an entire region?

“Now, a combination of new micro-datasets, methods based in machine learning, and multiple government initiatives are creating the ability to map entire economies, which can give us the tools to answer some fundamental questions with real and timely impact,” said Brintrup.

Although the volume of data is vast – there are approximately 300 million companies worldwide, each with an average of 40 domestic suppliers, resulting in up to 13 billion supply connections – researchers can map the connections between individual companies.

Currently, value-added tax (VAT) data is the most promising option for reconstructing reliable large-scale supply networks. Countries including Spain, Hungary and Belgium use a standardised VAT collection that practically records all domestic business-to-business (b2b) transactions. With these, it’s possible to map the entire national trade of a country.

In most countries like Germany, Austria, or France, where VAT is not collected for individual b2b transactions but only accumulated over a speciﬁc period, such mapping is not possible.

“ ̽��ֱ��standardised b2b collection could reduce administrative overheads for companies and would contribute substantially to tax compliance,” said co-author Christian Diem, also from CSH. Estimates suggest that VAT-related fraudulent activities in the European Union (EU) amount to €130 billion annually.

Beyond tax evasion, other global challenges also depend on the detailed knowledge of supply networks. “For individual companies, it’s nearly impossible to ensure that all trading partners, their suppliers, and their suppliers’ suppliers operate in an environmentally friendly way and in compliance with human rights,” said Pichler. “If this were centrally documented in a gigantic network, it could be more easily ensured.”

̽��ֱ��next step is to link trade data from diﬀerent countries. Currently, the EU records trade in goods between its member states at the company level. If it also included services and linked them with VAT data, this could lead to a comprehensive cross-border company-level network. According to the authors, this would represent almost 20% of the global GDP.

̽��ֱ��European Commission laid the legal foundation by proposing ‘VAT in the Digital Age.’ “Unfortunately, this is far from being realised,” said co-author Stefan Thurner, of the Complexity Science Hub. “So far, we do not have a single situation where the supply chain networks of any two countries have been joined and merged. This would be an essential next step.”

To create a truly international picture of supply interconnections, hundreds of datasets must be joined, analytical tools developed, and an institutional framework must be created, together with secure infrastructure for storing and processing enormous amounts of sensitive data.

“To advance this endeavour, a strong international alliance of various interest groups is required, including national governments, statistical oﬃces, international organisations, central banks, the private sector, and academia,” said Thurner. ̽��ֱ��ﬁrst collaboration in science, involving authors in macroeconomics, supply chain research, and statistics, now aims to establish a foundation. ̽��ֱ��researchers hope to inspire others to join their eﬀorts.

̽��ֱ��researchers hosted representatives of European ministries, national banks, statistical oﬃces, and researchers at a workshop in Vienna on 5–6 June 2023.

Reference:
Anton Pichler et al. ‘Building an alliance to map global supply networks.’ Science (2023). DOI: 10.1126/science.adi7521

Adapted from a CSH press release.

̽��ֱ��COVID-19 pandemic highlighted the interconnected nature of global supply chains, and showed how a disruption in one part of the world can have global effects. In 2021, supply disruptions were cost the global economy an estimated $1.9 trillion.

Understanding supply chain interdependencies between companies, sectors, and countries is vital for many challenges

Alexandra Brintrup

Abstract Aerial Art via Getty Images

Aerial shot of parked trucks, Scunthorpe, United Kingdom

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Comfortable with the uncomfortable

skbf2 — Wed, 09 Nov 2022 11:57:28 +0000

Dr Jag Srai on finding unexpected ways around a problem and putting new supply chain thinking into practice with global companies.

Take your medicine: how research into supply chains will help you take care of yourself

lw355 — Wed, 14 Jun 2017 15:20:27 +0000

“Like many people of my age, I have to take pills morning and night. I’m pretty good at taking them in the evenings, mainly because my wife makes me! But, left to my own devices in the mornings, I only remember to take them perhaps one day out of four,” says Dr Jag Srai.

“Wouldn’t it be fantastic if smartphones could remind patients, capture use and track activity, blood pressure, sugar level, and so on? And if, at the same time, their GP could see this data and call them in if there’s a problem?”

He explains that upwards of 30% of prescribed drugs are not taken by patients and, in the case of respiratory drugs, where application is more intricate, 70% are not taken as directed. ̽��ֱ��numbers vary depending on the type of condition being treated but they are disarmingly high across the board. This has consequences, and not only for the patient. ̽��ֱ��cost to the taxpayer of drugs that are not being used is considerable and reduces the pot of money available for patient care.

“In a world of scarce resources this in itself seems incredibly wasteful. But there are other reasons to be concerned,” adds Srai, who is Head of the Institute for Manufacturing (IfM)’s Centre for International Manufacturing. “Around 50% of patients taking antibiotics don’t complete the course. ̽��ֱ��consequences of this are potentially catastrophic as infections become increasingly resistant to drug treatment. And drugs contain active ingredients which, when disposed of inappropriately, end up as contaminants in our water supply.”

