Rebooting Supply Chains: Shorter, Smarter and More Sustainable ?

PART OF THE GROWTH CROSSINGS SERIES
A report from The Economist Intelligence Unit
Rebooting supply chains

Shorter, smarter and more sustainable?
Commissioned by
CONTENTS
1. Executive summary 4
2. Confidence, commodities and costs 8
3. Strategic innovation and supply chains 12
4. A future with shorter supply chains 16
5. Treasury: Supply-chain leader 20
6. Conclusion 24
Appendix – Survey results 26

© The Economist Intelligence Unit Limited 2017

1 EXECUTIVE SUMMARY
Concerns about geopolitical and economic company executives are focused on keeping
risks have grown among those who oversee down operating costs over the next year and
company supply chains. Both Brexit in increasing operational transparency through
2016 and the seeming arrival in 2017 of technological innovation. Over the next five
a new era in US trade policy under the years, companies envision bigger changes:
presidency of Donald Trump have created sourcing networks will be simpler, smarter
new uncertainties. For example, factory and ideally more sustainable.
managers in Asia, whose operations are
vital links in many companies’ global supply Key findings from the research include:
chains, may read nationalistic rhetoric from
the West and logically wonder whether some Most companies are confident about being
of their supplier relationships have become able to deal with supply-chain disruptions
politically inexpedient. Senior executives over the next year, but they are very
at multinational companies with complex sensitive about costs.
sourcing networks spanning the globe may
worry that populist pressure could force The survey found that those who are better
them to re-shore jobs or to rethink how prepared are more confident about dealing
their products are made and where they with challenges and disruptions. There was
come from. These are not necessarily substantial agreement on another point:
unfounded fears, as this Economist Intelligence lowering costs in the supply chain.
Unit (EIU) report concludes.
Innovation is seen as a crucial part of
The rules of global trade are shifting and strategic supply-chain management because
companies will need to make sure their it will help create full visibility across
supply chains have the agility and production networks and thereby support
resourcefulness to deal with potential sustainability.
challenges and disruptions that may lie
ahead. Questions remain about whether the Commitment to technological innovation is
pace of globalisation will slow considerably, extraordinarily widespread in supply chain
shift its direction or possibly reverse management. More than nine-in-ten (93%)
executives surveyed have identified it as
A survey about the future of supply chains, important. Companies that believe innovation
conducted by The EIU and commissioned is very important are also more confident they
by Standard Chartered Bank, found that can address external disruptions.
4 © The Economist Intelligence Unit Limited 2017

Global supply chains are expected to shorten,

but depending on the industry may not
necessarily become less complex.
More companies (49%) expect supply chains

to become shorter and simpler in the next
five years than those (33%) who expect them
to grow longer and more complex. Even so,
some companies that expect to shorten their
supply chains may increase their complexity
in response to consumer preferences.
Shortening and simplifying are seen as
ways to reduce the vulnerability of the supply
chain to external disruptions, as well as to
lower costs and improve effectiveness.
Treasury may yet emerge as a leader of

strategic supply-management efforts.
Are treasurers ready for the challenge?
Companies rate core skills of the treasury

function highly when it comes to managing
supply chains in the future. But most companies
still see treasurers in a governance role, rather
than having a strategically important role for
supply chains. Treasury will have to be enabled,
and some industries, such as IT, energy and
industrials, are more likely to thrust treasury
into a leadership role. This begs the question:
are treasurers ready to embrace the challenge
of leading a supply chain?
© The Economist Intelligence Unit Limited 2017 5

About the study C-level or board positions, while the

rest are senior executives and other
Rebooting supply chains: Shorter, smarter senior managers.
and more sustainable? is an EIU report,
sponsored by Standard Chartered Bank. n In terms of corporate functions, financial
It is part of the Growth Crossings series. The executives and managers represent
report explores the objectives, challenges 28% of the sample. The remaining
and potential disruptions facing companies three categories of respondents each
with global supply chains and how they are represent 24% of the sample: strategy
preparing to deal with them in the future. and business development, procurement,
and supply-chain management.
The report draws on two strands of research
for its findings: Survey respondents are distributed across
seven types of businesses. Three of them
n In February 2017, The EIU surveyed 522 – energy, materials and healthcare – each
business leaders in 13 countries. Six of represent 19%. Industrials are the next
the nations represented are in Asia Pacific, largest segment at 12%, followed by consumer
five in Europe, and two in North America. discretionary at 11%, and information
Nearly half (48%) of the respondents hold technology and consumer staples both at 10%.
Respondents participating in The EIU survey are spread around the world in countries from
North America to Europe to Asia Pacific.
EUROPE
247
ASIA PACIFIC
NORTH AMERICA
135
140

In-depth interviews were conducted with the

following individuals (in alphabetical order by
their surname):
• Deborah Elms, founder and executive

director, Asian Trade Centre
• John Hayduk, chief operating officer,

Tata Communications
• Tom Linton, chief procurement and

supply chain officer, Flex
• Ernest Mui, director of treasury and

tax, Asia Pacific, Knorr-Bremse
• Corrado Snaiderbaur, supply chain

manager, Chiesi Farmaceutici
• Sander de Vries, manager, Zanders
• Roy Williams, managing director,

Vendigital
We would like to thank all interviewees and

survey respondents for their time and insight.
The EIU bears sole responsibility for the content

of this report. The findings do not necessarily
reflect the views of the sponsor. n

