Oliver Chapman is the founder and CEO of supply chain specialists OCI, which was the No.1 fastest-growing company in the UK in 2022, according to the FT. OCI partners with organisations, supporting them with their supply chain. It pioneered commercial process outsourcing. Oliver’s supply chain interest started in his childhood when he distributed leaflets to sell video games. At 16 he made money by importing hair straighteners from China. As he became a little older, he found that he loved learning about different cultures; and from this, he generated a significant income for himself by trading in various ways; including recycling and importing tires. OCI was founded in part because of what Mr. Chapman calls a lack of respect for the trader that remains prevalent today.’. But he says trading needs to be a win-win. All parties need to benefit from trade. It is Oliver Chapman’s detailed understanding of how the supply chain operates, and its complexity that underpins OCI and its growth. He gives an example; he knows how to unload containers — he has done it himself.
Oliver Chapman, CEO of supply chain specialists OCI, explains why the cost-of-living crisis has permanently changed how organisations manage their supply chain. The supply chain is important; everybody knows this, but until recently, managing it effectively was not often seen as a top priority. Sure, it was managed in obvious ways, buyers and procurement specialists sought the ideal suppliers and considered transportation challenges, but there were much bigger issues, which were frequently forgotten.
The first issue that was often overlooked relates to a detailed understanding of the entire supply chain rather than focusing on direct suppliers. Each chain has multiple moving parts, an ecosystem of intricacy often made up of suppliers worldwide. A problem in one region could affect one company that supplied another, that supplied the company which supplied your organisation. The complex nature of the supply chain was always understood, but a detailed understanding was often missing.
Auditing the supply chain
One lesson from the supply chain crisis which helped create the cost-of-living crisis is the need to audit the supply chain thoroughly. The supply chain audit has become a priority, but it needs to be extensive, applied right across the supply chain, from sourcing of raw materials to final use, and must include detailed due diligence on all organisations that constitute the ecosystem.
The supply chain audit must also be updated regularly. The supply chain audit will reveal fragilities and opportunities within the supply chain. As a result, organisations must apply digital transformation and an agile approach to their supply chain management to respond rapidly to emerging threats.
There is more to the supply chain audit than identifying individual hubs within the supply network that could pose a problem. The audit can enable organisations to take a big-picture view of the supply chain. The individual suppliers that make it up may be sound, but, taken as a whole, the supply chain may be fragile. It may, for example, be too reliant on one region.
The supply chain crises of 2021/22 revealed the inherent risks in a supply chain that relies on all the moving parts that make up its operating just right. It is now understood that the supply chain needs resilience and redundancy. See a parallel with a data center or the electric grid. It is not enough for a data center or grid to be managed so that it operates to maximum efficiency under ideal circumstances— it must be able to continue to operate when something goes wrong. In 2021/22, the supply chain for some industries practically ground to a halt precisely because it lacked redundancy and resilience. The result was a cost-of-living crisis that has caused great hardship for millions of people.
Distances and cash flow
The historic view of the supply chain can also reveal inefficiencies in the physical distances involved in a product journey. Cash flow matters and cash can be tied up unnecessarily when the supply chain is spread over long distances. For example, components may be sourced in one part of the world, assembled in another, and maybe finally sold close to the original region where the components were sourced. Cashflow can be the victim of a widely dispersed supply chain, with cash lying idle while the individual parts are transported. It is so easy to underestimate the significance of this point; extended distances in a supply chain can massively reduce an organisation’s ability to scale. On the other hand, a supply chain ecosystem limited to a relatively small geographical area could enable the supply chain to scale an order of magnitude faster than a supply chain spread across the globe.
ESG considerations remain a priority for organisations. There are two core reasons for this. Firstly, the reality of climate change is becoming harder to ignore, and as part of their risk mitigation strategy, many organisations are prioritising net zero. Many see net zero as an important defensive strategy in anticipation of future regulation. It is also a potential competitive advantage in labor and consumer markets. Secondly, demographic factors mean we are likely to see permanent labor shortages, and social policies are often a key way to gain competitiveness in the labor market.
And auditing the supply chain to identify ESG strengths, weaknesses, and opportunities is crucial for organisations with authentic ESG aspirations. However, auditing the supply chain for ESG considerations is not simple — for some organisations, ESG scores created by third parties exist, but in the case of smaller organisations, ESG credentials are harder to quantify. ESG standards can also be supported by limiting the distances within the supply chain. So, looking at the geographical spread of a supply chain isn’t only important for cash flow but supports ESG too.