Tackling the thorny problem of patient compliance is just one aspect of the pharmaceutical industry that Srai and his team at the IfM are looking to revolutionise. They are working with other universities and major UK pharmaceutical companies AstraZeneca and GSK to make improvements across the whole supply chain, from how a pill is made to the moment it’s swallowed by the patient.

Advances in genetics and biochemistry are helping us move towards a much more tailored approach to medicine, focused on more targeted or niche patient populations, and ultimately the development of bespoke treatments to meet individual patient needs. ̽��ֱ��implications for how the pharmaceutical industry manufactures its medicines and gets them to the patient are clearly immense.

Most pharmaceutical manufacturing still takes place in huge factory complexes, where large volumes of chemicals are processed in a series of ‘batch-processing’ steps, and often a dozen or more are required to produce the final oral dose tablet. Developing new drugs is an expensive business and so big pharma companies hope for a ‘blockbuster’ drug – a medicine that could be used to treat a very common condition, such as asthma or high blood pressure, and which can be manufactured in large quantities.

But, says Srai, the manufacture of these blockbuster drugs is becoming a thing of the past. ̽��ֱ��batch process is costly, inefficient and makes less sense when producing medicines in small volumes.

New ‘continuous’ manufacturing processes mean that drugs can be made in a more flow-through model, requiring fewer steps in the manufacturing process, and in volumes better aligned with market demand. In the case of small volume manufacture, this technology breakthrough can support the move towards more personalised medicine.

“Combine this with the way in which digital technologies are transforming supply chains – through flexible production and automation, using sensors to track location, quality and authenticity, and big data analytics on consumption patterns – and it’s clear that the pharmaceutical industry is on the cusp of a huge change,” adds Srai.

Recognising this, and to make sure they harness the value these advances in science and technology can deliver, pharmaceutical companies are working together in a number of ‘pre-competitive forums’.

̽��ֱ��IfM team is playing a key part in two major related UK initiatives: the Continuous Manufacturing and Crystallisation (CMAC) Future Manufacturing Research Hub based at Strathclyde ̽��ֱ��, funded by £10m from the Engineering and Physical Sciences Research Council and a further £31m from industry; and REMEDIES, a £23m UK pharmaceutical supply-chain sector project, jointly funded by government and industry.

CMAC is focused on the move to continuous manufacturing and REMEDIES on developing new clinical and commercial supply chains. Srai’s team is leading the work on mapping the existing supply chains for different types of treatment, and modelling what the future might look like.

“We can envisage a future in which for some medicines, production is no longer a highly centralised large-scale batch operation but one where manufacturing is more about continuous processing, more distributed in nature, smaller scale and closer to the point of consumption.”

Asked how local this can become, Srai adds: “In some instances we are already able to ‘print’ tablet medicines on demand, and we are now exploring whether this might take place at more local production/distribution sites, or at the local pharmacy or even in our own homes. Of course, some critical hurdles still need to be overcome, not least in terms of assuring product quality at multiple sites and establishing appropriate regulatory regimes.

“New technologies are also opening up other possibilities in the way that patients receive healthcare. Wearable and smartphone apps could be feeding diagnostic and health information to our doctors – be they human or (with the advances in artificial intelligence) robot – who would assess our symptoms remotely. We may change our consultation habits completely and only go to the doctor for very specific types of treatment. Indeed, in the UK today, trials suggest some 30% of GP visits are unnecessary.”

As part of the REMEDIES project, the IfM team has been exploring the possibilities presented by technologies that are available now such as Quick Response (QR) codes that can be scanned by mobile apps on our smart phones – and how they can help ensure that patients are taking their medicine.

“A relatively easy thing to do with packaging is to use it as an information source for patients. For example, packs of pills come with a small leaflet that hardly anybody reads. If we want to help patients adhere to their treatment regimes, can we support them by giving them this plus more useful information in a more accessible electronic format?”

̽��ֱ��REMEDIES team is working on a mobile phone app that will allow patients to read the instructions on their phone (in a font size and language of their choice) or listen to some explanatory audio or watch a video. “This is simple, readily available technology that could have a significant impact on compliance,” says Srai.

̽��ֱ��potential for exploiting data to deliver bespoke healthcare in the future is enormous. With smart packaging, smartphones and wearable devices, information can become increasingly dynamic and interactive. Indicators such as time, location – even mood – can affect whether and how drugs are taken; and data such as blood pressure and pulse can show the effect they have on the patient.

