Supply Chain Directors are becoming increasingly important for businesses, especially those who double as a Chief Supply Chain Officer (CSCO). Lofvers: “Black swan events like Covid-19 and the war in Ukraine only accelerated this development. Supply chain directors know exactly where the bottlenecks are and realized that availability and reliability were more important than costs during the pandemic. After the lockdowns were lifted, companies dug deep and spent heavily on raw materials and semi-finished goods, sacrificing just in time for just in case. This was a mistake and we are all suffering the consequences: warehouses are fully stocked with things we do not need. Costs are gradually becoming a concern again, now that inflation has skyrocketed, but it is important to remember that we are entering a decade of scarcity. It is important for supply chain directors to stand firm and avoid slipping back into old habits - being as efficient and cheap as possible. Instead of focusing on costs, look at margins instead.”

Companies need to lean on supply chain expertise, and supply chain considerations should have a place in the C-suite. "However, Supply Chain Directors will only succeed if they take a holistic, strategic approach, so make sure to get started with scenario planning, a potent persuader. What’s more, you have to keep updating scenarios to stay relevant, convince the other board members and open their eyes, so that they can see what is at stake. If you fail to do so, cost and efficiency concerns will loom large and you’ll be back at square one, which will spell the end of your company.”

Scenarios can also be a valuable tool for identifying growth opportunities, he adds: “If you can see what other people can’t, use it to your advantage. During the Covid-19 pandemic, a European car parts wholesaler played a game with its supply chain department, challenging it to look ahead and predict what might happen in the future. They saw a shortage of materials and how it would paralyze the production of new cars. They realized that the market for pre-owned cars would balloon, and that the market for auto parts would follow suit. It was a massive opportunity, provided that they were properly prepared. Peugeot cars are more likely to roll into the shop than Mercedes vehicles, so getting their hands on a large number of Peugeot parts was key. On top of that, they had to get their distribution processes running smoothly. Companies who get their strategy right and involve both commerce and supply chain in the process will take home the spoils. I’ve seen time and time again that strategic thinking can make the difference.”

We’re living in exciting times. “We’re in a transition period between Kondatrieff’s fifth and sixth waves, which describe macroeconomic periods of between 20 to 40 years. The first wave began with the steam engine, and we’ve just emerged from the fifth wave: large-scale automation. The next wave will revolve around biotechnology, nanotechnology, AI, machine learning, you name it. The transition period is a time of disruption and war, like the one in Ukraine. It is also a time of creative destruction. Companies fail, go bankrupt, languish, or are acquired, and winners emerge. Whenever I give a presentation, I always tell the audience: half of your companies won't exist in 5 to 10 years. It’s quite the wake-up call and it can be startling realization, but there’s no denying that we’re in the midst of a transition and will be for a decade to come. We’re only just getting started."

Sustainable supply chain

The future is particularly promising for companies who believe that scarcity, sustainability and transparency are parameters that can be tweaked. “All leading software vendors in Europe have included carbon emissions in their optimization strategy. What’s more, they’ll be legally required to demonstrate their emissions optimization efforts starting from next year. With the Corporate Sustainability Reporting Directive (CSRD), which is set to enter into force in 2024, Europe is a long way ahead of the US when it comes to sustainability. We’re much more keyed into the importance of greening, and we’re also at the forefront of supply chain thinking. US companies only started realizing how complex life in Europe is during Covid-19, when states were given the power to decide whether or not people could cross state lines and companies had to start updating their planning accordingly."

German companies have had to prove that their supply chain is entirely free of child labor since early 2023, and Dutch companies will have to meet similar requirements in the future. The time of hiding behind your supplier is over: it’s your responsibility. As a result, companies will actively go looking for their tier 2 suppliers, the suppliers to their direct suppliers. Audits have turned out to be a cheap mask; manufacturers can easily hire actors or use software and hardware to cheat their way through an audit. Companies will have to be familiar with all links of the supply chain, which is only highlighted by the advent of mandatory product passports for office furniture and other products.