2 CONFIDENCE, COMMODITIES AND COSTS
Supply chains today face myriad risks, but

Figure 2. Finance executives nearly twice as
business leaders have prioritised several,
confident as non-finance ones
according to the survey. Whilst headline risks
% respondents on level of confidence to deal
related to political changes over the past year
with external disruptions to supply chains, by
clearly have entered the radar of executives,
finance function and by non-finance function
other issues are also of concern. The following
external factors were rated by respondents as
5% 1%
the top three most disruptive to their supply
chains in the next year: fluctuating commodity 5% 3% 26%
prices, political instability, and competitive
48%
pressures that speed up product innovation.
Finance function
In 2016, the CBOE crude oil volatility index, 44%
a measure of oil price fluctuations, reached
its highest in nearly eight years. Later in the
67%
Non-finance function
Figure 1. Bigger businesses, more confidence
% respondents who say they are “very Very confident Not confident
confident” their company can address Somewhat confident I don't know
external disruptions to supply chains
report, we will see how these factors may

be driving a focus over the next twelve months
on reducing supply-chain-related costs.
43% 57%
A key goal within companies has been

preparedness: 93% of respondents say they
are either confident or very confident in
their companies’ preparations to deal with
external disruptions to their supply chains.
Notably, respondents with a finance function
>500m US $ total annual revenues were nearly twice as likely as
<500m US $ total annual revenues
non-finance functions to be very confident.

This report will make the case that whilst

internal collaboration between operations Collaboration between internal
and finance is taking place to manage supply
chains, much more needs to be done to teams, including finance
achieve strategic objectives.
and risk management, is
the top action that 42% of
Size matters, but also
preparation respondents said they were
taking to reduce fallout from
Among the respondents who said they were very
confident about their company’s ability to deal supply-chain disruptions.
with external supply-chain disruptions, 57%
came from firms with more than US$500m in
annual revenues. This suggests the size of the
principal in a supply chain matters when it comes Overall, collaboration between internal teams,
to provision of resources to deal with disruptions. including finance and risk management, is the
But this is only one factor. top action that 42% of respondents said they
Figure 3. Internal collaboration tops action plans

% respondents by action taken to limit fallout from external disruptions
Collaboration among internal teams 42%
Mitigation plans for disruptions 42%
Demand planning for new products 29%
Product portfolio review for resilience 28%
Scenario planning 28%
Online analytical tools to mitigate risk 25%
Insurance against specific events 23%
Internal unit to study disruptions 22%
Secured more lines of credit 21%
Hired risk management specialists 21%
0% 10% 20% 30% 40% 50%

Figure 4. Virtuous circle of confidence and preparedness

% cohort, by actions taken to reduce fallout from supply-chain disruptions
40%
30% 31%
30%
29%
28%
20% 20%
18% 18%
17%
10%
0%
Internal unit to Insurance against Hired risk Added lines
study disruptions specific events management specialists of credit
Very confident in addressing external disruptions Less confident in addressing external disruptions
were taking to reduce fallout from supply-chain (28%) respondents say their companies have
disruptions. A third of those surveyed report also engaged in scenario planning.
their companies have then taken the next logical
step and developed plans to mitigate the fallout Scenario planning is particularly handy during
from disruptions. Being prepared to mitigate or a time of geopolitical uncertainty, and should
hedge potential disruptions allows companies also include disruptions in trade policy, such as
to be more flexible with their responses, says fallout from Brexit, says Deborah Elms, executive
Roy Williams, managing director at Vendigital, director of the Asian Trade Centre in Singapore.
a consultancy focused on supply-chain “It will take a while for companies to grasp how
management. “If your supply chain is more agile, damaging this will be,” she says because clarity
you can adjust to changing trade policy and other about the new rules governing trade flows in
challenges,” he says. Europe will not be known for quite some time.
Given that the pace of new product innovation A closer look at the cohort of respondents who
can be a significant challenge to supply chains, said they were very confident about dealing
29% of respondents in the survey also report with supply-chain disruptions reveals a simple
their companies are conducting demand rule: those who are very confident are more
planning for new products to mitigate fallout likely to have taken steps to limit supply-chain
from disruptions. And nearly three-in-ten disruptions. Among the actions taken to reduce

fallout, the very-confident cohort was more likely Cutting costs is a logical reaction to higher
than the less-or-not-confident cohort to set up levels of market uncertainty, but businesses
internal units to study disruptions, buy insurance should be focused on delivering value to
against specific events, hire supply-chain customers rather than getting caught in
management specialists and secure additional relentless drives to reduce expenditure.
lines of credit.
Boosting profitability and competitive position
There is no silver bullet for supply-chain risks undoubtedly gives companies a better chance
however. A significant majority of respondents of dealing with disruptions. The survey found
take multiple actions to prepare against that difficulty controlling costs in the supply
potential disruptions. chain is the most significant challenge, a
view cited by half of respondents. However,
there is often a lack of clarity around what is
Delivering value, or slash really driving costs within an organization.
and burn? Later in the report we will explore how achieving
complete transparency in supply-chain
Supply-chain-related costs are a top concern operations isa major strategic goal.
among businesses globally, particularly as
customer expectations for product quality Vendigital’s Mr Williams adds that it is
increase. Reducing costs in the supply chain important that business leaders avoid a
over the next twelve months is the most-cited “slash and burn approach” to cutting costs.
objective, with 50% of respondents identifying Indeed, there are good costs and bad costs.
it as a focus. Respondents are also keen on Bad costs may be more associated with fixed
increasing sales (42%), improving customer legacy costs in a part of the business where
service (36%) and improving the quality of margins are eroding, and these should be the
products and services (35%). focus of cost reduction drives. “Good costs are
things that help the business grow,” he says.
Controlling costs is important because companies These are usually variable costs that, when they
have to provide a return on their investment are rising, translate into higher revenue and
earlier and earlier in product cycles, according profit growth. The next section of this report
to Corrado Snaiderbaur, supply chain manager will focus on what may be one of the most
at Chiesi Farmaceutici in Parma, Italy. Even important “good costs” when it comes to strategic
patents, which offer protection for new management of supply chains: innovation. n
pharmaceutical products, do not provide a long
term safe harbour like they used to do. “If you
are not able to earn a return on investment in the
shortest possible period, you may be exposed to
risk from competitors who may put a better drug
on the market,” he says.