“As in the world of e-commerce, we are at the early stages of understanding how this consumer and patient data can inform the supply chain,” says Srai. “But we can now contemplate scenarios in certain therapeutic areas, in which each dose a patient takes is fully optimised for the here and now, and manufactured continuously, or even printed on demand.”

And if the patient forgets to take it, they will, if they choose, be reminded to do so by a very insistent app.

Inset image: Read more about research on future therapeutics in Research Horizons magazine.

Researchers are working with pharmaceutical companies to make improvements across the whole supply chain, from how a pill is made to the moment it is swallowed by the patient.

We are already able to ‘print’ tablet medicines on demand, and we are now exploring whether this might take place at more local sites, or at the local pharmacy or even in our own homes.

Jag Srai

Kate Russell

Keep taking the tablets

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Robots and carbon targets may signal the end of globalisation

fpjl2 — Wed, 17 May 2017 13:42:19 +0000

For decades we have been told that globalisation is an irresistible force. As Tony Blair said: “you might as well debate whether autumn follows summer.”

According to a new book by a Cambridge academic, however, factors ranging from automation and 3D printing to environmental regulations and customer expectations are now spelling the beginning of the end for globalised manufacturing.

Dr Finbarr Livesey, an expert in public policy, says that while digital globalisation continues apace, early signs can be seen of a sea change in the production and distribution of goods: with global supply chains shrinking as companies experiment with moving production closer to home.

In From Global to Local: the Making of Things and the End of Globalisation, published this week by Profile Books, he argues that many of the big assumptions we have about globalisation and outsourcing are now wrong, and that the global economy is subtly changing in ways yet to be picked up by blunt macroeconomic measurements.

“Robots are becoming cheaper than overseas labour, climate concern and volatile fossil fuel markets are restricting carbon footprints, and consumers increasingly expect tailored products with express delivery. Bouncing production around the planet is already making less and less economic sense,” says Livesey.

“Holding on to familiar stories about the global economy is not an option, as technological and political changes make a mockery of any past consensus.”

However, he warns against falsely claiming such shifts as a victory for protectionism: the technologies allowing the return of production to high-cost economies are unlikely to mean the promised return of jobs.

Livesey also argues that if ‘deglobalisation’ is indeed coming down the line then Brexit may be a particularly bad move for UK manufacturing:

“Trying to reach over our neighbours in the name of ‘global Britain’ at a time when many companies are on the cusp of reverting to regionalism means that marginal calls for European manufacturing bases may go to France or the Czech Republic, for example, rather than the UK,” he says.

Leaders in both west and east have hitched their wagons to the apparent inevitability of globalisation over the past thirty years. Yet, as Livesey points out, regionalism never went away. A significant percentage of exports continue to land in the same area they originate: around 50% in Asia and North America, and as much as 70% in Europe.

In the book he draws attention to examples of what he believes to be “weak signals of early change” as major companies tentatively start to U-turn on globalisation.

̽��ֱ��new Adidas ‘Speedfactory’ uses automation and 3D printing to produce high-end trainers – not in China or South Asia, but in Germany. “And we were told textiles were never coming back,” says Livesey.

̽��ֱ��mighty General Electric recently rejuvenated a vast manufacturing “ghost town” in Kentucky when they realised appliances could be made for the same or cheaper in the US than in China.

Foxconn, the company that makes iPhone innards, raised eyebrows when they suggested robots could replace one million Chinese workers – and that production could even move to the US as a result.

Global supply chains cost companies time in an age of next-day delivery, and add risks of disruption – from cultural differences to natural disasters – and even intellectual property theft. They also take a heavy environmental toll: shipping alone produces a billion tonnes of carbon, roughly equal to that of Germany.

“Take Zara, one of the daughters of ‘fast fashion’,” says Livesey. “They have a cycle from design through to production and shop floor delivery of just four weeks. In some cases it would take almost that long just to ship product from China. ̽��ֱ��new ‘Belt and Road’ initiative may only reduce that to two weeks.

“Many companies can’t afford the time, not to mention the added risk, of freighting goods around the world. Zara base much of their production in Spain, Portugal and Morocco to be on Europe’s doorstep – an example of ‘nearshoring’.”

Ultimately, the journey from production to customer may be measured in metres rather than continents. For example, Harvard Bookstore’s ‘Espresso Book Machine’ uses information from digital files to print and bind new books in store on demand.

Livesey highlights the patents for mobile 3D printing filed by Amazon in 2015 as indicative of a hyper-local rather than hyper-global direction for production. “While not currently feasible, there may come a time when your purchased product is printed en route to your house.”

While he admits that the data from the last few decades can make his position seem Canute-like at the moment, Livesey argues that the tide is turning, with signals of new localism amid the noise.

A recent survey of over 500 companies found well over half were moving production away from China. One in six companies surveyed by the Engineering Employees Federation had moved production from a low-cost economy to the UK. ̽��ֱ��Korean government passed a ‘U-Turn’ law encouraging companies to return from China.

