As supply chains encounter even more challenges and unprecedented pressures stemming from COVID-19 and the economic uncertainties tied to it, today’s chief supply chain officers (CSCOs) have their work cut out for them. Sixty-two percent percent of CSCOs said they lack adequate resources to meet future challenges that are now a reality, according to a study from leadership advisory firm Egon Zehnder.
CSCOs at companies generating between $3 billion and $10 billion in revenues were particularly concerned about this issue, with just 27 percent saying they have the tools to meet these challenges. Tom Reynolds, consultant and lead of the global supply chain practice at Egon Zehnder, noted that despite top C-level buy-in to these initiatives, there still is not enough understanding of just how much time and money is required to modernize and streamline the supply chain.
The growing complexity of the supply chain itself was tops among internal challenges, with nearly half (48 percent) of CSCOs saying this was a top-three issue. Talent shortages (44 percent) and organizational culture (37 percent) round out the biggest internal challenges, with Reynolds noting that the two industries leading in concern for talent shortages were retail and consumer products.
“Retailers are saying, ‘We don’t have the talent we need,’” Reynolds told Sourcing Journal. “We expect retail supply chain models going forward are going to be different than retail models of the past. But getting there is absolutely the challenge. It’s about investing in talent and developing that talent. That’s where the primary focus should be.”
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As many as 72 percent of respondents said they were concerned about the current skill level of workers in their organization, and a full 79 percent were worried about their ability to recruit professionals able to handle the increasing pace of change.
Given the growing complexity of supply chains, particularly as more apparel retailers strive to diversify their sourcing capabilities, even Reynolds was surprised at how much CSCOs felt they needed to improve on talent and culture.
“The whole concept of creating a culture and trying to attract and retain talent that is going to help them was way more compelling than I had anticipated it being,” Reynolds said. “To build highly strategic, highly innovative supply chains for the future, retailers have to embrace that kind of thinking. Amazon is admired because they embrace the concept of innovation, and they in turn go after people that look like that and embody the same mindset.”
Conversely, the top three external challenges facing supply chain executives today include increasing cost pressures (21 percent), global economic uncertainty (17 percent) and rising demand variability (17 percent), all of which have been exacerbated by COVID-19. Large companies feel the heat of economic uncertainty even more intensely, with 56 percent of them naming this as a top-three issue compared to 30 percent of small companies.
Among the 10 “fastest and most responsive” supply chain champions nominated by survey respondents, Zara was the only apparel retailer to make the list. The list also included Amazon, Walmart and Target among other retailers, as well as UPS.
“A lot of clients aspire to be like Zara, because they are exceptional at going from the point of innovation to the shelf,” Reynolds said. “Their overall lead time is fast and they’re very responsive in reacting to the market, all while keeping costs down. When you look at the survey itself, with cost efficiency appearing at the top, they do it better than anyone. It takes 30 days or less to get from concept to shelf, whereas many other apparel retailers take 52 weeks. If you don’t guess right, you’re left with a bunch of inventory. Meanwhile, Zara gets it out, tests it with consumers and then replenishes it.”
As far as handling seasonality issues related to COVID-19, Reynolds noted that retailers are already starting to see it, as evidenced by deep discounting practices across online apparel sites designed to unload excess inventory.
“It’s a great time to be shopping,” Reynolds said. “You’re seeing 20 percent, 30 percent and 40 percent discounts on products that were originally designated for brick-and-mortar stores. Retailers still need to be able to meet that need in a timely manner, but it’s costing them.”
The survey, initially conducted in the fourth quarter of 2019 before a follow-up in March as the COVID-19 outbreak spread, captured perspectives from 235 large company CSCOs across industries, 23 countries and corporate structures. A full 82 percent of the respondents are the most senior such executives in their organization.