3 STRATEGIC INNOVATION AND

SUPPLY CHAINS
Innovation, especially through the use of digital “We know how our materials move in different
technologies, will likely transform supply-chain areas of the world and how finished products
management over the next five years. This reach our customer’s door step,” says Mr Linton.
study found that business leaders are focused “In times of crisis and disasters, we can quickly
on using innovative technologies to increase react to it because the system allows us to run
efficiency and ultimately to achieve much greater ‘what-if’ scenarios and hypotheses in a very
transparency about operations. detailed manner.”
Nine-out-of-ten (93%) respondents say

innovation is important when it comes to supply- Strengthening data
chain management. Nearly half (49%) rated reliability
innovation very important, with 44% rating it
somewhat important. The need for better information to make
business decisions lies at the heart of data
Companies clearly are embracing an innovation reliability issues. Supply chains can generate
ethos when it comes to their supply chains, and huge amounts of valuable data, such as delivery
over the next five years they will be focused on times, shipment locations, inventories, new
improving two related aspects of supply-chain orders, payments and the list goes on. But
management: data analytics and visibility. For before a company can process and analyse
senior executives, this will likely mean that the this information, it needs to know the data
kind of skills and capabilities needed to manage is clean and reliable.
supply chains will evolve and may require much
more collaboration with hitherto unrelated When asked what their companies will
functions, such as treasury and IT systems do in the next twelve months to improve
management. data reliability, 43% of executives surveyed
said they would establish new supplier
Technology improvements that enhance visibility relationships. This strongly suggests
can also improve productivity, says Tom Linton, suppliers themselves will need to improve
chief procurement and supply chain officer at Flex their data management capabilities or face
in San Jose, California. He cites as an example the risk of being replaced. Companies plan
the company’s creation of a cloud-based platform to automate processes in the supply chain
that allows it to be better informed in near real- to improve their ability to monitor inventory.
time about the functioning of the supply chain. More than four in ten (41%) in the survey

Figure 5. Priorities for improving data reliability

% respondents according to planned course of action in next twelve months.
50%
43%
40% 41%
38%
34%
33%
30%
29%
20%
10%
0%
New supplier Automate monitoring Improve supplier Trace origins of Define common Add or upgrade
relationships of inventory data collection materials and goods data standards cloud-based platforms
Companies are seeking to improve their ability

to trace the origins of materials and goods in
When asked what their their supply chain. About one third (34%) of
executives in the survey identify this as one
companies will do in the
of the steps the company will take in the next
next twelve months to twelve months. Defining common data standards
for the organization is also identified as a step
improve data reliability, companies plan to take.
43% of executives surveyed
said they would establish From data reliability to
new supplier relationships. complete transparency
Innovation is expected to have a transformative
effect on strategic supply-chain management,
and most importantly on creating see-through
identify this as one of the steps their company sourcing networks. Respondents cited
plans to take over the next twelve months. improving supply-chain visibility as the area of
Almost as many companies (38%) also plan greatest need to manage the supply chain more
to engage suppliers to improve their data strategically. Better visibility can help companies
collection and dissemination. be aware of weak points in the physical

Figure 6. Supply-chain visibility in need of innovation

% repondents, according to areas in greatest need of innovation to manage supply chains
Improve supply chain visibility 39%
Contingency plans for disruptions 36%
Managing supplier payments 32%
Optimising working capital 31%
Quicker receivable collections 30%
Digitising supply-chain transactions 29%
Procure-to-pay technology 27%
Supply-chain finance platforms 21%
Dynamic discounting 16%
0% 10% 20% 30% 40% 50%
production process or in financing that could Better visibility can help companies decide
lead to slowdowns in deliveries or disruptions. where in distribution they need to send new
By knowing where these weak points are, supply- product shipments, according to Mr Snaiderbaur,
chain leadership can take steps to mitigate or who implemented a supply -chain planning
hedge those risks. tool for group affiliates when he came to
Chiesi twelve years ago. In 2012, the company
implemented an enterprise resource planning
(ERP) platform to monitor data from affiliates.
Innovation is expected to “Having clear visibility of data across the supply
chain from the corporate position allows you
have a transformative effect to make a common decision with the affiliates
on strategic supply-chain based on data and not based on a negotiation
basis, which is always better,” says Mr
management, and most Snaiderbaur. Such decisions involve where
importantly on creating Chiesi will ship new products so that the
company can be sure they are sent to where
see-through sourcing networks. they are needed and not to where inventory
may be too high.