“Companies are deciding to have their production either in their home country or nearby. Automation is attacking the costs of labour and shifting the calculus for managers. Political forces are constraining the space for manufacturing, for example restricting emissions from transport. ̽��ֱ��early signs are there.”

Finbarr Livesey will be discussing his book and the future of globalisation at this year's Hay Festival.

A new book suggests there is early evidence of a coming U-turn in the globalisation of manufacturing – and that the story we are told about the direction of the global economy is wrong.

Holding on to familiar stories about the global economy is not an option, as technological and political changes make a mockery of any past consensus

Finbarr Livesey

Container Port, Barcelona,

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How bright is your digital future?

Anonymous — Wed, 18 Jan 2017 08:35:54 +0000

̽��ֱ��combination of new technologies, IT infrastructures and data analytics holds out an alluring possibility of a world in which the end-to-end supply chain is utterly transformed – highly connected, flexible, efficient, resilient and truly responsive to customer needs. Each of those attributes sounds attractively incremental but put them together and you have a completely new way of doing business and one in which customers are not just on the receiving end of a product or service but are central to it.

A good example of this is the pharmaceutical sector. As part of the REMEDIES project, we are working with the major players in the UK pharmaceutical supply chain to address some of the challenges they face, such as tackling the hundreds of days’ of inventory sitting in the supply chain and the vast quantities of waste caused by patients not taking the drugs they are prescribed.

Using digital technologies and data-rich systems to make the pharmaceutical supply chain much more efficient is one thing but we are also mapping an entirely new business model in which drugs can be manufactured to order – possibly at the local pharmacy. Not only would this meet a patient’s individual medical needs, but the consumption and effects of those drugs can be continuously monitored to help doctors better support their patients.

A brave new world, in other words, of personalised medicine enabled by digital manufacturing processes, digital infrastructures and lots of data. But realising this vision of a digital future remains elusive, particularly for the largest global businesses.

Many of these companies recognise the need to digitalise aspects of their supply chain, often in response to particular challenges. They may, for example, as in the pharmaceutical sector, have a pressing need to solve the intransigent inventory management issues that bedevil many supply chains. They may have an issue with quality and see digitalisation as the best way to ensure their products are of a consistently high quality and their provenance is traceable.

Or they may be losing competitive advantage through poor customer service and see a digital agenda as a way of regaining market share, possibly while supporting their ambitions to reduce environmental impact.

But developing an end-to-end digital supply chain involves a major transformation both at a conceptual level and in execution. And while thought leaders and change agents within big companies may see the prize, CEOs and shareholders will be much more cautious given the levels of investment and organisation-wide disruption it entails. This is particularly the case for the global giants with a history of merger and acquisition (M&A) and an array of legacy systems to integrate. Even without the complication of M&A, all large companies have to organise themselves into manageable structures, which have a natural tendency to turn into silos and hence become obstacles to organisational change.

There is also the wider question of a lack of digital skills and attitudes across the board – at senior and middle management levels as well as within day-to-day factory operations. Companies may be able to see the opportunity, acquire the technology and capture the data but a shortage of both skills and mindset presents a significant barrier.

One of the challenges with the digital supply chain vision is the sheer scale and ambition of it. At the Centre for International Manufacturing, we have begun to conceptualise what a digital supply chain might look like and break it down into key areas to help companies understand the key ways in which digitalisation can impact on their organisation. We have been doing this by talking to companies both individually and as a non-competitive group.

Having identified the key areas, we have been developing ‘maturity models’ against which companies can benchmark their current performance, identify where the greatest opportunities lie and start to think about where to prioritise their efforts.

Factory design and production processes

Digital developments in factory design and production processes underpin the extended supply chain. ̽��ֱ��flexible factory is an important concept in this rapidly moving environment: how can you design and configure a factory for technologies which you don’t yet know? In this context, factories need to be modular and reconfigurable. One of the questions our framework helps companies consider is this: it is relatively straightforward to design a state-of-the-art, highly flexible plug-and-play factory – but is it cost-effective? Is it where companies will be able to create and capture most value?

Making the most of data

Some companies are already very good at gathering product and customer data but the challenge is how to integrate that data and use it to make better decisions about, for example, product lifecycle management, sales forecasting and designing products and services in response to customer needs. Data ownership is fast becoming an important issue in the supply chain and service delivery context. When partners are involved, who owns and can access the data is a critical question. Data sharing and connectivity also raises the question of open source versus ‘black box’ and developing common international data standards across sectors. In this area we must also consider the resilience of these digital supply chains and understand the cyber security challenges they may present.

