Although we can also ask ourselves whether the supply chain has become more important at the corporate level. How many companies actually have an excelling supply chain as a core strategy? Which companies have a supply chain position in the board room? And have we not been going over the same thing for the past twenty years? Are we really still discussing the matter of logistics versus supply chain?

Supply chain, in its current form, is nearing the end of its life cycle of integration and optimisation. Even supported by the latest IT technology, the intended total network integration and optimisation is grinding to a halt. We are getting snarled up in woolly terms like expectation management, incentives, people management, engagement, organisational behaviour and influencing. It is high time that we acknowledge that we are all but done integrating and optimising, that we are starting to repeat ourselves, that we have to think of something new. Not more IT, not more transactions at even lower levels to generate even more data that creates the illusion of control, the right behaviour and the right decisions.

Operations research has yielded many algorithms that supply chain professionals and IT developers have eagerly used to solve problems regarding forecasting, inventory management, allocation, networks, production optimisation and so on. There is, within operations research, such a thing as the hardest category of problems: the NP-complete problems, or in other words, problems that cannot be optimally solved within a linear time algorithm. Unfortunately, the human behaviour that creates and has to solve many problems in the supply chain is much more complex.

Behaviour and decisions, especially under pressure of time and politics, are often not rational. Perception of quality, prices and performance differ from person to person within a company, and even more so between the company and its suppliers and customers in different countries with different cultures, values and motivations. To get more out of the supply chain, we will have to radically change things. An understanding of organisational and cultural behaviour, the so-called ‘behavioural supply chain’, will be of vital importance in taking the next step in our global and multi-cultural supply chain world.

Yarra River in Melbourne Autralia

Last week here in Melbourne, Rob Murray, CEO of Lion Nathan (producer of beer and wine products) dared to relate the ten-year success of his company, in terms of increased sales and shareholder value, directly to the ten-year cultural growth of his company. The previously dominant culture of aggressive-assertive and passive-defensive behaviour has been changed to positive collaborative behaviour thanks to a cultural awareness programme. The employees are now better at sharing information and collaborating, and are much more enthusiastic about the company and its brands. Perhaps even more importantly, this makes the customer more enthusiastic as well and more inclined to spend more on a supplier that truly believes in its company and brands. Changes like these take vision, courage and leadership at the highest level.

We know by now, in theory, what the supply chain is supposed to look like. Yet we are progressing with difficulty, and get stuck on the human factor. Once upon a time, as a graduated operations researcher, I set out into the world with a single objective: to optimise! I still want to do that, but I have since learned: ‘There are no problems, only people.’

Niels van Hove,  S&OP Manager Cheese, National Foods

Paradise Australia, but not yet for the consumer?

Getting my life started in Australia, I wondered though if the laid back attitude, the nice weather, the lattés on the numerous terraces and all the great facilities available were numbing the Australian consumer to the high prices they pay for basic goods. I realised that although many companies on this island where monopolies, duopolies or something close to not ideal for the consumer, nobody was complaining about it. Now I don’t dislike monopolies for the sake of it, but I hate not having a choice and being ripped off on top of that. Furthermore, my background as an Operations Researcher and Supply Chain professional gives me goose bumps for the wrong reasons on a lack of efficiency and innovation.

It all started with getting a phone line. Living in an inner Melbourne suburb I could choose from exactly one option: Telstra. The biggest competitor Optus could not deliver this very basic service in my area, probably because of the massive network fee Telstra charges their competitors. Lazy as I am, to make things easy, I wanted my internet connection through the same provider. The shock came a month later when my first monthly internet bill was AUD$500. It seemed Telstra charges for both downloads and uploads, and my frequent usage of Skype didn’t help there! In their monopolist minds it had not appeared yet to Telstra that internet is more or less like a toilet. If you have a need you use it. 24-7, no exceptions, it’s just there waiting to be used. The service should be for the connection and the speed, not how often I use it.

Going shopping it makes you realise that Australia is the third densest retailing country in the world, Switzerland being number one. Coles and Woolworths control 70 percent of the packaged grocery market and that’s highly felt by your wallet once you pay your weekly shopping at the cashier. In walking distance in a densely populated suburb I have two major retail locations. In terms of supermarkets, I can choose between Coles and Coles! The Australians I see there don’t seem to wonder if they’re overcharged.

Now I’m looking to buy a house, it appears to me that the big four banks, which are all backed by the government, can get away with interest rates up to 3 percent above the national Reserve Bank rate. The Australian public does not rebel at all. They finish their latté and cross the road to one of the nearest big four. Currently 90 percent of the new mortgages are now dealt through the four big banks. Some estimates say that it’s indirectly closer to 100 percent . Guess who’s laughing?

But change is coming. In telecommunications Telstra is being forced by the government to split its activities in wholesale and retail, preventing it from charging competitors unfair prices just because they can. It is widely expected and proven in many countries that this will increase competition and be a major benefit for the Australian consumer. In retail land Aldi just opened their 200^th store and the American giant Costco just opened the doors in Melbourne. The Australian Competition and Consumer Commission struck a deal with Coles and Woolworths to end restrictive leases in shopping locations. This will open the door for other retailers like Aldi, who will aggressively expand. Hallelujah, we will have choice! And the big four banks? Well, they probably stay the big four for a long time, but as consumer I start to see positive signs and look forward to Australia as a consumer paradise island.

Niels van Hove,  S&OP Manager Cheese, National Foods