Companies also see a need for contingency of funds in the financial supply chain. These
plans to deal with disruptions. More than a include procure-to-pay technology, cited by
third (36%) of executives in the survey identify 27%, supply-chain finance platforms (21%)
this as an area of greatest need for innovation. and dynamic discounting (16%). n
Nearly a third (31%) of respondents identify
optimising working capital as an area of
greatest need, while 30% also named quicker
receivable collections.
Improving financial flows

can reduce delays in the
financial supply system that
can slow down movement in
the physical supply chain.
Digitising supply-chain transactions

was cited by nearly one-in-three (29%)
respondents as an area of greatest need
for innovation. Why is digitisation so
important? It automatically identifies
and records which part of a supply chain is
involved in a particular event or issue, according
to Vendigital’s Mr Williams. When transactions
are digitised, it frees up resources than can
be applied toward reducing costs and improving
the effectiveness of the supply chain.
Improving financial flows can reduce delays

in the financial supply system that can slow
down movement in the physical supply chain.
Thus, it should not be a surprise that companies
also identify as areas of greatest need several
innovations designed to streamline the flow

4 A FUTURE WITH SHORTER SUPPLY CHAINS
Economic historians see globalisation as share of respondents (33%) still expect their
the result of two ways in which international supply chains to lengthen, while 15% expect
commerce has been unbundled. Trade allowed their supply chains to stay the same in that
production to be distanced from consumption in time period.
the first unbundling, and then production was
further broken down into tasks that were spread Company size, and therefore the resources
around the world in the second unbundling. they have, does not appear to be a large
Supply chains greatly increased in length and factor in supply-chain expectations. Among
complexity during the second unbundling. the respondents who said they expect their
supply chains to shorten, 49% came from
While it is far beyond the scope of this report companies with US$500m or less in annual
to suggest the fate of globalisation, this study revenues and 51% from companies with more
shows many business leaders expect to see fewer than US$500m in revenues. The cohort of
links in their supply chains in the next five years. respondents who said they expect their supply
chains to lengthen had a similar breakdown.
Nearly half of respondents (49%) say they expect
their supply chains to shorten and become While size doesn’t matter, location does. Nearly
simpler. A reasonably significant six-in-ten respondents in Asia Pacific (59%) say
Figure 7. Supply chains are expected to shrink

% respondents by expectations for their supply chains in next five years
49% 33% 15% 3
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Shorten and become more simple Lengthen and become more complex Stay the same Don't know

they expect shorter supply chains versus 46% in service companies have been shortening their
Europe and 45% in North America. Businesses in supply chains in the UK but they have also been
Asia Pacific may be keen on keeping their supply adding more local ingredients into their food
chains closer to end customers in the region, supply because of a strong demand by consumers
where intraregional trade has been rising. for local content. Thus, consumer preferences
and demands can act to add complexity even
At Knorr-Bremse, a maker of braking systems when supply chains are shortening.
for trains and commercial vehicles, the
general rule is that “we always want to have
a shorter and simpler supply chain,” says
Ernest Mui, the company’s Hong Kong-based Consumer preferences for
director of treasury and tax for Asia Pacific.
The company faces a challenge in achieving innovation and products that
that desirable goal. Mr Mui is concerned that
are tailored to their needs will
in the coming year, the political environment
in some countries raises the possibility those tend to drive complexity, while
nations may not remain committed to free trade
and keeping their market open. “For the United
also making it more important
States, there is already a bit of uncertainty,” that supply chains are shorter
he says. “If some important markets become
less open, the supply chain would obviously to speed product innovations.
become longer.”
Shorter is not always Not surprisingly for most industry sectors,

simpler high levels of confidence about the ability to
deal with external disruptions is accompanied
Shortening supply chains, of course, does not by expectations that supply chains will be
necessarily make them less complex. More than shorter and simpler over the next five years.
a third of respondents (36%) say they agree with This is true of the consumer staples, consumer
the statement that a rising regulatory burden discretionary, healthcare, materials, industrials
will add cost and complexity to managing their and IT sectors. The energy sector is the
supply chains. exception: respondents from this segment
have very high levels of confidence their
Furthermore, consumer preferences for companies can address disruptions and also
innovation and products that are tailored to their generally expect longer supply chains.
needs will tend to drive complexity, while also This is understandable given the nature of
making it more important that supply chains extractive industries, where production happens
are shorter to speed product innovations. Food where resources lie.

Important clues about why many respondents services to end customers. “On the supply
expect to see shorter and simpler supply chains side, getting our partners to digitise
are found in their strategic objectives over the operations so they can provide services
next five years. They suggest businesses are they offer today and not have a human
seeking greater, more centralised control over and not have a manual process to execute
their supply chains. against, will bring consistency, speed
on the transaction, and a higher level of
availability, making it possible for a machine
Digitise, digitise, digitise! to run more than one eight-hour shift,”
John Hayduk, chief operating officer at
American writer Henry David Thoreau once Tata Communications, says.
said famously: “Our life is frittered away by
detail. Simplify, simplify, simplify!” Today’s Tata Communications has taken steps to
supply-chain operator would agree but automate parts of its business it controls
would probably suggest replacing simplify internally. “Now the company is taking a
with digitise. bigger step to bring those same benefits to
the company as a whole,” according to Mr
When respondents were asked to rank the Hayduk. Achieving that goal requires creating
objectives that are likely to be the most an automated flow with its partners employing
important over the next five years, more standardised software. The company has
than half of respondents (55%) said digitising completed the model for how it will accomplish
most aspects of supply-chain management. this goal with its partners and will begin
Nearly as many (54%) cited achieving execution next year. Mr Hayduk expects that
complete transparency about where and major partners will be able to complete the
how all products are sourced. digitisation project within the next two years.
The strategic future of supply chains, at least