Flexibility versus connectivity

One of the conceptual and practical challenges for organisations is whether to build monolithic, enterprise-wide systems that can connect supply chains. Clearly, for many companies – particularly those with a history of M&A – it would require a huge act of organisational will, not to mention significant investment, to move to a common platform. And, would doing so actually deliver a sufficiently flexible and reconfigurable solution? Instead, companies are talking about developing a ‘digital backbone’ that can interface with other systems to provide more networked and flexible approaches to optimising the end-to-end supply chain. And this digital backbone is more than an IT system – it should embody the critical touch points and interfaces between organisations as well as the data architectures and analytics. It also signifies a cultural shift to digital.

̽��ֱ��last leg

Using web-based systems to fulfil orders and manage the complexity of last-mile logistics is something that we have seen business-to-consumer companies do with impressive levels of sophistication and achieve corresponding levels of competitive advantage. For many large manufacturers there is still work to be done in developing systems that can support product delivery to multiple points of sale and ultimately direct to the end customer. But the opportunities are clear and create a virtuous circle. By delivering better customer service you not only attract new customers (and retain the old ones) but you also get access to better customer data which in turn can improve both the product and the service you offer. There are also many efficiencies to be had from digitalising this last leg of the supply chain though better stock management and reduced transport costs.

Towards the digital supply chain

By breaking down the digital supply chain into distinct but connected scenarios against which companies can measure their performance and aspirations, we believe we have created a powerful framework that will help them develop their digital supply chain capabilities. ̽��ֱ��scenarios help to clarify thinking and develop a strategic approach to digitalisation which is both deliverable and will create maximum value for the company.

̽��ֱ��next step is to put the strategy into action.

First published in IfM Review.

Dr Jag Srai, Head of the Centre for International Manufacturing at Cambridge's Institute for Manufacturing, and colleagues are developing new ways to help companies embrace the challenges and opportunities of digitalising the extended supply chain. Here, he provides a glimpse of this digital future.

A brave new world of personalised medicine enabled by digital manufacturing processes, digital infrastructures and lots of data

Jag Srai

Jacqueline ter Haar

pharmaceuticals

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Unlocking innovation in the supply chain

sc604 — Mon, 25 Apr 2016 23:01:00 +0000

In order to stay innovative, many leading companies run internal programmes, covering a wide range of subjects from technology innovation to business model innovation. But these programmes, in many cases, fail to generate significant value.

Some companies consider collaboration with others in the supply chain. One obvious benefit of doing so would be the integration of capabilities and skills. But it’s almost impossible to integrate different strategies at a large scale, since many companies would be unwilling to share all of their data and information.

Apart from limited innovation, the consequences of locking innovation inside companies are obvious. Knowledge and information are not integrated between companies in the supply chain, so the services and solutions delivered to end customers may not be the best ones. Additionally, supply chains are usually output-focused instead of outcome-focused.

Suppliers seldom focus on the value delivered to end customers. On the other hand, if innovation can’t be unlocked in the supply chain, the supply chain is not efficient. Suppliers, contractors and clients have to discuss back and forth several times before final decisions are made.

In some industries in the UK, such as the utility industry, the regulator has triggered the change to unlock innovation in the supply chain, by directing the industry to be outcome focused and customer focused. Companies are incentivised to explore new models to engage suppliers for innovation. One approach is the formation of a strategic alliance, where suppliers/contractors and the client companies can work together within one organisation, and team up to deliver services and solutions to end customers. Suppliers are contracted on outcomes instead of on outputs, so that they consider the end customers as well as the closest step in the supply chain.

̽��ֱ��shift from output based model to outcome based model and the formation of a strategic alliance to engage suppliers and clients can bring benefits for key stakeholders. For customers, when suppliers are contracted on outcomes and get rewards when customer experience is improved, they will pay attention to end customers, so that customers are expected to get better services. For client companies, in outcome-based contracts, they can transfer some of the responsibilities and related risks to suppliers, and risks and rewards are shared with suppliers. And for suppliers, since they are contracted on outcomes, they will have certain flexibility to choose among possible solutions. In this situation, they are incentivised to innovate and to come up with more efficient and effective solutions.

However, the challenges and barriers are enormous. Partners in the alliance have different business models, and conflicts can arise when they are brought in under the same outcome-based model. Also, partner companies have very diversified backgrounds. Some of them may be competitors outside the strategic alliance, and some of them may not have had smooth relationships previously. If trust and collaboration in the alliance are limited, failure is likely. When the whole industry is still output focused, extended suppliers may have neither the capabilities nor the confidence to be contracted on outcomes. And if the atmosphere in the whole industry is not collaborative, it is challenging to form collaborative and trusting relationships.

We observed this new model closely and worked together with people from industry, aiming to find key points that can ensure the success of an outcome-based model with a strategic alliance approach where suppliers and clients partner with each other to deliver services and solutions to end customers.