over the next five years, entails not only Enhancing sustainability
making supply chains shorter to reduce
complexity, but also digitising the information Improving supply-chain sustainability
generated to enhance understanding about also strengthens it against challenges and
production across the supplier network. disruptions. To deal with regulations and
Doing this would make them transparent. sustainability, more than four-in-ten (42%)
respondents report their companies are
Digitisation and automation are critical to increasing their monitoring capabilities or the
the future of the supply chain that delivers frequency of monitoring. By a similar margin
services to customers at Tata Communications, (40%) companies plan to consolidate their
a global provider of telecommunication supplier base and increase automation. Such
services. The company would like to extend actions would tend to shorten the length of
digitisation to major partners who deliver the supply chain and reduce its complexity.

Therefore, it should be no surprise that more

than a third (36%) of companies identify supply-
chain sustainability as a strategic focus. This
is the case, in part, because more than one
third (36%) also see regulations governing
sustainability adding to the cost and complexity
of the company’s supply chain management.
A substantial share of respondents (38%) report

that the companies plan to take steps to raise
social and environmental standards in the supply
chain. Similarly, more than a third (36%) plan
to increase supplier audits and 32% plan to
create a supplier code of conduct.
More than a third (35%) say that social and

environmental impact of the supply chain is
just as important as compliance with standards.
A similar share (35%) say that regulations will
improve social and environmental standards
for their company’s supply chain.
Improving sustainability, however, faces

challenges. A significant share of respondents
(28%) agree or strongly agree that complexity
is preventing their company’s supply chain from
becoming more sustainable. Respondents also
see a downside to complying with regulations.
Nearly a third (32%) strongly agree with the
statement that regulations will make it more
difficult for their company to achieve greater
supply-chain efficiency. n

5 TREASURY: SUPPLY-CHAIN LEADER
The future needs of supply-chain managers their companies have developed mitigation
will require a much more cross-functional plans to deal with disruptions. Risk management,
approach. The days of supply chains being in fact, is identified by 68% of executives in
run only by the COO’s office or by engineers the survey as an important skill for managing
and logisticians appear to be fading. Instead their supply chain over the next five years,
a highly collaborative model is emerging. more than any other factor. In addition,
63% say monitoring corporate cash flow
will be important for strategic supply-chain
management in five years.
The days of supply chains
So, business leaders are encouraging
being run only by the COO’s collaboration between operations and finance
office or by engineers and teams to reduce the impact of near-term
supply-chain disruptions, and they see strategic
logisticians appear to be fading. needs for more risk management and cash and
liquidity management skills in the future.
Instead a highly collaborative
model is emerging.
Can treasury lead the way?
However, when respondents were asked about
treasury’s role in managing supply chains more
Yet, business leaders need to enable the role strategically over the next five years, the top
of treasury when it comes to supply-chain three choices were traditional in scope: oversee
management and think beyond the traditional cost management (47%), optimise working
role that treasurers play in the organisation. capital (47%) and monitor liquidity and risk
Treasury may even need to lead some management (43%).
supply chains.
Less than a third of respondents (31%) thought
To reduce the fallout from disruptions, 42% treasury would be regularly collaborating
of respondents say that their companies have with business heads, despite the importance
increased collaboration among internal teams, of its skill sets. Also, only 28% of executives
such as finance and risk management. In thought treasury would be leading a financial
addition, one third of executives surveyed say supply chain team in the organisation and 19%

Figure 8. Treasurers seen handling cost controls, working capital in future of supply chains
% respondents, expectations for treasurer’s role in supply-chain management over next five years
Oversee cost
management
47%
Member of Optimise working

executive committee capital
47%
19%
28%
43%
Lead a financial Monitor liquidity
supply team and risk
31%
Collaborate with
business heads
thought treasury would be a part of an executive business heads on supply-chain management,

committee or equivalent. compared with 31% of overall respondents.
A third of respondents in the IT industry see
Business leaders clearly see a growing need treasury joining executive committees in five
for the expertise of treasury when it comes to years, a much greater share than the 19% of
the future of supply chains, but their vision of overall respondents.
treasury’s role seems limited and stricken with
unrealised potential. Furthermore, respondents who described
innovation as being “very important” to their
Looking more closely at the data and some company’s supply-chain management were much
industries are more likely than others to more likely to be empowering their treasury
empower the treasury function. For example, function vs the overall pool of respondents.
41% of respondents in the energy industry say According to this cohort, in five years, treasury
in five years treasurers will be collaborating with would be collaborating with business heads (40%