In the resulting report, co-authored with IBM, we conclude that there are three areas that partners in the strategic alliance should work on. These three areas are commercial solutions, collaboration and operational design. A commercial solution that is accepted by all partners lays the foundations of working together. Collaboration ensures that partners start to integrate their skills and capabilities, and design and deliver solutions collaboratively. Process design aims to ensure the smooth operation of the strategic alliance.

Commercial Solutions

Since partners are measured against outcomes, a commercial solution should address the risk and reward sharing mechanism and the benefit realisation framework. ̽��ֱ��risk and reward sharing mechanism needs to solve these problems: how benefits and rewards are shared among partners based on contributions, how risks are shared among partners based on accountability, and to what extent the alliance should be measured against end customers’ outcomes. ̽��ֱ��benefit realisation framework needs to solve the following problems: how to decide on the final solutions among many possible capital solutions and operational solutions; how to solve conflicts between return on investments and customer outcomes; and how to solve conflicts among partners regarding their preferences on solutions, etc.

Collaboration

Collaboration should be built from four aspects: strategic objectives, organisational culture, trust and communications. With shared strategic objectives, partners can work towards the same direction. A collaborative and innovative organisational culture needs to be formed within the strategic alliance, collecting the best parts of partners’ organisational cultures. Trust can ensure that partners are willing to share data, knowledge and information, and trust other partners’ decisions. Consistent and efficient communication rules need to be followed, and educational communications will be helpful to deliver the concepts of outcomes and collaboration to every employee.

Operational Design

Operational design includes continuing education, information platforms, process design and metrics and measurements. Continuing education is important to ensure that employees understand the strategic objectives of the alliance and that everyone talks on the same tune. Information platforms help to integrate knowledge and capabilities from partners, and that data and information can flow efficiently. Also, data security needs to be addressed. Process design such as decision-making process, risk management process, culture change process, etc. can facilitate the smooth operations of the alliance. Metrics and measurements that measure the contributions of partners, behaviours of individuals, financial status and the achievements of outcomes also needs paying attention to in everyday operations.

Firms that would like to engage suppliers for innovation can consider forming a strategic alliance, combining suppliers and client companies, while focusing on delivering outcomes to end customers. However, they should be fully aware of the challenges and barriers in this model, and make decisions carefully to ensure success.

Jinchen Hou from the Institute for Manufacturing comments on how members of complex supply chains can form alliances, in order to unlock the innovation that’s often hiding within individual companies.

Nicole Yeary

Ford Rouge Factory Tour

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Keeping the supply chain flowing

lw355 — Tue, 06 Oct 2015 15:47:22 +0000

A typical supply chain can be a vast, sprawling network of producers, suppliers, ‘super middlemen’, retailers and consumers that connect, for instance, a piece of mined aluminium with a finished car, or a field of wheat with a loaf of bread on the table.

Dr Jag Srai and the team he heads in the Centre for International Manufacturing like nothing better than a complex, multi-faceted supply chain, because within the connections lies a vital source of competitive advantage. Companies that can more optimally ‘configure’ this complex network have the opportunity not only to improve their business but also to do so sustainably in an otherwise resource-hungry and wasteful world.

“Many supply chains today have developed over time, a consequence of often short-term tactical decisions or ill-considered mergers and acquisitions,” he explains. “There may be large distances between component supply and the end product, delays in sharing information along the chain, or an excessive fragmentation of activities.

“Within little more than a generation, the traditional model of a vertically integrated firm, which has most of its component and final product in-house, has become fragmented. Today, for manufacturing a typical consumer electronics product, dozens of firms in as many countries might be involved in its manufacture, with activities dispersed among narrowly focused companies distributed across developed and emerging economies.”

Srai’s team has been mapping these global networks across multiple sectors, developing novel tools for their visualisation and for identifying opportunities to reconfigure them to meet demand more effectively.

Of particular focus has been a comparison of the food and pharmaceutical process industries, and the assembly power houses of aeronautical and automotive industries, in both the UK and India.

“Manufacturing is a top priority in both countries,” explains Professor Sir Mike Gregory, former Head of the Institute for Manufacturing, where the Centre is based. “In the UK, the government has placed manufacturing at the heart of plans for economic recovery. And in India, the government launched the ‘Make in India’ initiative in 2014 with the aim of transforming the country into a major global manufacturing hub and generating millions of new jobs.”

̽��ֱ��project is funded by the UK’s Engineering and Physical Sciences Research Council and the Indian Department of Science and Technology. It began a year ago but follows a previous study in which the team created a set of representations of the UK food supply chain for dairy, fruit and vegetables, and staple foods. It was painstakingly collated from industrial reports, literature reviews and first-hand case studies, as well as interviews with key industrial players.

̽��ֱ��resulting map provides a fascinating insight into the dynamics of networks that many consumers are unaware of – such as the one that links a cow on a dairy farm to a pint of milk on a UK doorstep (a seven-step process, as it turns out).

Crucially, it also identifies how new trends are being driven by an increasing demand from consumers to know where their food is coming from and for cheaper, own-brand labels. “Organisations that are able to align these complex networks with their own strategic aims have an opportunity to set themselves apart from their competitors,” explains Srai.

One of the researchers’ main interests is how maps such as this can be used to foster a more sustainable approach to manufacturing, as Dr Mukesh Kumar explains: “Food security, for instance, is a global challenge as populations continue to grow, yet 30–40% of food in the UK is currently wasted, mostly at the retail and consumer end of the chain.”

Working with their collaborators in India, the team has now generated comparable maps of the Indian food supply chain. ̽��ֱ��comparison could help each to explore the key differences and identify how multinationals from one country looking to do business in the other might need to adapt a supply chain to work best.

“ ̽��ֱ��UK food retail chain is dominated by a few large, organised retailers who control 73% of UK grocery sales, and as a result exert considerable influence over upstream partners in the chain, whereas in India this type of organised retail accounts for only 12% of sales,” Kumar explains.

“But the largest difference is where the wastage happens. In India, most wastage occurs at the early stages of the supply chain, with tonnes of fruit and vegetables perishing due to poor handling and storage facilities and lack of cold chain infrastructure.”

According to estimates by the United Nation’s Food and Agriculture Organization, each year about 40% of India’s fresh fruit and vegetables rot before reaching consumers’ plates, as does an amount of wheat almost equal to Australia’s total annual production.

“Supply chains that link the UK and India incur waste up- and downstream. ̽��ֱ��figures are quite scary – you sometimes wonder how anything ends up on a plate!” observes Srai.

He highlights how crucial it has been to work closely with Indian researchers, industry and policy makers, helped by funding through the UK India Education and Research Initiative: “We have chosen partners in India who complement our skills. It’s like a supply chain in action! It has seen a continuous stream of collaborations emerging out of this, none of which would have been possible without this project.”

For instance, researchers at the Indian Institute of Technology Ropar and the Indian Institute of Management Lucknow have been looking at how simulation and modelling of operations could be used to flag up sustainability challenges.

“Our Centre’s research on ‘network mapping’ tools and close links to industry have meant that we have provided methods and industry contacts to our partners, while leveraging their specialist skills in the specific areas that we require. We have also taken the combined output to inform our wider work in the ̽��ֱ��’s Strategic Research Initiative on Global Food Security,” says Srai.

“Technology, supply chains and the way markets and regions develop become interesting change agents. I believe that our research network will be able to anticipate these changes,” he adds. “It’s only by understanding a company’s overall global supply network – a ‘whole system’ approach – that it’s possible to appreciate the opportunities and the benefits that can emerge for doing things better, wherever you are in the world.”

Inset image: Distribution centre (Nick Saltmarsh).

In this age of rapid and escalating change, what can businesses do to flourish? Take a look at their supply chains, say researchers in the Centre for International Manufacturing, based on their research in the UK and India.

Supply chains that link the UK and India incur waste up- and downstream – you sometimes wonder how anything ends up on a plate!

Jag Srai

Neil Palmer (CIAT)

Increasing the efficiency of food supply chains can decrease wastage

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Putting a price on our future

lw355 — Mon, 07 Oct 2013 15:47:26 +0000

How can businesses value and manage their dependencies and impacts on the natural world? How can banks be encouraged to make clean energy investments? As sustainability moves up the agenda, the ̽��ֱ�� of Cambridge Programme for Sustainability Leadership (CPSL) is linking Cambridge academics with international businesses to help their leaders make responsible decisions for the long-term.

“Companies are starting to think about the ecological impact of their activities across their supply chain,” said Dr Bhaskar Vira, ̽��ֱ�� Senior Lecturer in the ̽��ֱ��’s Department of Geography. “We’re trying to put a real economic value on natural resources.” Production of many mass market consumables, from beer to chocolate, takes advantage of many natural resources that aren’t currently factored into operational costs.

“A global food manufacturer, for example, wants to be aware of all the ingredients that have gone into one of its flagship confectionary products, and the way in which they’ve been grown and sourced,” said Vira. “Throughout that supply chain there may be impacts on the environment that aren’t currently factored into the price of the product.” Similarly, an agribusiness giant depends on tomatoes supplied by farmers in California – a water-scarce region. Working with CPSL, we’re are asking whether there is something this company can do to encourage farmers to be more water efficient in their working practices.”

“If a company was asked to pay for the groundwater used in its factories, how much would it cost? Water use might be 10% of the overall operating budget, and that’s the kind of figure a company might start to take seriously. At the moment they don’t need to pay this cost, but if a government starts to regulate in the future they might need to. Similarly, if the government of California starts to regulate farming practices and the cost of tomatoes suddenly shoots up, certain companies need to factor this into their long-term business planning. It makes good strategic sense to anticipate some of these future changes.”