vs 24% overall), leading financial supply chain that data analytics and systems management
teams (36% vs 30% overall) and serving on an – traditionally a role of IT departments – is an
executive committee (25% vs 19% overall). important skill for strategic management of
sourcing networks.
Some businesses are ready to enable their
treasurers to take a leadership role when it Many companies have been upgrading legacy
comes to supply chains. Are treasurers ready data management systems and consolidating
for the role? platforms over the past several years. The
survey showed that over the past 2-3 years,
Sander de Vries, manager at Zanders, Treasury more than a third of businesses (37%) have
and Finance Solutions in The Netherlands, deployed data analytics platforms to manage
believes so. Treasury can play a leading role in cash flows, liquidity and payments. Given
the implementation of financial supply chain that this is a critical strategic area for
management strategies that work hand in glove supply-chain management, it is surprising
with the physical supply chain management, he that more businesses have not already
says. Treasury’s value-add would be to reduce introduced these solutions.
the overall financing cost for the supply chain,
at a time when reducing costs are paramount, Fewer respondents have deployed other
according to the survey findings. technologies, including supply chain finance
platforms (29%), cloud-based customer and
The treasury department can manage risks supplier platforms (27%), social media-based
and increase efficiencies. For example, treasury communication tools (26%), mobile payment
can streamline purchase-to-pay, as well as systems (21%) and blockchain or XML-based
order-to-cash processes. Such steps can both payment platforms (15%).
improve the functioning of the supply chain
and reduce its overall costs. “The treasury Businesses see the importance of liquidity
department has expertise and knowledge on and risk management in the future, but
the dynamics between operational risk and they have not yet deployed a solution to
financial risk. It also knows how to quantify monitor areas such as cash flows, payments
different kinds of risk and to handle those and risk exposures, and they may need to
risks,” Mr de Vries says. play catchup. n
Skills for the future

In addition to risk management and cash and
liquidity management, respondents also see
data management increasing in importance for
supply chains. Overall, 62% of respondents think


6 CONCLUSION
Donald Rumsfeld, former US secretary of This study has argued that the future of supply
defense, in a moment of obfuscation once chains will entail shorter though not always
said to the media: “There are known knowns. simpler production links. The future will require
These are things we know that we know. There a varied collection of skills that include risk
are known unknowns. That is to say, there are management, cash and liquidity management,
things that we know we don’t know. But there data analytics and systems management among
are also unknown unknowns. There are things others. It will require transparency to meet
we don’t know we don’t know.” It’s the unknown demands of regulators and senior executives,
unknowns that have businesses encouraging and digitisation of information across the
greater internal collaboration between teams supply chain.
to reduce the risk to their supply chains.
The stakes are high. The role of treasurers
Geopolitical uncertainty and political risk and others on company financial and risk
are rising and supply chains could be in for management teams are likely to become
some shocks. However, companies have been important to the management of the supply
stepping up their ability to mitigate disruptions chain, and being able to conceive of these
and meet ever-intensifying competitive pressures roles in an innovative way will be a competitive
from consumers and customers demanding advantage. Ultimately collaboration and
greater levels of product differentiation. innovation will make supply chains efficient,
more reliable, more flexible and more durable. n
Managing a supply chain is a never-ending,
constantly changing, demanding challenge
that requires clear thinking and sharp vision.
One needs to be prepared even for the
unthinkable, at least on some level. It is a
network that, when necessary, can hum with
more activity and intensity than even the busiest
bee hives. With so many moving parts and each
so vulnerable to so many unexpected disruptions,
it is amazing supply chains work relatively well
for so many companies.

APPENDIX
A1. In what region of the world is your organisation headquartered?
Asia Pacific 135
North America 140
Europe 247
0 50 100 150 200 250
A2. Which of the following best describes your company’s primary sector?
Energy 19%
Materials 19%
Healthcare 19%
Industrials 12%
Consumer discretionary 11%
Information technology 10%
Consumer staples 10%
0% 5% 10% 15% 20% 25%
A3. Which of the following best describes your function in your company?
Finance 28%
Strategy and business development 24%
Supply-chain management 24%
Procurement 24%
0% 10% 20% 30% 40% 50%

A4. Which of the following best describes your title?
Manager 24%
Head of department 15%
CEO 14%
Other c-level executive 11%
Board member 10%
Head of business unit 5%
CFO 4%
COO 4%
SVP, VP, director 3%
Assistant manager 3%
CIO/Technology director 3%
CMO 2%
Treasurer/Comptroller 2%
0% 5% 10% 15% 20% 25%
A5. What are your organisation’s total annual revenues in US dollars?
Less than $50m 29%
$50m to $500m 23%
$500m to $1bn 19%
$1bn to less than $10bn 17%
More than $10bn 12%
0% 10% 20% 30% 40% 50%
B1. Which of the following answers best describes the main objectives that you have for your supply chain over the
next 12 months?
Reducing operating cost 50%

Increase sales growth 42%
Improving customer service 36%
Improving quality of products & services 35%
Form more strategic partnerships with suppliers 27%
Reduce overall inventory levels 26%
Introduce new products to market more quickly 25%
Reduce vulnerability to external risks 24%
Expand capacity of suppliers of distributors/re-sellers to support my company 22%
Digitise some or all supply-chain information 22%
Expand internationally 21%
Make the supply chain more socially and environmentally responsible 21%
Hire new talent to manage the supply chain 20%
0% 10% 20% 30% 40% 50%

B2. What is/are the most significant challenges to achieving the objectives that you chose in the previous
question?
Difficulty controlling costs 34%

Meeting customers’ expectation on product quality & service 31%
Increasing pressure from global competition 30%
Growing regulations 25%
Need for faster production times 24%
Political uncertainties in markets where your company operates 20%
Lack of visibility on demand/volatile demand 20%
Increasing financial volatility (ie currency fluctuation, etc) 19%
Lack of transparency with suppliers beyond first tier 16%
Complying with sustainability rules 16%
Weak distribution / re-seller network 16%
Difficulty accessing finance for suppliers 13%
Natural disasters 11%
Pressure to re-shore jobs 9%
Other, please specify 1%
0% 10% 20% 30% 40% 50%
B3. Rate the following external factors according to how disruptive they could be to your supply chain over the next
12 months.
Changing trade policies among nations 16% 14% 33% 24% 14%
Increase in extreme weather events 16% 20% 32% 20% 11%
Cyber attacks 13% 19% 33% 21% 14%
Increasing worries about product safety 12% 19% 34% 26% 9%
Rise of protectionist sentiment 11% 18% 35% 25% 10%
Political instability 11% 17% 32% 29% 12%
Failure of first-tier suppliers to find reliable sub-tier suppliers 10% 19% 35% 24% 12%
Fluctuating commodity prices 8% 16% 29% 34% 13%
Technological change 8% 20% 35% 27% 10%
Competitive pressures that speed up product innovations 7% 16% 38% 29% 10%
0% 20% 40% 60% 80% 100%

Not disruptive 2 3 4 Very disruptive
B4. How confident are you that your company is prepared to address the external disruptions in the previous
question?
Confidence 32% 61% 5% 2%
0% 20% 40% 60% 80% 100%

Very confident Somewhat confident Not confident I don't know

B5. Which of the following actions has your company taken to reduce fallout from supply-chain disruptions?
Increased collaboration among internal teams, e.g. finance, risk management, etc 42%
Developed mitigations plans for disruptions 33%
Conducted demand planning for new products 29%
Engaged in scenario planning 28%
Reviewed current product portfolio for resilience 28%
Invested in online analytical tools to mitigate risk 25%
Bought insurance against specific events 23%
Set up internal unit to study disruptions 22%
Hired supply-chain risk management specialists 21%
Secured additional lines of credit 21%
I don’t know 6%
0% 10% 20% 30% 40% 50%
B6. Thinking about the data your company receives from its supply chain, what steps is your company likely to take
in the next 12 months to improve data reliability?
Establish new supplier relationships 43%
Automate processes to improve monitoring of inventory 41%
Engage suppliers to improve data collection and dissemination 38%
Improve ability to trace origins of materials and goods 34%
Define common data standards for the organisation 33%
Introduce and change cloud-based supply chain management platforms 29%
I don’t know 7%
0% 10% 20% 30% 40% 50%
B7. Please indicate the degree to which you agree or disagree with the following statements.
Regulations will add to the cost and complexity of my

company’s supply-chain management 16% 20% 35% 21% 8%
Supply-chain sustainability is a strategic focus in

my company 14% 22% 30% 25% 10%
In my company, social and environmental impact of the

supply chain is just as important as compliance with standards 12% 23% 36% 21% 8%
Regulations will improve social and environmental

standards for my company’s supply chain 10% 25% 37% 21% 6%
Complexity is preventing my company’s supply

chain from becoming more sustainable 10% 18% 40% 24% 7%
Regulations will make it more difficult for my company

to achieve greater supply-chain efficiency 10% 22% 34% 24% 9%
0% 20% 40% 60% 80% 100%

Strongly agree 2 3 4 Strongly disagree

B8. With regard to regulations and sustainability, which of the following steps has your company taken or do you
expect it to take in the next 12 months?
Increase monitoring capabilities and/or frequency 42%
Consolidate supplier base 40%
Increase automation of processes 40%
Raise social and environmental standards in the supply chain 38%
Increase supplier audits 36%
Create a supplier code of conduct 32%
Expand corporate social responsibility and/or public relations teams 25%
0% 10% 20% 30% 40% 50%
C1. Please describe the importance of innovation when it comes to supply-chain management in your company.
Importance 49% 44% 6% 2%
0% 20% 40% 60% 80% 100%

Very important Somewhat important Not important I don’t know
C2. Which of the following has your company deployed in the past two-to-three years as solutions to managing cash
flows, liquidity and payments and to identifying and analysing risks?
Data analytics/forecasting platforms 37%

Enterprise resource planning software 34%
Treasury and risk management systems 29%
Supply-chain finance platform 29%
Treasury management systems 28%
Cloud-based customer/supplier platforms 27%
Social media-based communication tools 26%
Mobile payment systems 21%
Block chain or XML-based payment platforms 15%
I don’t know 10%
0% 10% 20% 30% 40% 50%

C3. Thinking of your answer(s) to the previous question, how confident are you in your company’s ability to apply
those solutions to the challenges specifically faced by supply-chain managers?
Confidence 35% 56% 5% 4%
0% 20% 40% 60% 80% 100%

Very confident Somewhat confident Not confident I don’t know
C4. In which areas do you see the greatest need for innovation when it comes to strategically managing your
company’s supply chain?
Improve supply chain visibility 39%

Contingency plans to deal with disruptions 36%
Managing payments to suppliers 32%
Optimising working capital 31%
Quicker receivable collections 30%
Digitising supply-chain transactions 29%
Procure-to-pay technology 27%
Supply-chain finance platforms 21%
Dynamic discounting 16%
I don’t know 4%
0% 10% 20% 30% 40% 50%
D1. Over the next five years, I expect my company’s supply chain to
Expectation 33% 49% 15% 3%
0% 20% 40% 60% 80% 100%

Lengthen and become more complex Shorten and become more simple Stay the same I don’t know