CPSL has drawn together a group of companies in the food, agriculture, and extractive industries, into a project called ‘Right Values for Externalities’, whose goal is to reflect the external costs incurred in product lifecycles on their balance sheets. “We created teams of one economist and one ecologist to work on case studies with companies, using company data to understand what its impact might be,” said Vira, who provided scientific guidance for this project, co-funded by the Natural Environment Research Council as part of the Valuing Nature Network (www.valuing-nature.net). ̽��ֱ��work has resulted in the creation of practical guidance for companies wishing to undertake an evaluation of external impacts associated with their activities, and to understand how these risks can be anticipated and prioritised in their decision-making.

̽��ֱ��project is one of many convened by CPSL, whose Director Polly Courtice said “we’re facing a perfect storm of having to provide food, energy and water for a population that’s growing from seven billion to nine billion, and the pressures this puts on society. CPSL is having a continuous series of conversations with businesses to work out how to respond to these challenges.

“We are driven by how we can help to promote change, and avert environmental and social crises that are much nearer to the present day than we used to think,” said Courtice. Vira added, “We want to use our case studies as examples of what other businesses should be thinking about. CPSL plays a key role in this as a trusted intermediary between the ̽��ֱ�� and businesses –that trust is developed through long term relationships.”

At a different level of engagement, Professor Danny Ralph, Academic Director of the Centre for Risk Studies at Cambridge Judge Business School, is involved in a CPSL project aimed at finding ways to unlock greater mainstream investment in clean energy. “ ̽��ֱ��Banking Environment Initiative is a means of tackling key sustainability issues,” he said. CPSL drew together six banks and six energy companies, and linked them with the Centre for Risk Studies, and with Dr Chi Kong Chyong and Dr David Reiner in the Judge’s Energy Policy Research Group, to investigate valuation models for clean energy investments.

“Banks want to invest in companies they believe will cope in the future. But green technologies are expensive, and energy companies making these investments are unlikely to recoup their costs. Should an institutional investor choose a company that appears to be very forward-looking in its R&D and is moving towards green technologies, but isn’t very ‘capital efficient’, over a more focused one?” asked Ralph. “A long-term investor needs to ask which companies are positioning themselves so they can adapt their basic products to a world we can’t even predict.”

Using a methodology called real options analysis, the Cambridge team showed the importance of building in a degree of flexibility, to account for decision-making around uncertain future market conditions. “In a standard banking valuation, a company would diversify its risks,” explained Ralph. “But climate change, for example, is affecting the whole world. You can’t diversify something we’re all going to face together. What we’ve done is highlight that investors need to stop thinking about diversification in terms of a portfolio where the risks are unrelated. This changes the nature of the uncertainty around investment risk.”

“Danny’s work is helping to drive a conversation in the industry about valuation methods, and is having a big impact on the thinking of these banks,” said Dr Jake Reynolds, CPSL’s Director of Business Platforms. “If we really want to effect change, we have to find a way to align sustainability with business models, and that means banks discussing this with their clients. This project has provided a brilliant platform for that - these conversations about clean energy were just not happening before.”

“We are working with people dealing with real problems that our research community may have a great deal to contribute to,” said Courtice. “We try to act as a bridge between the knowledge base in the ̽��ֱ�� and that in the business community, and create opportunities for them to interact. We’re looking for areas of mutual interest and we’re maintaining the engagement long enough for the issues to emerge.”

CPSL’s Executive Education programmes raise awareness of issues from climate change to resource scarcity to transport. Around 6,000 business leaders have now completed a programme, and on leaving have become part of CPSL’s global Sustainability Network.

A key focus of CPSL’s work now is to bring this network into closer contact with the ̽��ֱ��’s research. A series of business platforms have been set up, bringing together senior practitioners with shared interests in particular business problems from climate change and natural capital depletion, to responsible investment and product innovation. ̽��ֱ��aim is to help practitioners identify what needs to change, and to take practical action to achieve this with their peers.

“Leaders come on our Executive Education programmes and then ask what they can do to change their organisations,” said Reynolds. “They realise that even if they became the world’s most sustainable company that wouldn’t solve the problem because their peers may not be with them, or their suppliers, or their clients, or government policy might be tilting business the other way. So they start thinking about their industry and the wider influence it has over the economy. Many come to the conclusion that they have to work together on these big problems rather than go it alone.”

Helping big businesses consider their impact on the environment is leading to a re-evaluation of activities to combine profitability with sustainability.

If we really want to effect change, we have to find a way to align sustainability with business models

Jake Reynolds

Ryan Hyde on flickr

Tha'll do

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