D2. Looking at the next five years, rank the following objectives based on how important they will be for your company?
Co-create products with suppliers 7% 11% 34% 34% 14%
Establish financial incentive programmes with suppliers

to improve quality standards 6% 13% 34% 32% 14%
Improve social and cultural diversity in first-tier suppliers 4% 14% 35% 31% 16%
Reduce the environmental impact of my company’s 4% 16% 34% 32% 14%

supply chain
Holistically manage physical and financial supply chains 4% 9% 38% 33% 16%
Achieve complete transparency about where and how 3% 11% 32% 34% 20%
all products are sourced
Digitise most aspects of supply-chain management 2% 8% 35% 34% 21%
0% 20% 40% 60% 80% 100%

Not important 2 3 4 Very important
D3. In the previous question, you answered that improving social and cultural diversity in first-tier suppliers will not be an
important objective for your company over the next five years. Choose the most relevant reasons why among the choices below.
My company's executive leadership is focused on

44%
other priorities
My company has already focused a lot on social

42%
and cultural diversity in its supply chain
Social and cultural diversity is too difficult to 12%

monitor in our supply chain
0% 10% 20% 30% 40% 50%
D4. Thinking of managing both physical and financial supply chains more strategically, what roles do you anticipate
treasury will play over the next five years?
Oversee cost management 47%
Optimise working capital 47%
Monitor liquidity and risk management 43%
Regularly collaborate with heads of businesses 31%
Lead a financial supply chain team 28%
Become member of the executive committee or equivalent 19%
I don’t know 8%
0% 10% 20% 30% 40% 50%

D5. Rank the following skills by how important they will be in five years to managing your company’s supply chain
more strategically.
Ability to collaborate with finance teams 3% 7% 30% 39% 20%
Product innovation 3% 11% 24% 38% 24%
Leadership on social and environmental standards 2% 11% 37% 30% 20%
Risk management 2% 5% 25% 42% 26%
Data analytics and systems management 2% 7% 29% 36% 26%
Ability to form and direct corporate strategy 2% 8% 33% 36% 21%
Monitor corporate cash flow and liquidity 1% 6% 29% 38% 25%
0% 20% 40% 60% 80% 100%

Not important 2 3 4 Very important

LONDON
20 Cabot Square
London
E14 4QW
United Kingdom
Tel: (44.20) 7576 8000
Fax: (44.20) 7576 8500
E-mail: [email protected]
NEW YORK
750 Third Avenue
5th Floor
New York, NY 10017, US
Tel: (1.212) 554 0600
Fax: (1.212) 586 0248
HONG KONG
1301 Cityplaza Four
12 Taikoo Wan Road
Taikoo Shing
Hong Kong
Tel: (852) 2585 3888
Fax: (852) 2802 7638
SINGAPORE
8 Cross Street
#23-01 PWC Building
Singapore 048424
Tel: (65) 6534 5177
Fax: (65) 6428 2630
GENEVA
Rue de l’Athénée 32
1206 Geneva Switzerland
Tel: (41) 22 566 2470
Fax: (41) 22 346 9347
Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report
can accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out herein.

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PART OF THE GROWTH CROSSINGS SERIES

A report from The Economist Intelligence Unit

Rebooting supply chains

© The Economist Intelligence Unit Limited 2017

4 © The Economist Intelligence Unit Limited 2017

Global supply chains are expected to shorten,

More companies (49%) expect supply chains

Treasury may yet emerge as a leader of

Companies rate core skills of the treasury

© The Economist Intelligence Unit Limited 2017 5

About the study C-level or board positions, while the

6 © The Economist Intelligence Unit Limited 2017

In-depth interviews were conducted with the

• Deborah Elms, founder and executive

• John Hayduk, chief operating officer,

• Tom Linton, chief procurement and

• Ernest Mui, director of treasury and

• Corrado Snaiderbaur, supply chain

• Sander de Vries, manager, Zanders

• Roy Williams, managing director,

We would like to thank all interviewees and

The EIU bears sole responsibility for the content

© The Economist Intelligence Unit Limited 2017 7

2 CONFIDENCE, COMMODITIES AND COSTS

Supply chains today face myriad risks, but

report, we will see how these factors may

A key goal within companies has been

8 © The Economist Intelligence Unit Limited 2017

This report will make the case that whilst

Figure 3. Internal collaboration tops action plans

Collaboration among internal teams 42%

Mitigation plans for disruptions 42%

Demand planning for new products 29%

Product portfolio review for resilience 28%

Scenario planning 28%

Online analytical tools to mitigate risk 25%

Insurance against specific events 23%

Internal unit to study disruptions 22%

Secured more lines of credit 21%

Hired risk management specialists 21%

0% 10% 20% 30% 40% 50%

© The Economist Intelligence Unit Limited 2017 9

Figure 4. Virtuous circle of confidence and preparedness

10 © The Economist Intelligence Unit Limited 2017

© The Economist Intelligence Unit Limited 2017 11

3 STRATEGIC INNOVATION AND

Nine-out-of-ten (93%) respondents say

12 © The Economist Intelligence Unit Limited 2017

Figure 5. Priorities for improving data reliability

Companies are seeking to improve their ability

© The Economist Intelligence Unit Limited 2017 13

Figure 6. Supply-chain visibility in need of innovation

Improve supply chain visibility 39%

Contingency plans for disruptions 36%

Managing supplier payments 32%

Optimising working capital 31%

Quicker receivable collections 30%

Digitising supply-chain transactions 29%

Procure-to-pay technology 27%

• Deborah Elms, founder and executive

• John Hayduk, chief operating officer,

• Tom Linton, chief procurement and

• Ernest Mui, director of treasury and

• Corrado Snaiderbaur, supply chain

• Sander de Vries, manager, Zanders

• Roy Williams, managing director,